The crypto industry is relatively new, but it has surely established itself as another means to make money. Crypto.com’s annual market report shows that there are now over 580 million people who own crypto assets in one form or the other. One good thing about this industry is its versatility; people can earn money by investing and trading, staking (especially on POS networks), mining (POW networks), presales, DeFi yield farming, crypto lending, and Dex liquidity provisions. But trying to make money with crypto isn’t a walk in the park; well crafted strategies work together to ensure success. Despite this, many crypto traders and investors often encounter pitfalls that result in loss of money . Here are seven of them that you should avoid at all cost.
1. Looking away from investment diversification
“Never put all your eggs in a basket.” You may have heard this adage many times, but it rings true when crypto is involved. Any little shift in user sentiments or code based errors will cause a crypto asset to relinquish its value immediately, causing all your money to go down the drain if you invested in it. Fortunately, diversifying your crypto investment can give you a buffer when one fails on the market. While it’s standard procedure to invest in crypto coins, you can try your hands on crypto tokens. The BTC Bull Token, especially, is directly impacted by Bitcoin’s value, which means you can enjoy its benefits just as the major crypto’s value soars. You only need a DeFi crypto wallet (Trust, MetaMask or Best Wallet), and enough USDT or ETH to get started.
2. Prioritising short-term goals
Entering the crypto world for short-term trade may not be the best idea. First, you’ll have to speculate how the prices of cryptocurrency will be at a particular time, causing money loss in the shortest possible time if your prediction is wrong. Then there’s the high transaction fees you’ll have to pay for conducting so many trades on crypto exchanges. Instead, try long-term crypto investment. This way, you can survive the low seasons without losing your money. The key to long-term investment is careful research to see which crypto assets have the potential to increase their value over time, and the ones that have the hype for a while but lose their value afterwards.
3. Falling for FOMO (fear of missing out)
FOMO runs high in crypto circles, as traders and investors alike are looking for the next big thing. With crypto coins being introduced, it’s easy to get caught up in a tidal wave of optimism, especially with information of their potential spreading like wildfire. But, not all hype is justified; influencers are often paid to put these assets in a positive light. and you may just be investing in a coin that won’t live up to its promise. Besides, one good performance doesn’t justify a crypto coin’s inherent value. Therefore, always double-check any positive news on the hottest crypto in town, especially if it has a low market capitalization.
4. Being a victim for crypto scams
The crypto industry is not safe from scams, so you have to be careful. Since it’s a new industry, bad actors can parade a valueless currency as the new item on the market. People often fall victim to these schemes, especially because they are tempted by figures too good to be true. Aside from this, scammers can also hack your crypto wallet and drain your funds using emails or messaging apps. Blockchain analysis company, Chainalysis, estimated that cryptocurrency worth approximately $7.7 billion was stolen from victims through scams. While detecting scams can be quite tricky, you can protect yourself. Always read the published white paper of new crypto assets to see what they want to solve. If there’s no white paper, run in the other direction. Also, don’t connect your wallet to any app you don’t trust, and keep your password, private keys and seed phrases to yourself.
5. Forgetting your crypto wallet password, private keys, or seed phrase
A very costly mistake you can make is to forget your crypto wallet password. Unlike bank accounts, where staff can help you retrieve your account even after forgetting your password, your wallet, along with your funds, may be lost forever. Some wallets make room for this situation by providing private keys (long alphanumeric sequences) and backup seed phrases. Losing these too means a forever goodbye to your investments. Therefore, store these passcodes somewhere that you can easily retrieve them. But be cautious, so that no one can access them and steal from you.
6. Making errors when transacting
It’s pretty easy to lose money when dealing with crypto transactions. For instance, mistakenly putting in the wrong crypto wallet address could send your funds to the wrong person. The bad news, you can’t make a reversal and retrieve your cryptocurrency. Even a minor error, such as a misplaced decimal point, can cause so much loss. This happened to someone who sold a $300, 000 NFT for $3, 000 after putting in 0.75 Ether instead of 75 Ether. The only solution here is to be very careful when doing any transaction; always double-check the addresses and everything you type before hitting the send button.
7. Overlooking taxes and fees
Most crypto transactions come with blockchain or exchange fees and taxes, which could be quite expensive. But you can reduce them by researching the right bank account or debit/credit card, and use exchanges with affordable fees to save money. While at it, prepare for tax payments that could arise when you sell crypto assets.
The Conclusion
Making crypto online is possible, but only when you play your cards well. It’s also pretty easy to lose everything, especially if you make mistakes like those discussed above. It’s important to understand the industry and create the right strategies to get investment profits. While at it, protect your wallet details and avoid scams.
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