6 Amateur Mistakes to Avoid When Buying or Trading Crypto
Investing in cryptocurrency is becoming a trend these days. People of all ages are joining in. However, amateurs get into this market, fail due to their shortcomings, and flee within weeks. So, what are the things that they are doing wrong? Let’s find out.
Not Understand How Blockchain Technology and Cryptocurrency Trading Works
Cryptocurrency markets are unpredictable. The values of these cryptocurrencies are volatile. As a result, when someone new enters the market, they feel confused, unless they know about it beforehand.
Recently, crypto’s popularity has forced many to jump into this market without gaining any knowledge first. As a result, you’ll see people from all backgrounds looking to invest in cryptocurrency markets without knowing how crypto trading or blockchain technology works. Of course, there’s no need to delve deep into the technical side of things. However, a bit of background study regarding these things will always prove helpful.
Not Analyzing the Cryptocurrency Markets
The data available on cryptocurrency across various platforms and exchanges are vital to the crypto trade. That data holds information regarding the value of crypto against the USD, which one has a higher market cap, how much the prices are fluctuating, etc. These data points are vital when you want to trade cryptocurrency or conduct crypto transactions.
Among all the available data points, the price fluctuations and market caps are super important. However, amateurs usually don’t take note of these and instead trade based on the currency’s value. Not only is it the wrong approach to crypto trading, but it can also lead to serious losses.
Analyzing the crypto markets becomes more necessary when selling. Amateurs will note the market value at one time of the day and then sell it hours later. At that point, they’re still thinking that the market value remained unchanged. However, crypto’s volatility comes into play here. Not looking at the market value while selling and taking predictions into account can lead to losses when selling cryptocurrency.
Choosing Cryptocurrency Value Over Cryptocurrency Market Cap
When you look at a crypto exchange, you’ll see that cryptocurrency prices vary from time to time. Given how volatile cryptocurrency is, these variations often seem absurd—for instance, a Bitcoin’s price changes by five to ten percent each day. Every week, you may find that one Bitcoin costs $35,000 at the start of the week and falls to $32,000 by the end of it.
Since the values change absurdly, it’s never wise to purchase cryptocurrency based on its value. Instead, always look toward the cryptocurrency market cap to make your decision.
Crypto with a high market value but low market cap reaches its end within months or even weeks. Some of them might even be scams. Therefore, never put your faith in the cryptocurrency value. Always opt for the one with a higher market cap.
Not Buying from a Cryptocurrency Exchange
Amateurs avoid exchanges thinking they are unfair or often not transparent. However, exchanges offer quick and user-friendly trading facilities. Of course, you do have to pay transaction fees, but that’s a small price to pay given the platform they provide you with.
Excited about the possibilities, amateurs will trade chaotically. These trades are often unscheduled, thinking that luck will favor them.
However, as we mentioned earlier, cryptocurrency markets and trading require you to analyze first. Thus, there’s no scope for unscheduled or chaotic trading. Each approach must be meaningful because you have a strategy in mind. It won’t always guarantee success but will surely prevent serious losses.
One of the biggest mistakes amateurs and beginners make is getting emotional about trading crypto. That leads them to make irrational decisions when buying or trading crypto, which can never end well in this market.
When you think emotionally while dealing with cryptocurrency, your vision gets cloudy. A real-life example of this could be the recent Squid Coin scam of 2021. When the Netflix show, Squid Game, became a huge hit, scammers capitalized on it and came up with Squid Coin. People didn’t stop to even think about the origins of this crypto and its sustainability. They just bought it.
In the end, the scammers absconded, making over $3 million in the process.
Emotional thinking can also lead you to buy crypto that’s having a momentary success. You might see your friends suddenly investing in an unknown currency, and you join the hype train. However, not doing your research and simply trusting others won’t help you much in this market.
So, avoid these mistakes when you get into the crypto trading scene. While avoiding them won’t always guarantee success, it’ll surely keep you afloat longer and at least give you hope of success.