Cryptocurrency has gained worldwide recognition in the finance sector, especially in the past year despite the many uncertainties that came with 2020. The tremendous growth the crypto industry saw in 2020, especially for Bitcoin, has drawn the attention of more users. As of December 2020, Blockchain.com wallets reached over 63 million wallet users, and now more than ever, there are millions of people interested in investing and trading bitcoin.
While this might sound interesting especially to beginners, there are certain crypto investment mistakes you should not make. This article highlights some of them.
1. Little to No Knowledge
The fear of missing out is one of the wrong reasons why people go into investments. It is not enough that a lot of people are talking about it, especially with the surge Bitcoin experienced towards the end of 2020. The exciting news of getting more money might cloud your judgment and you end up investing in what you don’t have adequate knowledge about.
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The first rule of investing is to never invest in what you do not know or understand. Take some time to learn about what you intend to commit your funds to. Learn the basics and do further research where necessary. One of the things you’ll find out from your research is that cryptocurrencies are decentralized and highly volatile. This means you could lose your money in the process and you are fully responsible for your money.
Don’t get carried away by the noise. Be aware of all the risks involved and know how it works, then proceed to commit to it if you’re convinced enough.
2. Overtrading
Overtrading refers to buying and selling stocks in excess. This is not far-fetched especially for people who started trading for the sole purpose to make quick money. As tempting as this seems, it’s dangerous. You might end up losing your profits due to the cumulative trading fees. Trading sometimes works like trial and error, which means you will likely not consistently have good trades all day.
Take deliberate action to avoid overtrading. Practical steps to take include being self-aware, creating rules, taking breaks, and practicing risk management.
3. Using the Wrong Exchange
Your choice of exchange goes a long way in the outcome of your trades and your overall experience. There are several platforms to use today, including the bitcoin evolution exchange. However, before deciding, you must first read up on the features, fees, and practices of the exchange. Also, consider security and transparency for the safety of your funds. Put your options together and decide based on what suits your preference best.
4. No Diversification
Every expert in trading would always advise you not to put all your eggs in one basket however tempting it may be. While Bitcoin might be the first and most promising of all cryptocurrencies, you don’t have to stick to just that. Diversify your portfolio by investing in other cryptocurrencies. To make it easier, choose an exchange that allows you access to other cryptocurrencies apart from Bitcoin.
Conclusion
As more people embrace cryptocurrency in 2021, it is important to avoid these common mistakes if you’re looking to get the best outcome.
