6 Biggest crypto mistakes to avoid as a beginner

Investing in crypto has the potential to be a rewarding experience, especially with new coins and projects regularly emerging. However, for those new to the market, it can be a confusing and rather overwhelming, especially at times of great market volatility.

So, how can you navigate crypto investing without losing all your hard earned cash? To help, here’s a few common crypto mistakes to avoid as a rookie.

Not doing your research

Just like with any investment, it’s absolutely crucial that you do your own independent research on the cryptocurrency or asset you’re investing in, as well as understanding the current conditions of the market.

This type of research often includes understanding what type of cryptocurrency it is, its performance to date, its current demand, and expected longevity.

For an extra level of assurance and due diligence, you can also consider digging  deeper by reading the cryptocurrency’s whitepaper, finding out its market capitalisation (market cap), researching its team and developers, and determining whether it has any interesting unique functions or utility.

Related article: How to buy cryptocurrency in Australia in 5 easy steps

Following the hype

While it might seem tempting to invest in a booming cryptocurrency that Elon Musk is tweeting about and daydream about all the potential profits that you could rake in – this unfortunately isn’t always reality.

Fear of Missing Out (FOMO) is one of the main reasons why beginners lose money early on in their investment journey. It’s important to not act on impulse and buy into the hype, as you may end up with more pain down the track.

Investing more than you can afford

The real golden rule of investing is to only invest what you can realistically afford to lose. While some “experts” might claim that you won’t earn a decent return unless you pour large amounts into your crypto portfolio, the truth is, there are no  guarantees in any financial market. Following this rule, helps keep emotion out of your decision making.

Related article: How to choose a cryptocurrency exchange

Letting your emotions take over

It’s important to always invest with your head not your heart, and this definitely rings true with crypto. As crypto is a volatile asset class that can invoke a lot of passion, it can be easy to get overly confident when your crypto investment rallies, and then panic when it suddenly drops.

Rather than panicking when this happens, try to remember that all markets can be volatile, so it’s best to remain calm. You should take a step back and then reassess your investments based on your initial strategy and research.

Putting all your eggs in one basket

Although it can seem like a good idea to only invest in your favourite cryptocurrency project, you should be wary of putting all your eggs in the one basket.

Why? Because if that particular crypto suddenly goes down, you have no other assets to help protect and limit your losses. Instead, it’s considered best practice to diversify an investment portfolio with a mix of different crypto assets, as well as explore the option of different asset classes such as stocks, bonds, private equity, property and commodities.

Related articles: Opinion: Are you failing the diversification test?

Picking a platform without proper security & local support

If you can, try to find a local and regulated exchange that offers 24-hour support and has local licenses. Also look for platforms that are registered with AUSTRAC and Blockchain Australia. The benefit is if something goes south, you want to make sure your investments are protected by local laws, and you have adequate around-the-clock support from responsive customer support teams.

The crypto market doesn’t need to be overwhelming, and you will likely have a greater experience if you arm yourself with the knowledge needed to mitigate any silly and avoidable mistakes.

Cover image source: fizkes(Shutterstock.com)