Whether you are new to crypto or a veteran Bitcoin maximalist, the truth is that the world of cryptocurrencies can be complex and often confusing for anyone.
Despite the growing popularity of digital assets, many people still make mistakes when using and investing in cryptocurrencies. From Bitcoin to Ethereum and beyond, there is now a wide range of cryptocurrencies to choose from.
Just recently, meme coins were the in-thing, and everyone and their grandmother talked about cryptocurrencies. With the current bear market, the hype around crypto has somewhat dimmed, but as mass adoption increases, the likelihood of more people making huge mistakes while using crypto is ever-increasing.
A good example of a common mistake most people make while using crypto is not prioritizing the secure storage of their private keys. The recent FTX meltdown brought that to light, and many people lost money in the multi-billion dollar collapse of the former crypto exchange.
In this article, we will highlight some of the biggest mistakes people make in the world of crypto and offer practical advice on how to avoid them.
Lack of Proper Research and Understanding
Lack of conducting due diligence is by far one of the biggest mistakes people make when using cryptocurrencies.
Granted, crypto gains can be quite lucrative, and it is easy for anyone to be driven by greed and FOMO (fear of missing out) and jump into a crypto project without a second thought.
However, with so many different cryptocurrencies available, it is important to take the time to research and understand the differences between them. Some people blindly follow advice from social media influencers who themselves are clueless about how a certain crypto project works, and without conducting proper research, investors of the project get scammed millions of dollars.
To avoid this huge mistake, be sure to self-educate. You need to learn everything there is to know about the underlying technology and market trends of the prospective projects in your portfolio.
This self-education process includes understanding the different features and use cases of each cryptocurrency, as well as keeping up-to-date with the latest news and developments related to the project you are investing in.
After all, with your money on the line, there is no better way to keep track of your investment than to stay informed.
It is also important to understand the potential risks and uncertainties associated with cryptocurrencies, as well as the impact of regulatory changes on the market.
By taking the time to properly research and understand the crypto project you are looking to invest in, you can make informed investment decisions and increase your chances of success.
It is important to approach cryptocurrencies with caution and a critical eye and to never invest more than you can afford to lose. Remember that investing in cryptocurrencies is a long-term strategy, so don’t get caught up in the hype of any crypto project.
Not Properly Securing Wallet and Private Keys
Next, let’s talk about the proper storage and security of your private keys. To the uninitiated, private keys and public keys are crucial elements of cryptocurrency transactions.
Simply, public keys are like digital addresses that can be used to receive funds, while private keys are used to sign transactions and control access to the funds in a cryptocurrency wallet.
You should keep your private keys secure because they are the keys to accessing and controlling your cryptocurrency funds. If someone else gains access to your private key, they can easily transfer your funds to their own wallet, leaving you with no access or control over your assets. This is why it is so important to properly secure your private keys and keep them protected from potential hackers or theft.
How do you keep your private keys safe from prying eyes? Well, there are several ways to secure private keys, including storing them on a hardware wallet, which is a physical device specifically designed to store and secure private keys.
Another option is to use a secure, encrypted file-storage service, such as a password-protected flash drive. It is also important to use strong and unique passwords for each of your cryptocurrency wallets and to never share your private keys with anyone.
By taking the time to properly secure your private keys, you can protect your digital assets, whether they are NFTs, smart contracts or cryptocurrencies and tokens, thus ensuring that your investments are safe from potential theft or loss.
At the risk of sounding like a broken record, remember your private keys are the keys to your crypto kingdom, so it is important to keep them secure at all times.
Trading Based on Emotions Rather Than Strategy
When it comes to trading, tons of crypto users trade based on emotions rather than using a tried and tested strategy. This can lead to impulsive buying and selling decisions that are not based on market analysis or solid investment principles.
Trading on emotions can result in significant financial losses, especially in a volatile market like the cryptocurrency market.
A close friend of mine was trading crypto in 2020 and got caught up in the hype around meme coins at the peak of the previous bull rally. At the time, all sorts of meme coins were going to the moon, and literally, anyone could make money by simply making the right pick.
Unfortunately, my friend was eager to make big profits in the crypto market, inspired by the stories of overnight millionaires, he impulsively invested a large portion of his savings in an obscure cryptocurrency and meme coin. In the space of a few days, the value of that cryptocurrency plummeted.
To avoid such mistakes, be sure to have a solid investment strategy in place. This should include a long-term perspective, a diversified portfolio, and a systematic approach to buying and selling assets. It is also important to stay disciplined and avoid making impulsive decisions, especially during times of market-wide greed and FOMO.
Not Staying Up to Date with Crypto Trends
The crypto space is unlike traditional finance (TradFi). While TradFi events and changes happen at a slow pace, in the world of crypto, things can change rapidly and unpredictably. This is why it is important for traders and investors to stay up-to-date with market and regulatory changes that could impact the value of their investments.
For example, 2013 marked the first move by the People’s Bank of China (PBC) to put brakes on Bitcoin’s meteoric rise. The PBC declared that financial institutions were not allowed to deal with Bitcoin, leading to a sharp drop in the value of Bitcoin.
Then in 2016, Japan officially recognized Bitcoin as a form of payment or property in a regulatory move that led to a significant increase in BTC’s value. More recently, in late 2017, the U.S. Securities and Exchange Commission (SEC) announced that initial coin offerings (ICOs) would be regulated as securities, which led to a decrease in the value of many cryptocurrencies.
These are just a few examples of how news and regulatory changes can have a profound impact on the value of cryptocurrencies. This is why it is so important to stay informed and up-to-date with the latest developments in the market and regulatory landscape. Some news might bring about the hype around the project and therefore drive the price of the crypto project “to the moon,” and other market updates, such as the recent FTX meltdown, might bring about fear, uncertainty and doubt.
By staying informed and adapting to changes in the market, traders and investors can make informed decisions and minimize their risk of financial loss. Whether it is through reading industry news, following market analysis, or attending crypto events, staying up-to-date with market and regulatory changes is an important aspect of successful crypto trading and investing.
Conclusion: Avoid Risk Where Possible
In the end, when it’s all said and done, using cryptocurrencies can be a bit tricky if you don’t know what you’re doing. It can also be a beautiful experience that allows you the freedom to take charge of your finances and stand to win significantly.
The goal, however, is to avoid making the big mistakes covered in this article. From not conducting enough research and due diligence to not prioritizing the secure storage of your coins and digital assets, trading on impulse, or not keeping up with the most recent news and regulations, these mistakes can be avoided.
By following the tips and tricks shared above, you can reduce your chances of making a costly mistake and increase your rate of success in the exciting world of crypto. The most important thing is to be proactive, informed, and strategic in your approach.