The cryptocurrency market had proven its ability to generate returns, but to be able to do that, crypto enthusiasts must do several important things. At the same time, most of the beginners venturing into this sector fail to take into account critical mistakes made by others like them, which leads to the same mistakes being repeated over and over again. In case you are in the early stages with cryptocurrencies and would like to make a difference, this article will “turn a light on”.
#1 Taking Exaggerated Risks
Risk-taking is a double-edged sword since it can increase the upside when right and blow out all your money when the market will not behave as expected. Because of that, managing risk is a key factor, as we’ve highlighted in one of our recent articles. Building a portfolio (in the case of investors) or using risk management tools (for traders) will limit the downside and keep you in the game in the long run.
#2 Not Paying Close Attention to Education
There are so many changes the blockchain had brought to a centralized financial system, that education is more important than ever. Each cryptocurrency has a unique structure and serves different purposes, requiring a trader or investor to allocate enough time to study and have the right mindset. If that will be the case, you will be able to understand why a token has upside or downside potential, what fundamentals can contribute to long-term growth, and how it can create disruptions in its respective field.
#3 Believing in get-rich-quick schemes
Beginners are drawn into the crypto sector motivated by news in the media highlighting how much money several individuals had made by investing in this industry. They act on emotional impulses and fail to realize this is actually a business model that requires an investment, a proper strategy, a particular mindset, and at the same time, comes with risks. Believing from the start that the crypto market will make you whole is one of the biggest traps you could fall into.
#4 Getting involved in unregulated businesses
The number of scams in the industry is declining but despite that, there are still companies wanting to cut corners to get around with regulatory requirements. If you are not aware of that, it is important to liquidate the investment once the truth is revealed. However, the problem is when you are fully aware of bad practices and yet decide to invest in a crypto company, regardless of what it is doing. In the long run, this behavior will create more harm than good, so it is appropriate to have strong principles and work ethic from the start.