In only a decade, many crypto investors got the chance to feel what it is like to become a millionaire. Although, many failed from repeated mistakes also.

Before you learn how to make the right moves in the crypto market, you have to avoid the wrong ones. Moreover, the crypto market undergoes a lot of price fluctuations every single day. Today, it may hit an all-time high value in the market, while it may be the complete opposite tomorrow.  

Fortunately, in this article, you will learn how to avoid these common mistakes! 

5 common mistakes to avoid when trading with crypto 

1. Not identifying your investor profile 

You are planning to lose when you don’t take the necessary time to identify your investor profile. What kind of investor are you? Are you someone who likes high-risk investments or just a conservative, risk-averse investor?

According to Layman’s terms, there are three profiles that investors may identify: 

• Conservative 
• Trader 
• Moderate 

The conservative investor never wants to take part in risky investments. For example, these investors won’t deal with short-term investments as they are associated with higher risk. The conservative investor will seek to hold an asset for long periods and then seek to make a profit from that investment after a few years.  

The most common investors in the crypto industry are traders. There are about 120 million crypto traders across the world. Traders seek to make profits from short-term investments, where many are involved in day-to-day trading. Traders are those who get involved in very risky investments, which at the same time make greater profits. 

Last but not least, the moderate investors. Moderate investors along with traders are the most common types of investors in the crypto industry. Moderate investors combine risky investments with non-risky ones. They will mix short-term trading with long-term investing and seek to make profits from both. 

So, now you know the type of investors. Now, you have to identify which one you belong to? Are you a trader, moderate investor, or just a conservative one? 

2. Not doing enough research 

The crypto industry is not one you want to enter without doing enough research. With so many price changes day in and day out, the crypto industry is super volatile. 

Although, you would be surprised that 1/10 of people invest in the crypto industry. Many of these crypto investors don’t even know what a cryptocurrency is or what a blockchain is. In some cases, they don’t even know any other cryptocurrency except Bitcoin. 

Many investors want to enter the crypto market because they think it is “quick cash,” but that isn’t the case. The more risky a market is, the more research you should do to minimize your own risks. 

3. Believing in scams

The crypto industry is filled with fraudsters seeking to conduct illegal theft actions through email or text. Some fraud actions include emails or texts that will make fake promises, such as asking you to send money and lying to you that they will send you back more money. In the summer of 2021, statistics showed that crypto frauds soared by 1000%!

Always keep in mind that offers that seem too good to be true should be carefully overlooked. Please don’t believe in emails or texts that offer free money or tell you that they have sent you a gift. Unless the official websites or apps of cryptocurrencies are emailing you, don’t fall for these scams. 

Here are some other common scams fraudsters try to make: 

• Spoofing: fraudsters deflate the price of unknown cryptocurrencies. They create fake buy and sell orders. Whenever traders try to conduct a purchase, these fraudsters will cancel the order. They usually do pre-mining with coins before they are ever available on the crypto market, promote it on the web, and sell all of these coins at much higher prices! 
• Fake coins: sometimes, it can be challenging to identify which coins are real and aren’t. The biggest issue is that criminals can steal all your private information and even the money you invested when you invest in fake coins! This is done through links that install spyware on your computer after you click on them. 
• Wallet theft software: don’t believe every crypto software app available on the app store or Google Play store. These applications may easily steal your funds and leave you nowhere. Try going for trusted crypto wallets such as Exodus, Electrum, Trezor Model T, and more.  

Let’s not forget that you should also be careful when purchasing a coin. For instance, you can use Moonpay to buy ethereum with a credit card, Bitcoin, and many other crypto coins.

4. Not having patience and panic selling 

Cryptocurrency is a decentralized currency meaning that it has no central bank to back it up. That is why you shouldn’t expect any control over cryptocurrency and any entity to control their direction. It isn’t like the central bank that applies measures to avoid the destabilization of physical money. 

Cryptocurrencies are highly volatile, and you should have lots of patience knowing that you are going to deal with market fluctuations every single day. Especially if you are a trader, this is even more important. 

Moreover, when things get rough, don’t start to panic and sell right away. This is a common mistake many beginners make, as they sometimes won’t expect very high price fluctuations. Panic selling, in other words, is throwing your money away. Today, the value of a crypto coin may be at a record low, but tomorrow, it may burst and hit an all-time high. You never know, so don’t quit that quickly! 

Let’s take an example: I purchase a bitcoin that has a value of, let’s say, $65.000; after one week, the crypto market crashes, and the price of that bitcoin falls to $28,000. Let’s say after one month, the market price of one bitcoin that I bought goes up to $75,000. If I sold that bitcoin while it was at $28,000, I would have lost $37,000. Although, if I had waited and sold it after the market crash, I would have won an extra $10,000 when the value went to $75,000. 

5. Not diversifying your investments 

Another huge mistake many crypto investors will make is only investing in one coin. If you ask many about cryptocurrencies, usually, most of them will only know about bitcoin. That is because bitcoin was the first coin to start the crypto market and currently has the highest value out of the other coins in the market. 

Currently, there are over 6,000 cryptocurrency coins out there. Bitcoin has the highest market cap of $1.29 Trillion. Ethereum and Binance coin come right after bitcoin but are nowhere near the market value bitcoin has. 

Concentrating your capital on only one type of investment may not be the best idea and may even increase your risk of loss. For example, if one coin goes wrong, then you have other alternatives. You can try diversifying your investment into different coins such as bitcoin, ethereum, Binance coin, dogecoin, and other coins that seem to be doing good. 

You never know what may happen in the future, and it doesn’t necessarily mean that the coins you see today will always be at that same spot they are today. Bitcoin holds over ten times more value than ethereum, but maybe ethereum may hold more market value than bitcoin in the future. Perhaps even a new coin may come in the crypto game that may demolish the rest. You can never really know. 

The brightest idea is to analyze all opportunities in the crypto market, give them perspective and analyze trending growths that you can take advantage of. 

Conclusion

In this article, you learned the five common mistakes you should avoid when investing in the crypto market. Remember that you should initially think about your investor profile and find out what kind of investor you are. Please don’t go into the crypto market without researching, especially for this industry. It’ll never end up well for you. 

Only invest in apps that are trusted, don’t ever download any apps that are sketchy or not an authorized user. If you are investing lots of money, then be very careful where you are investing. 

The crypto market is decentralized, so don’t lose patience and expect it to be like the stock market. The government doesn’t back up any cryptocurrencies! 

And, never forget that every day, new coins may enter the crypto market. What looks bad or good today may not be the same story tomorrow. Always analyze the market and take advantage of trending coins. Investments never stay constant, neither should you!