Cryptocurrency is a fascinating new asset class that has been gaining popularity over the past few years. It’s still relatively unknown to many people, and it can be challenging to figure out where to start when investing in this new frontier. However, there are some mistakes that you should avoid at all costs if you want to reap the most benefits from your investment.
1. Low Price Doesn’t Mean You’re Getting a Bargain
Memes are everywhere on the internet, and they have been for many years now. Recently, something new has come out of this trend in which people create their own memes with coins based on popular ones like Dogecoin or PepeCash.
The thing is that most of these meme-inspired currencies can be bought in bulk. Most of the investors decided to profit from investing early, and admittedly a lot of them made quite a handsome amount from doing so.
But don’t be fooled; just because a cryptocurrency is trading at a low cost does not mean it’s trading at a discount. Always remember that trading at a low price in the cryptocurrency world reflects the currency’s demand and actual worth.
So don’t be fooled. Dogecoin became a household name thanks to Elon Musk’s support. The cryptocurrency rocketed up the charts following his endorsement, and many people that had never traded before were eager to buy Dogecoin due to its low prices. In turn, this increased demand led more investors into Dogecoin trading.
But don’t get it twisted; Dogecoin was a one-off because of Musk. There are many, many other coins that are trading at a low price. But these will largely disappear because of the low demand and low volume. If you think you’ll make money as an early adopter, just know you’ll have a very high chance of simply losing your money.
2. Not Planning Ahead
What is your risk appetite, and how do you intend to earn? When will the money be withdrawn or just cashed out? How long are you investing for? What level of investment would make sense given my current situation in life? What do I expect over time concerning returns on that invested capital and future cash flow needs?
These are just some of the questions you need to ask yourself before jumping on the cryptocurrency train. And having a plan is never a bad idea when you’re investing in something like cryptocurrency. Educate yourself well, and follow a diversity of sources, so that you can establish a solid plan for your trading.
But while you’re planning your entrance strategy, it’s also essential to plan an exit strategy too. Buying any asset, but especially digital coins, without having an exit plan could be disastrous for investors as they have no safety net when things go wrong.
What if market conditions keep getting tougher? You need stop losses set up so that as soon as your coins start making less money than before, it’s time to get out of the trade while there still might be some chance left of recouping those lost funds fully or partially through careful planning and timing.
Likewise, it’s also important to have an exit strategy when you are up and ‘winning’ your bet too. Investors need to have a sound exit strategy so that they can profit from their investments. One of the keys is knowing when you’re winning and then selling your stocks for higher profits while still profiting off what’s left.
If you don’t know about market psychology or are not as invested in understanding it, you could lose money by letting greed get the better of you since all bets might be lost with expectations on future price growth. Always do your research, and get some help if you can, to plan sound entrance and exit strategies!
3. Putting All Your Money into One Type of Cryptocurrency
If you’ve spent any amount of time investing in stocks, then it should come as no surprise that pouring all your money into just one form of crypto could cost you. Just like with a standard stock purchase, considering putting some of those funds elsewhere may help shield yourself from what might otherwise be a significant financial hardship if things don’t go according to plan or something unexpected happens along the way.
Many new cryptocurrency traders make this common rookie error when they invest their money in only one financial asset or currency. If something terrible happens because of an event that’s related solely to that particular coin’s success–or lack thereof–then all investments can go up in smoke at once.
Cryptocurrencies, especially, are like a roller coaster. One minute they’re up, and the next, your investment is plummeting down with no hope of recovery. So making sure your portfolio is diversified can help shield you from this volatility.
4. Not Seriously Considering Risk Factors and Risk Tolerance
This tip is relatively simple. Don’t risk what you cannot afford: there is always the possibility that an investment will not yield any money whatsoever — or worse, still result in a loss when everything turns sour on you financially. There are no guarantees in investing, but a prudent allocation of investments can reduce losses.
When the prices of coins dip, beginners may believe they are an excellent opportunity to buy. However, if you don’t understand why it is dipping in price and have no idea when it will go back up again, you can lose money pretty fast! To avoid this headache, make sure that, before buying on any dips or during bull runs (when people think it’s about ready for another plunge), take some time to research what has caused these movements so far.
The volatility of the digital coin market is also one reason why leverage should be used cautiously. If too much money is invested, there could be a sudden crash in prices, and investors will lose their assets.
The cryptocurrency market’s instability can cause it to make or lose hundreds of billions worth of dollars within days due to its volatile nature. This current example highlights how risky the market can turn out for many people if not done correctly.
Closing Thoughts
We’re living in the era of digitalization and cryptocurrency, which has created an entirely new asset class. It’s both fascinating to invest in and difficult because it operates outside of traditional financial markets such as banks, government regulation, or physical currency. But for those who are unbanked – meaning they have little access to banking services like loans, credit cards, or bank accounts- this may be their best option. If only just as a way out from poverty-perpetuating cycles due to exclusionary practices by mainstream institutions.
Cryptocurrency is a hot topic, and for a good reason. It’s been on the rise over the past few years in popularity and value – which means more people are investing their money into it as well. But there are many different types of cryptocurrency to invest in, so it can be challenging to know where you should put your money when you want to get involved.
We recommend not putting all your eggs in one basket. Just because Bitcoin has had such an enormous amount of success doesn’t mean other forms of cryptocurrency won’t do just as well or better than Bitcoin down the line. Make sure you diversify before risking any significant amounts of cash by only placing them in one stock. Oh, and don’t seriously think you’ll make any substantial money by investing in meme coins, please.
Unbanked believes everyone should have a fair chance at wealth, so be sure you do your research and begin your cryptocurrency investing journey strongly. We’d love to hear your success story!
