6 Common Mistakes People Make Investing in Cryptocurrency

Or Investing into anything for that matter.

Cryptocurrency has become a lucrative option for first-time and seasoned investors to put in their money.

According to theblockcrypto.com, Bitcoin returns per March 2020 is up by nearly 20%, beating the Index of Top 500 Companies in the United States (S&P500), which closes at 7%. And Bitcoin isn’t just the only Cryptocurrency performing well out there. Check out the graph below:

With all the success that investors are reaping from Cryptocurrencies, you may also hear stories about people losing money. Some claim They’re just not profitable enough, They’re not safe enough, or They’re too volatile.

Are they? Or they just don’t know what they’re doing?

Let’s look at the 6 Common Mistakes people make investing in Cryptocurrency, so you won’t repeat them and will be on your way to Cryptocurrency success.

The number one mistake people make getting into the markets is not knowing whether they want to invest short term or long term.

Sure, there are a lot of Traders who make it big in Cryptocurrency.

But before we talk about the profit you can make buying Cryptocurrencies and selling it just a few hours/days later, let’s talk details.

Professional Traders sit down in front of their computer screens to watch market movements daily. They’ve trained their eyes to be sharp by understanding not just economics, but human emotions and sentiments. It takes not just knowledge but also rigorous practice.

If you’re ready to sit on your couch, watch the market movements, be ready to make the right move at the right time and settle for “razor’s edge” as Jim Euclin states it (Not to mention the transaction fee exchangers and platform charges), go for it.

But let’s face it, not everyone can do that. In that case, you’re better off doing your research, spotting a good Cryptocurrency to HODL and sit on it for at least a year or two. (More on that here).

- The most prominent figures in the industry

- Promising returns

- Magnificent concept

- Lavish Exposure

- Beautiful website

These DON’T DETERMINE whether a Cryptocurrency is going to do well.

Yet, a lot of people lured to jump into the Cryptocurrency train fall for these. And we can’t blame them.

We call it the bling-bling syndrome, and for a good reason. A lot of times, a company uses these to lure investors into putting their money. They make lucrative offers so bright; the people don’t ask what’s exactly going on behind the scene.

I’m not saying all these companies intend to take your money and disappear.

Sometimes, the people involved just don’t have what it takes to run a Cryptocurrency company no matter how technically advanced they are. Thus, the company fails to perform.

Instead of looking at what they’re showing, read between the lines. Ask questions like:

- What’s their Business Concept? (What kind of challenges they’re trying to tackle, and what solution has they prepared?)

- Does the concept make sense?

- Where’s the company registered?

- Are they audited by an independent auditor?

- What’s their Risk Management Strategy?

- Etc.

Be critical, it’s your money on the line.

Majority of the movements in the market are caused by human sentiments. If you understand basic human psychology, you understand investing. This is true for not just Cryptocurrencies, but other assets for that matter.

A lot of first time Investors have ever experienced FOMO before. This causes 2 things:

- Buying High, or “Hype Buying”

- Selling Low or “Panic Selling”

ICO’s can be a very interesting time to buy a Cryptocurrency. Majority of people buy Cryptocurrencies after reading about their meteoric growth on news site and watch the price drop after.

What they don’t realize is they’re buying the hype. Instead, Pre-ICO or when their price is down is the best time to invest.

Most of the successful Cryptocurrency investors are Early Adopters, meaning they invested long before the hype started and they HODL.

Many people also make the mistake of investing after their traction has dropped due to a low price. From our research, we can conclude that for majority of the cases, when traction is low long after their ICO, and it remains low for a long time, something’s not right.

Here’s one example:

Again, if you’re not a Trader material, you’re better off picking the right Cryptocurrencies at their early stage and HODLing. (More on that here).

Before investing in Cryptocurrencies or any Assets, understand how the market operates. And then apply what Warren Buffett said:

“Be Afraid when others are greedy, and be greedy when others are afraid.”

There are 2 kinds of people in the market:

- People who operate based on emotions

- People who can predict market movements accurately

People who invest their lifetime savings or sold assets to invest in Cryptocurrencies falls under the first category.

When you invest what you’re not willing to lose, you operate with fear.

Fear of losing and not winning enough is the main reason panic selling and hype buying occurs.

Keep aside money that you’re ready to lose in case things go south. This way, you step out of your emotions, and you’ll make a more objective analysis.

It isn’t wrong to Get Rich Quick.

In fact, there are investors who became rich “overnight” through Cryptocurrencies. Check out the story of Eric Finman, a 19-year-old boy who turned his $1000 gift into $4.4 Million by amassing 401 Bitcoins.

Read also the story of Peter Saddington, an Entrepreneur who bought a Lamborghini with the 45 Bitcoins he bought at just $115.

A lot of people around the world who saw these stories decided to hop in and buy Cryptocurrencies too, hoping they’d become another overnight success.

What they don’t realize, is the “overnight success” took Finman and Saddington roughly 8 years to bear fruit (They each bought Bitcoin in 2011).

They’re early adopters; They bought Bitcoin at its early stage and HODL. They didn’t jump in with the hype.

Majority of people lose money in Cryptocurrency not due to their desire to become rich, but Greed.

Greed is the enemy of intellect, and this is especially true in the world of Investing. When you operate from Greed, you can’t analyze objectively, and thus you make wrong decisions (again, Buying Hype and Panic Selling).

Instead, realize that Investing is a long-term game. Spot the right coins you believe in, sit on it for at least 2 years and let it follow its natural process. (More on that here).

PS: The “Whales” (People who own more than 1,000 BTC) are said to still hold their BTC even after the price hit $17,000. HODL.

I’ve read stories about how people put in all their savings or sold assets to jump into the Cryptocurrency hype, only to later find price dropped and they lost it all.

This is usually caused due to following the market hype vs doing their own research, and not diversifying their assets. Again, Greed has many forms.

Don’t put all your money into one basket. Diversify. Divide your portfolio into 2, one that you’ll sell when the price reaches a certain point (If you’re keen on Trading) and one that you’ll allow to grow for at least 2 years.

Cryptocurrency can be a very profitable asset within decades to come. But a lot of people make mistakes by simply not understanding what they’re doing. Don’t be that person, do your research and invest wisely. If there are people who have made it investing in Cryptocurrency, you most certainly can too!

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