Cryptocurrency has become one of the most popular ways to store and invest in assets. As of 2021, there were 100 million cryptocurrency users globally. That’s why it’s no surprise that you’re interested in buying crypto and trying to make extra money.
Of course, buying crypto involves a lot of risk, so it pays to learn how to invest correctly. Avoid the eight beginner cryptocurrency investment errors to get the most from your money.
1. Chasing Short-Term Cryptocurrency
There are a lot of pump-and-dump schemes in the crypto market. People can easily make new crypto coins with a few lines of code and market them as the next big thing. Unfortunately, those people are usually only in it for the short term and will cause the people investing to lose money.
Try to avoid these products. Stick with trusted cryptocurrency protocols and avoid venturing too far off the normal investment markets. You can still take a chance on less-known products — just make sure to do your due diligence to learn about the creators and make sure they don’t have a history of running pump-and-dump schemes.
2. Failing to Diversify
Many established cryptocurrencies — such as Bitcoin and Ethereum — are well-established and considered good investments. But at the same time, those cryptos aren’t immune to changes that cause their prices to drop.
You’re out of luck if you only stick with a few crypto investments. With how many options for cryptocurrencies are available, it makes more sense to diversify and spread your risk.
Look at some of the less-popular cryptos to see what they can offer. Invest in what looks good to make sure you have diversity.
3. Not Researching the Coin
It’s tempting to make blind investments in cryptocurrency. Many people only look at the price and how much it changes over time. But you must also remember that cryptocurrency and blockchain are technologies with different use cases.
Make sure you learn about cryptocurrencies before buying. Does a product offer a new and unique use case that makes it worth investing in?
Learning these things will help you learn about a product’s long-term viability and if it will keep going up over time. Doing this will also help you learn about the features offered by a cryptocurrency product and if there are additional earning opportunities.
4. Not Exploring Earning Opportunities
Some cryptocurrencies have limited options. Bitcoin, for instance, is only useful for holding wealth and sending transfers.
But other cryptos are a little different. Take Ethereum, for instance. It uses a proof-of-stake transaction verification model that uses staking servers to validate transactions for Ethereum applications.
Some of these crypto products and applications have additional earning opportunities. Make sure you explore those opportunities to make the most of your holdings. It can increase the total amount of a cryptocurrency you hold.
5. Using the Wrong Platform
There are many places to buy and sell cryptocurrency. Many won’t present any problems and allow you to purchase whatever crypto you want. But others are less trustworthy and will put your holdings at risk.
Make sure you investigate a crypto trading platform before buying and selling cryptocurrencies. Look for past red flags that point to cases where a company doesn’t do enough to protect its users.
The company you use should also take security seriously and do everything possible to protect its users’ holdings. Find more information here about a reputable crypto platform.
6. Not Using Cold Storage
When buying crypto, it’s tempting to keep all your crypto holdings on an exchange. After all, it’s easy to do this. Buy your crypto in one place and leave it until you need it.
But you must also remember that you don’t have complete control over your holdings in this situation. There have been many situations where a crypto trading platform failed, resulting in user funds’ loss.
Put crypto you aren’t actively trading on a cold storage cryptocurrency wallet. Doing this will give you total control over your holdings and prevent you from losing anything if an exchange ever fails.
7. Trying to Time the Market
Some people see the fluctuating crypto prices and believe they can time the market. Their goal is to buy a cryptocurrency at a discount and sell again once it rises in price.
The problem is that this doesn’t usually work. The markets are volatile, and even if you can get accurate predictions, you will likely lose money in the long run.
If you plan to hold crypt long term, try to buy whenever you have money to invest. Many successful investors buy a little over time to grow their holdings.
8. Not Taking Profit
It’s tempting to hold on to crypto as long as possible. There are some periods where prices just keep going up. You want to make the most profit possible, so you never sell.
But you also never know when things will come crashing down. Market downturns can happen at any moment. You can miss out on a lot of profit if you wait too long.
Create a plan to take profit from your holdings. This will allow you to maximize your earnings instead of waiting and potentially losing what you made.
Watch for Beginner Cryptocurrency Investment Errors
The crypto market can be unpredictable at times. Prices can keep going up for some time, and out of nowhere, things will come crashing down. If you aren’t careful with your crypto trading strategy, you risk losing money.
That’s why you must learn beginner cryptocurrency investment errors and do whatever possible to avoid them. When you do, you can minimize your risk and increase the chance of making crypto profits.
Do you want to read more financial tips that will help you get the most from your money? Check out the blog to find more advice that will help.