We all want to avoid them. But mistakes happen, especially if you have taken a step in the crypto industry. According to the sources, Investors have lost billions in cryptocurrency scams. Mistakes can be mitigated or avoided with the right planning and information. Let’s see what the common mistakes are and how to avoid them.
1. No proper planning before investing
Any investment needs to be in line with your financial goals. How much money do you wish to make, and for what term (long-term or short-term)? What is your risk-taking capacity? etc. Even after investing, you must plan-do you want to take the profit or completely withdraw the coins?
For example, it doesn’t count how much you pay for a cryptocurrency if you plan to hold it long-term. The value will likely go up for some popular cryptocurrencies such as bitcoin, ethereum, etc. Sure, there are better and worse moments, but the returns are mostly positive when you invest for the long term. On the other hand, you may gain potential returns if you invest in cryptocurrencies with a low market cap. But if you invest at a higher price, you may have to wait a long time for it to gain substantial profit, or maybe you will even ever recover the amount invested.
2. Influenced Through One-Sided Opinions
How did you get keen on crypto? What are your sources of gaining information? Maybe you will follow a YouTuber who has excellent knowledge about cryptocurrency or is connected to an organisation. Still, It is always better to collect different opinions instead of gaining knowledge through only one source of information. It will help you better understand the crypto world and a better image of the market situation.
You need to gather information because, what may be a wise option for one individual, may not be appropriate for others because of different risk tolerance or goals regarding that investment.
3. FOMO (Fear Of Missing Out or just buying high)
When you see the value of your assets skyrocketing in price, you react and sell it immediately. The desire to sell the asset is even more so if you’ve missed out on previous similar opportunities. The point is, what went up must come down. If you’re investing in the asset at a higher price, you may need to wait a long time to break even.
4. Lack of Appropriate Security
Keep in mind that crypto is unregulated, and if the government anytime imposes a ban, the possibility of recovering your coins is near none. There are a lot of fake profiles of crypto influencers on all web. It is essential to be careful with the scammers on YouTube, Twitter, Telegram, etc. If you are connecting with an organisation, you need to research and trust. For the most part, they offer a few insane great offers that guarantee to double your crypto in minutes and disappear yourself, and so many people have lost their money in this type of scam.
5. Investing money you cannot afford to lose
You should only ever invest in crypto if you can afford to lose. Of course, nobody wants to lose money! Crypto is highly volatile, and those amazing gains may go hand in hand with the risk of huge losses. The lower the market cap of the crypto, the higher the volatility and risk. How much return you’ll receive depends on your personal experiences and risk tolerance, but make sure that you know the risks involved and the worst-case scenario.
There is no guarantee that you will make money by avoiding these mistakes? Of course not. But it may help you reduce the risk.
For any clarifications/feedback on the topic, don’t hesitate to contact the writer at namita.shah@cleartax.in.
I’m a chartered accountant and a functional CA writer by profession. Reading and travelling in free time enhances my creativity in work. I enjoy exploring my creative side, and so I keep myself engaged in learning new skills.
