7 Worst Cryptocurrency Investment Mistakes to Avoid

Make real profit in cryptocurrency

There is a reason why every video or article on cryptocurrency investments asks you to do your own research before investing. But can you do the required research on your own? Do you have the requisite knowledge to understand the technology, terminology, ecosystem, etc., to predict the future of specific cryptocurrencies?

I am into technology for more than a decade and a half, thanks to my profession. I understand some of the terms and technical aspects behind cryptocurrency and blockchain. But that still is nothing to help predict or understand future growth.

Neither can the vast majority of the population who have found a penchant for the idea of ‘getting rich fast’ through crypto investment.

Based on my experience with investment and reading various Reddit and other online discussions, I can see a pattern. Due to a lack of understanding and a dream of becoming rich overnight, people make common mistakes while investing. Often it ends with heavy losses or complete loss of initial investment amount.

The most important way to not lose your money in cryptos is by being aware of the mistakes. Here are the seven worst mistakes you should avoid as a crypto coin investor, irrespective of whether you are a first-timer or into it for some time.

Buying a Coin Because It Is Dirt Cheap

We all want to get rich fast. We want to wake up one day and see the crypto we bought has multiplied hundreds or thousands of times our purchase price? How wonderful that would be!

For that, you cannot buy cryptos that are already hundreds of dollars and expect them to multiply a thousand times. You think the coins available for few cents or much less than a cent have the potential to multiply as per your expectation. Also, as they are super cheap, you can buy millions of them in your budget.

Can you guess what happened to their investors? They all most likely lost their entire investment.

This notion has been solidified by cryptos like Doge or Shiba Inu growing thousand times their initial price. But most people do not check that hundreds of other coins were available dirt cheap but are no longer present in the market. Can you guess what happened to their investors?

Right, they all most likely lost their entire investment. These super low-priced coins can go down to zero within no time. The closer they are to zero USD, the faster they can get there too.

What you can do:

• Be careful of the low price trap. Do your background checks before you bet your life savings on the perceived hidden gems.
• If you cannot do the research, stick to stable coins with proven market performance records.

Pulling Money Out of Long-Term Investment

Nowadays, youtube videos, online discussion groups, and news articles are about how someone made millions overnight due to cryptocurrency. There is news about Goldman Sachs's senior management, who made millions due to Dogecoin price appreciation and quit his job.

These posts make people believe that they can also make quick bucks and retire early or get super-rich fast. When such euphoria spreads, people generally try to invest all they have and make the maximum profit.

In this blind race, many pull out from their well-planned long-term investments and invest the money into the hyped instrument.

This is one of the most significant investment mistakes. It is always prudent not to break your previously well-planned investments. If you have gone through the financial planning and decided to invest, you should stick to it until the end of the plan to benefit from it.

If you regularly break your long-term investment plans, then you will never be able to meet your goals. There will always be another new gold rush, and you will keep following it without making much profit out of it.

What you can do:

• Do not break your long-term investment plan unless the return is not according to your initial expectation.
• Invest only surplus money or new money into the crypto market. Never invest money that you don’t have, i.e., investing borrowed money.

Buying High and Selling Low

Buying high and selling low is a classic mistake that most retail investors make. And this is one of the reasons why retail investors do not profit in trading or investment. In fact, it makes people continuously lose their money.

What if the price rises too high and I am not riding the waves?

When the price of the coin goes up, people assume it has a good prospect. They become afraid of missing out on the opportunity. What if the price rises too high and you are not riding the waves? In a rush to be part of the race, people put too much money when the coin is at a high price.

When the coin price falls, the same people panic. Most investors cannot hold on to their investment as they have no clue about the cryptos fundamental. They go with the flow of the market. Now they sell below their buy price and make losses.

I had made this mistake during my stock investment days. And I felt I still have the same urge during crypto investment. But at least now, I am aware that it is not the right strategy. People who buy in dips and sell high are the ones who make a profit.

What you can do:

• Try to understand why the price of a coin is suddenly rising at a certain point before putting your hard-earned money into it.
• Try and resist the compulsion to buy or sell coins based on their up or down movement, respectively. You might not make the highest profit, but you will certainly save yourself from significant losses.

