Article contributed by Ren & Heinrich. Follow them on Medium here.
Photo by Sarah Kilian on Unsplash
Let’s jump right in.
1. Get rich quick mentality
We all know that if you play your cards right and with some luck, you can gain a small fortune by buying and selling cryptocurrencies. But very rarely does the ‘I became a millionaire overnight’ story actually take place. On the contrary. Even in the fast-moving crypto world, most people make their money by proceeding thoughtfully and methodically. Anything else quickly leads to disappointment.
What you should do:
- Develop clear goals. What do you want to achieve?
- Develop a plan to achieve those goals. Be realistic.
- Execute this plan and stick with it. Be patient.
Where you can learn more about this:
I share a lot of stuff on how to invest in crypto here on my Medium channel. Want to get even more free updates on crypto, economics, and investing? Follow me on Twitter here!
2. Trading with no experience
It sounds easy. Simply sell one coin for another as you ride to the top on the back of successful projects. For this to work, you need years of experience in analyzing and interpreting chart patterns. If you do not have this experience, you will most likely lose your money by messing up the timing.
What you should do:
- For beginners: stay away from day trading.
- For advanced users: learn how Bitcoin and altcoin cycles alternate, which signs are relevant, how to find the right time to buy and sell and how to keep your emotions under control.
Where you can learn more about this:
Here is a guide I wrote that helps you to better understand the typical patterns of Alt-seasons and how you can use this for your advantage.
3. Lack of research
It’s simple. To be a successful investor, you need to understand what you are buying. Without proper research, you’re just throwing blind darts and hoping to hit.
What you should do:
- Take your time to carefully analyze every coin and token you are interested in. Whitepaper, road map, use cases, target groups, tokenomics, etc. — doing proper research is not done in just 2 hours.
- Use multiple sources to get your information.
- Compare a lot of crypto projects to get a feeling for when something is marketing fluff and when it’s solid information.
Where you can learn more about this:
I wrote the most in-depth free guide about researching cryptocurrencies on the internet. You can check it out here.
4. Investing more than you can afford to lose
If it goes well, you’ve made a decent profit. If it goes wrong, you’re ruined. Don’t risk it.
What you should do:
- No matter how tempting the opportunity may seem, take a step back, think, and invest only what you can afford.
- Don’t max out your credit card, don’t take out a loan, and don’t ask friends or your family to give you some money so you can buy more.
Where you can learn more about this:
If you want to learn more about how to not screw yourself in crypto you should read this story about my buddy Steve and how he lost $20k in a crypto scam.
5. Emotional instability leading to FOMO and panic selling
Prices went up 10%? Buy, buy, buy! They dropped 10%? Crap, time to sell! Like this, you will surely lose your investment. It’s all based on feelings which means you will always be one or two steps later than the people who are making the real money.
What you should do:
- Do never chase prices.
- Research and pick a cryptocurrency before it’s pumping and then sell according to the price targets you have set. It’s not a foolproof method but it will take you a long way.
Where you can learn more about this:
I wrote an article about the 5 most important psychological rules when it comes to successfully investing in crypto. Check it out here.
6. Blindly following crypto influencers
I know crypto, business, and finance better than the majority of people. I made a lot of money with my knowledge. And yet I often make mistakes. So don’t take everything I say for granted. Some influencers even abuse your trust and make you buy coins for a high price that they previously bought cheaply.
What you should do:
- Never blindly believe an influencer. Always verify things yourself.
- Keep this in mind: if it’s too good to be true it is not true.
Where you can learn more about this:
This article on mashable gives some good insights into how some crypto influences trick people.
7. Having the wrong crypto portfolio
What is the better choice? Going all-in large caps or having a majority of your holdings in shitcoins? Finding the right balance in one’s crypto holdings is difficult, and many get it wrong, over-relying on certain assets or under-reflecting the prevailing market situation.
What you should do:
- Define your investment goals and assess your risk tolerance. Based on that build a crypto portfolio that reflects these facts.
- Learn to react correctly to changes in the market by adjusting your portfolio.
Where you can learn more about this:
I wrote a guide about the 5 best crypto portfolios — for beginners and advanced users. You can find it here.
8. Thinking that a low coin price = big potential for future increase
Many newbies see a cryptocurrency with a price of $0.0003. Instigated by dishonest influencers, they think fantastic wealth is within reach when the coin goes to $1. It doesn’t work like that.
What you should do:
- Always check the market cap of a coin and compare it to others. Like this, you can quickly assess how realistic it is for a coin to reach a certain price.
9. No safety measures
Every year, people lose millions as they do not adopt the appropriate security precautions and behaviors to keep their crypto investments safe. It’s not sexy but it’s necessary. And you can do it with little effort — so do it now!
What you should do:
- Use hardware wallets.
- Stay away from sketchy exchanges.
- Keep your passwords safe.
- Don’t tell others about your investments.
Where you can learn more about this:
Here’s a good article to get you started.
10. No profit taking
Let’s wrap things up with something simple: do not get attached to your holdings. Sell when you reach your targets and take out profits. Put a part of these profits to the side for a bad day. Consider re-investing a part of the money in crypto, gold, and real estate when the opportunity arises.
