Summary

The article outlines common mistakes made by beginners in cryptocurrency investing, emphasizing the importance of research, avoiding FOMO, diversifying investments, and choosing the right exchange platforms.

Abstract

The cryptocurrency market's rise in popularity has led to an increase in beginner investors, many of whom fall into common pitfalls. One critical error is failing to conduct personal research before investing, often leading to significant financial losses. Another prevalent issue is succumbing to the "Fear Of Missing Out" (FOMO), causing investors to make impulsive decisions based on market fluctuations. Additionally, newcomers tend to concentrate their investments in a single project, ignoring the principle of diversification, which can mitigate the risk of market volatility. Lastly, beginners often select the wrong exchange platforms, where they do not have full ownership or control over their assets and may incur higher fees. The article underscores the necessity of a strategic, well-informed approach to cryptocurrency investments, advocating for long-term thinking and due diligence.

Opinions

The author admits to personal experiences of making investment decisions based on hype rather than research, which led to financial setbacks.
The author suggests that new investors should educate themselves about the crypto market, including understanding blockchain technology, different market conditions, and the use of wallets.
The author emphasizes the importance of not investing money that one cannot afford to lose and the value of long-term investment strategies over short-term gains.
The author advises against investing all resources into a single cryptocurrency, advocating for a diversified investment portfolio to manage risk.
The author criticizes certain platforms like Revolut for not allowing users full control over their cryptocurrencies, such as the inability to stake or transfer coins to a cold wallet, and recommends more reputable exchanges like Binance for better ownership and lower fees.

4 Mistakes Beginners Make When Investing in Cryptocurrency

You probably made one of them when you first started investing in cryptocurrencies

In past years, the cryptocurrency market has grown in popularity around the world. When Satoshi Nakamoto invented Bitcoin fourteen years ago, no one knew about it, and no one imagined it would become one of the future’s investment tools. Nowadays, people are increasingly deciding to invest in cryptocurrencies.

You may be wondering how the cryptocurrency market works.

“Cryptocurrency markets are decentralized, which means they are not issued or backed by a central authority such as a government.”

The cryptocurrency market is extremely volatile, and if you don’t know how to manage it, you can lose more money, especially if you’re a beginner.

In this story, I’ll briefly examine four common mistakes that newcomers make when they first start investing in cryptocurrency.

1. They do not perform their own research

Most beginners invest after a relative, friend or random person advised them that it would be better to invest in the crypto market or, more specifically, in a particular crypto project. They take it for granted and no longer perform their own research, resulting in financial loss the majority of the time.

When you first start, it’s important to understand at least the fundamental terms and how they work.

To begin, try to devote 15 minutes per day to studying the crypto market for 1–2 months before beginning to invest. At the very least, make an effort to understand the concepts of blockchain, altcoins, bull market, bear market, and (cold) wallet.

It happened to me as well. For a long time, I didn’t want to know anything about the cryptocurrency market. I was reluctant to invest due to a lack of knowledge, but I didn’t do anything concrete to learn how it works.

Though I decided to invest in cryptocurrency almost a year ago, it was not a calculated decision, but rather a herd effect. One of my friends told me that he has begun to invest in cryptocurrency. I was so enthused by what he told me that I began investing that very evening.

The problem was that none of us knew anything about the projects’ whitepapers or what each of the tokens we invested in proposed. We were only guided by the fact that it had increased significantly in recent weeks or even months. Later, I discovered that the main project I invested in has a process in court.

2. They are suffering from FOMO

FOMO is an abbreviation for the phrase “Fear Of Missing Out.” When the crypto market goes down, the majority of newcomers experience FOMO. They expect to make a lot of money in a short period of time, and these episodes of crypto decline cause them a high level of anxiety and panic.

Going back to my experience as a newcomer, my first investment was in Ripple — XRP; at the time, I was unaware that they had a legal process in court. Also, due to a lack of basic knowledge about cryptocurrency, I invested $100 when XRP was 1.8$, close to the current bull run’s ATH (all-time high). You can imagine that after a few days — in May 2021 — the crypto market crashed, and my first intention was to exchange all tokens into fiat and withdraw my money, but I didn’t.

I’m currently more than 53% under, but at least I don’t need the money right now. If I’m not converting my money into fiat, I can’t say I’ve made a loss on my investments. When you decide to withdraw, you can consider yourself to have lost.

This year, I realized that in the crypto market, you have to think about long-term investments. You may be able to recover your investment in the long run. If there is one thing you should learn from my experience, it is that you should not buy high and sell low. Also, never invest money that you can’t afford to lose.

3. They only invest in one project

“Don’t put all your eggs in one basket.”

The meaning of this expression, first used by Miguel de Cervantes, is that you should not put all of your resources into a single investment because you could lose everything in the event of a market or economic shock. It will be much better to diversify your portfolio in order to mitigate major changes in a particular currency.

Following the big crush in May 2021, I decided to take a break from investing and focus on learning more about how the cryptocurrency market works. I resumed my investing after 6 months, adding new coins with higher potential to my portfolio. And I am proud to say that I have defeated FOMO, and I am now only making long-term investments.

4. They invest in the improper exchanges

Last but not least, because of a lack of knowledge or for other reasons, the majority of newcomers invest in improper exchanges. I called them improper because in this case, you do not own the coins, but rather the platform.

I began investing in Revolut, a British technology company that provides banking services. The main issue was that the coins did not belong to me, but to Revolut. I can’t put my coins in savings or stacking to multiply them, or deposit them in a cold wallet. They also charge high fees.

After 6 months, I migrated to Binance, the world’s largest exchange, where I can use savings and stacking options and I can deposit my coins to a cold wallet. It also has a greater number of coins than Revolut and lower fees.

If you want to open an account with them, you can find my referral link HERE. When you sign up, you will receive a 10% discount on trading fees.

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