Investing Big in One Go

Most beginner investors make this mistake— spend all the money buying coins in a very short interval of time. They get stuck with the price they see first. It makes them lose out on acquiring the coins cheaper when the prices dip, as they are left with no more liquidity at hand.

The cryptocurrency market is currently very volatile. Some celebrity tweets or says something in the media about a coin, and the whole crypto market reacts accordingly. The reactions are often quite sharp and make the price of coins change rapidly in either direction.

If you are a beginner, You keep watching the price movement throughout the day to figure out the right time to invest your money. With a slight downward trend, you feel this is your chance to get some more coins of your choice. If the price moves up, you will feel you should add more coins before the price rises too high.

The dopamine rush will make you put your money in every price swing until all your liquidity is gone too soon. Also, if there is some favorable news on a coin, you will try to put in all your money in one go because you do not want to miss the once in the lifetime opportunity.

What you can do:

• Resist the urge to monitor the price charts throughout the day. Do something else, read a book, do some research on the crypto coins, focus on your studies or the main job that earns you a salary.
• Divide your liquidity into multiple phases of the investment. Plan your purchases and stick to that timeline.

Putting All Your Money Into One Coin

Along with putting all their money in one go, many people make the mistake of investing all the amount in one coin. This is a risky approach. You might think — investing in cryptocurrency itself is risky. True, but you should try to hedge your risk as much as possible.

When you invest a hundred percent of your cash in one coin, you are entirely at the mercy of that single crypto. If the crypto fails or its price goes down substantially, you lose most of your investment. You will not have any other coins to even out your losses.

It is a better approach to spread your capital in multiple cryptos. Put some of your money into stable coins, which are in the market for a few years now and have solid historical performance. You can take higher risks for the rest of the amount and invest in coins that you think will rise fast.

What you can do:

• Stay away from choosing the one lucky coin that will make you rich overnight. It can make you lose everything overnight too.
• Divide your money into multiple crypto coins and buy them in phases.

Trying to Time the Market

Trying to time the market is one of the most common mistakes among investors. They think they can buy coins at the lowest rate and sell just before the price starts falling. That is one of the reasons why people keep monitoring the price chart throughout their awake time.

Most people who try to predict the price movement of coins end up losing money. It is a simple fact; no one can time the market perfectly, especially the retail investors like us.

The only people who can time the market are the people who have inside news or the whales. Whales can manipulate the market due to their huge holdings. Average investors have neither the insider info nor the large quantity to impact the direction of the coin price.

What you can do:

• Set a price target to buy or sell the coins. If the target hits, then take action. This is especially important if you are using leverage or margin position.
• Do not go with the flow of the market and move your target, expecting a maximum profit. In crypto investment, sticking to the plan is the key to long-term gain.

Lack of Exit Strategy

Most investors do not have an idea of when to sell their coins. The only thing they plan is to sell when they can make maximum profit. But they don’t define what would be that maximum amount.

Lack of exit strategy is one of the worst mistakes investors can make. Due to it, they do not sell when the price rises as they expect it to increase further. Also, they do not sell their coins when the prices fall drastically. They hope to somehow reduce their loss by waiting for the price to rise.

In either case, investors lose out on making a profit or reducing their loss. Lack of planned investment makes them take random actions in the spur of the moment. And if your exit strategy is to react to the market movement, you are leaving your hard-earned money to luck.

What you can do:

• Always have an exit strategy. Know when to sell your investment.
• Always set a target price for both profit and loss. Once your target profit or loss amount is hit in your portfolio, sell your holdings.

Final Thoughts

Most crypto investors, especially the new participants, do not have a clear idea of investing sustainably. Combined with it, not knowing common mistakes proves to be costly. But now, you are aware of the mistakes to avoid while investing your hard-earned money into crypto coins.

Keep these mistakes in mind and avoid them as much as you can. The mentioned suggestions can help you invest safely. In turn, it can help you make a profit out of your investment in the long run.

Thanks for reading the article. I hope it helps you invest in cryptocurrency wisely.

Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any financial decisions.