Investing in cryptocurrencies is a lucrative field. Crypto products have attracted a whole new segment of investors, bringing in more capital and increasing the market. However, not all players make money and, unfortunately, most new crypto traders make mistakes that can be easily avoided. Whether you are new to the parallel market or just trying new opportunities in this new field, here are some things you have to avoid.
With the increasing use of the internet, especially in the current period, there has been an increase in cases of investment fraud: unlicensed operators, using methods of aggressively disposing of financial resources by telephone, e-mail or social media, claiming to come from reputable companies and secure investments, advertise transactions through an electronic platform mainly in foreign exchange (FOREX), precious metals, oil, contracts on differences (CFDs) and cryptocurrencies, such as bitcoin.
Many times, they direct unsuspecting investors to websites or use testimonials and material that seems real, and it is not easy to identify that it does not correspond to reality. They target potential investors looking for investments through the internet, search engines or social media. They advertise unlicensed online trading platforms, and promise high returns to attract investors to investments that – while seemingly offering reasonable or high returns – are in fact related to illegal activity. They often use pictures of luxury items or celebrities to convince them of these investments.
Caution is required, because the ad can then be linked to another site, where one is either invited to invest in a platform after giving their details, or to open a special account managed by the company being advertised.
It is pointed out that most sufferers report that, initially, their investments showed significant returns, as a result of which they were motivated to consider their investment successful and to invest more money or to recommend to a friend or family member to invest.
However, later, when they asked for their winnings to be reimbursed, under various pretexts the deposit in their account was too late, and in the end their account on the platform was deactivated, resulting in the loss of their money.
The crypto market is extremely volatile, which means that price changes are normal, and if you get carried away easily, you will lose money.
Selling because you are panicking and anxious is a common mistake made by beginners, where they start entering a market without much research and then, when faced with a sudden drop, they sell to “reduce their losses”.
The problem with this approach is that once you sell, you lose real money, while in some cases reducing your losses makes sense, most coins will recover back in days, if not hours, and then seeing an increase you will buy back at higher prices, only to repeat the cycle.
As a trader, you need to understand the specifics of each currency you trade and this includes its price history and reasonable future projections so that you can plan your trades accordingly.
Another very common mistake that beginners make is to spend all their money in one go. If you find a good opportunity to enter, you should buy with a percentage of your funds (50% – 60%) and keep the rest to see if your entry works. This way, even if a coin falls after your purchase, you can buy it cheaper.
Likewise, if the uptrend continues, you can always buy more and, although this approach reduces your profit margins, secures your position and prevents you from being all-in in a market that is collapsing.
Price movements, chart tracking and market analysis are not enough to invest in cryptocurrencies. If you want to be a successful trader, you need to follow the news and keep up to date with all the latest and upcoming developments.
Cryptocurrency trading has a number of differences compared to traditional stock trading. To succeed in cryptocurrencies, you need to find reliable sources of information, carefully do your research, select the most appropriate exchange and wallet, as well as find benchmarks and portfolio management tools.
As with any new economic or social phenomenon, various myths develop and spread in the cryptocurrency world. It has indeed happened in the past that investors enjoyed returns of 1000% within a year, but what has also happened is that they lost everything when they found themselves in the eye of the cyclone and did not show composure or did not understand the object well enough to begin with.
Short-term investment in cryptocurrencies
As a short-term investment we define the investment of a capital and the closing of this investment within a quarter. Short-term investment is day trading, weekly trading, etc. Cryptocurrencies and especially Bitcoin offer high price volatility daily and therefore high risk to traders. To trade cryptocurrencies, you can open a trading account with a Forex Broker.
For cryptocurrency trading you do not need to buy Bitcoin, Ethereum etc. You can do CFD trading with a small initial capital. The biggest advantage of CFD trading is the leverage where you actually multiply the effects of trading. This, combined with the high volatility of cryptocurrencies, greatly increases the risk, but there can be multiple potential gains of your capital as well.
Long-term investment in cryptocurrencies
For anyone looking to diversify their portfolio, a long-term investment is the right approach, as one can benefit from the potential rewards of the blockchain technology and the impact it has on cryptos.
The long-term investment makes more sense; Buy something today and keep it for 1, 2, 5, 10, 20 years, when its value could have been multiplied.