The crypto space is quite appealing, largely due to the massive returns on small investments, as well as, for its mission to disrupt the traditional financial space. However, it is still intimidating for newcomers because a lot of processes and terminology aren’t easy to wrap our heads around. In short, it is easy to mess up.
So, we have curated a list of the most common mistakes that newcomers make, which most of us have learned the hard way so you know what to expect when getting into crypto:
FOMOing (Fear of Missing Out)
It is probably the most popular term in the crypto industry describing a situation wherein people get a strong desire to invest when the market is pumping. During such an event, rational thoughts might suggest taking profit from the rising price or waiting for a dip is ideal to buy a cryptocurrency. However, it boils down to: it’s a feeling where you think that you’re missing out on a party. In most cases, it turns out, once you jump in the market, it’s already too late.
Now that you’ve entered the market despite understanding its volatility, as soon as the crypto you bought goes down, you make the mistake of pushing the sell button.
While it’s essential to cut your losses, this decision should be made in advance, instead of a knee-jerk reaction to seeing your cryptocurrency making red candles. So, don’t panic sell; create a strategy using stop-loss methods – meaning, when an investment reaches a certain point during loss, stop and pull out your money immediately.
Don’t Underestimate Cryptocurrencies Volatility
You know that cryptocurrencies are volatile, but you don’t know the crazy fluctuations it experiences, including the most popular ones like Bitcoin and Ethereum. 10%-15% daily price change is quite common. The market is constantly moving, sometimes upwards, and other times, downwards. It’s possible that it may stay bullish for days, or even, months. At the same time, it can stay bearish for a long time.
So, if you are new to the industry, be prepared to experience crazy tides of volatility.
Constantly Checking The Price
Undoubtedly, investments are exhilarating, especially when the price of your cryptocurrency goes up. For the first time, it rushes your adrenaline, and after that, it becomes a habit to check the price after every five minutes, just to get that dopamine hit.
Most of the time, it’ll be a disappointment because, as we said, crypto is volatile and experiences change in prices at small intervals. So, unless you are a day trader, it’s better to check your investments after longer intervals.
Secure Your Private Keys
“Not your keys, not your crypto” is a common phrase we use in the industry. It simply means that if you don’t have access to your keys, you will lose access to your crypto funds. Just so you know, the Private/Seed key consists of a long, unique string of characters.
Always secure it from hackers/spammers, and never share it with someone you don’t trust. No service provider will ever ask for it; so, don’t be fooled and hand over the only key that allows you to access your investments.
You Don’t Really Need The Whole Coin
Most newcomers entering the market have a perception that they need to buy a whole coin, which requires thousands of dollars, especially for top cryptocurrencies like Bitcoin and Ethereum. Not only is this a big misunderstanding but has also become a barrier for adoption because not everyone wants to enter the crypto market with deep pockets.
Most cryptocurrencies, like BTC and ETH, are fungible, meaning they can be broken down into smaller parts that you can buy. For example, 1 BTC can be divided into 100 million small units called Satoshis. So, instead of a whole BTC, you can buy even 1 Satoshi.
Always Use 2FA and Save Recovery Key
2FA is two-factor authentication, which is usually offered by centralized exchanges for your personal security. It strengthens your account by requiring two methods to verify your identity before allowing you to access your funds. So, always opt for it, and in the meantime, always keep a backup of the details that you use in 2FA. If you ever lose access to your recovery key, accessing your account becomes a pain. In most cases, you should expect to record a video, holding your ID card and saying the date.
Copy the Address Instead of Manually Writing Down – And Always Double Check
Crypto transactions are irreversible, meaning once you have made a transaction, there is no way to get back your crypto if you have accidentally sent it to the wrong address. Moreover, no regulations exist as of now that mandates the receiving party to refund the amount.
Therefore, instead of writing down a 24 letter-long address manually, copy and paste it. Before you press the send button, verify if you have copied the right address.
Falling Prey to Scams
The global crypto market cap is $1.79T and where there is wealth, there is someone wanting to scam their way into getting some. Besides, the missing regulation makes the space even more enticing for malicious actors trying to take advantage of users. Most common scams in the crypto industry are:
- Giveaway Scams: Investors are promised free cryptocurrencies in return for a task, like verifying your wallet address by sending a small amount to a particular address. In the past, scammers have even hacked Elon Musk’s account to get his followers to send crypto to an address specified by them. So, be vary of these groups offering giveaways.
- Investment Scams: Investors are promised high returns on their money, like Ponzi or Pyramid schemes. Scammers have also used ICOs for similar scams. So, DYOR, read white papers, engage with communities, and clear your doubts before investing.
- Phishing Scams: It’s quite common in the internet world where a scammer would present a similar-looking platform to get access to password-protected account. For example, they may send a clone of Binance website, and as soon as you enter the information, it goes to the spammer. Therefore, always check if you’re using the right address for the website.
Understand Fees (Gas) on Transactions
For each crypto transaction, you are required to pay a small amount of fee to the network. Generally, fees are relatively low in the crypto industry compared to traditional finance. However, when the network experiences heavy traffic, the fee can shot up through the roof. So, it’s good to understand how transaction fees in the crypto industry works, or you might end up paying an exorbitant amount.
In the End, Don’t Have Nightmares
The most significant wealth transfer is happening, and with a basic understanding of how the crypto industry operates, you can turn any obstacles into opportunities. The intention of this blog post is to highlight the most common mistakes that newbies make as they enter the space. At the same time, our intention is not to scare away, but give you a handy guide as you pave your way through the industry.