Top five mistakes all crypto newbies make

If you’ve been dabbling around Bitcoin and cryptocurrencies, trying to understand their essence through personal research, you’ve come to the right place. More and more, we see mainstream media cover Bitcoin thanks to its great profit potential and support from institutions. In a short period of time we saw the richest man in the world, Elon Musk, buy Bitcoin for Tesla’s balance sheet, following more than 20 public companies before him.

By all means, it seems like the right time to invest in crypto, especially Bitcoin. But then there are these horror stories of people who lost everything, or simply skipped buying Bitcoin when it was worth less than a dollar. We all make mistakes, and you have the luck to learn from them. So let’s take a look at the top 5 mistakes you should avoid when first entering the crypto scene.

Mistake #1 – Not understanding Bitcoin

Since everyone is buying Bitcoin so should I… right? This is the typical mindset of a retail investor who first discovers Bitcoin. The immense FOMO we are currently experiencing may lead individuals to put large amounts of money on a digital coin they barely understand because some influencer or news host told them to do so. But Bitcoin is so much more than a quick gamble, and investing simply to make money is a losing strategy.

If you manage to understand how money works and what problems Bitcoin resolves, you will be well ahead of your peers, and you will manage to finally realize why so many HODLers haven’t cashed out yet. If you’re looking for a great intro read, make sure you check out “The bullish case for Bitcoin” by Vijay Boyapati.

Mistake #2 – Emotional trading

No other market has as many amateur investors as crypto. With no barrier of entry and global access, everyone is getting introduced to the concept of trading. Technical indicators, analysis, trends… you name it! And for the most part, it’s quite fun and rewarding, at least for those that get started in a bull market.

But 90% of traders usually end up losing everything, and the reason for that is an underdeveloped emotional intelligence. This lack of overview stems from too little experience in the markets, no understanding of fundamentals, and an inability to control one’s feelings. As a result, traders make fast decisions without thinking and end up losing money by selling at low price points.

To improve your decision-making process, it is first important to understand how the crypto markets operate and familiarize yourself with the volatility that makes them so intimidating. Then, it might be a good idea to learn from people who have done your mistakes before and are now teaching others how to avoid them. This video is a great starting point.

Mistake #3 – Looking for [enter coin here] killer

Every cryptocurrency that is built by forking the protocol of its predecessor is not guaranteed to replace it. In fact, chances are that the coin will simply fail in direct proportion to the community behind its founders and proponents. A great way to see this at work is to look at all the 11 Bitcoin spinoffs, none of which are currently posing any threats. 

Instead of looking for the next coin that will perform a 1000x, it’s best to invest in the market leaders. That is, at least until you are comfortable risking your funds on uncertain opportunities.

Mistake #4 – Failing to understand market cycles

One of the most unique elements in the crypto market is its cycles. The bull and bear markets follow a 4-year cycle that is fueled by the Bitcoin halving and massively affects all cryptocurrency prices. The most interesting fact is the similarities with all those cycles, which seem to “rhyme” with one another, offering great investment opportunities.

Amateur traders that enter the space during a bull market are often overconfident in their decision since everything seems to be growing at a rapid pace. It is only later that reality hits, and their profits disappear in thin air. Their lack of emotional intelligence does not enable them to understand the shift in market sentiment, and thus in the direction of the markets.

Mistake #5 – Focusing purely on profit

When new investors enter the crypto markets, the only thought in their mind is how they can leverage the situation to earn more money. Soon enough, however, and only if they choose to learn about the coin’s fundamentals, the same investors will understand the importance of Bitcoin in the modern world. At this point, you get the opportunity to make a choice:

• Either you cash out the money and enjoy the profits;
• Or you choose to hold onto your coins.

The second option has led to most profits since the US dollar continues to devaluate while the market cycles of Bitcoin continue to elevate its value and consumer demand.