Things People Get Wrong About Cryptocurrency – Cryptocurrency adoption is gradually growing as more individuals continue to show interest in the new technology. Since the launch of Bitcoin in 2009, it has gone from just a digital currency to an approved asset by cryptocurrency regulators worldwide.
As the trend grows, more investors are coming into the scene with the end goal of making profits. However, some of these enthusiasts are faced with some myths regarding cryptocurrencies and their investments. In this article, we will be looking at some of the things people get wrong about crypto.
So what are the top 3 things people get wrong about crypto investment?
1. Poor knowledge of cryptocurrency
Some individuals buy cryptocurrencies without doing any preliminary study. Regardless of asset type, this is a bad idea. Some people feel that Bitcoin is a get-rich-quick scam, which leads them to invest in sophisticated cryptocurrency exchanges and DeFi platforms. Caught up in the buzz, new investors may be tempted to overlook basic and consistent prospects for profits, such as dollar-cost averaging. Following the advice of obscure crypto-influencers who are either not informed professionals or have an agenda is a costly error made by many.
When a beginner clearly understands what cryptocurrencies are, how they work and also how to safely hold them can go a long way in preventing them from making mistakes and losing their funds. Learning the basics will make it easier by being familiar with those coins that have endured the longest and developed a reputation.
The more stable and substantial cryptocurrencies, like Bitcoin and Ethereum, are a smart place to start when developing a cryptocurrency portfolio and honing your crypto-literacy. Therefore, it is advisable to take your time before investing in Bitcoin or any other cryptocurrencies.
Beginners must learn how to choose, use, and purchase Bitcoin via an exchange. Not all exchanges are reliable and safe, nor are they all made equally. Exchanges have defrauded investors utilizing their platforms in a number of instances. Failure of exchanges, which results in the complete loss of consumer deposits, is another frequent occurrence. A famous example of this is the collapse of FTX, previously one of the biggest crypto exchanges in the world.
And last, a little crypto-knowledge will help a lot. For instance, acquiring early hardware wallet skills will help you avoid the all-too-common situation of your preferred exchange going out of business. Learn the expression “not your keys, not your crypto”.
2. Lack of trading strategy skills
This is by far the most prevalent mistake made by crypto investors, particularly novice ones. Cryptocurrency is a relatively new asset class with value propositions that many novice investors are unfamiliar with. It’s similar to Warren Buffet’s advice to “invest in what you know.” If you are unfamiliar with cryptocurrencies, you are investing in new territory. You might be out of your depth and end up losing money.
There are several methods to invest in cryptocurrencies, or any asset for that matter and complex tactics aren’t always the best choice. Half-baked strategies, on the other hand, seldom result in success. Many bitcoin traders who are glued to their screens 24 hours a day have failed due to short-term thinking. The high volatility may make this a tempting tendency to pursue, but developing and sticking to a strategy will help you navigate the volatile markets.
While keeping an eye on your investments is a crucial element of wealth management, doing so on a regular basis does not ensure success. Risk management is an essential component of every solid trading strategy, and determining the risk management profile that works best for your approach requires time and effort. It is natural to make mistakes when first starting out, but they will smooth out with experience.
3. Not paying attention to fees
Fees play a significant role in the crypto market. They are a source of money for exchanges, allowing them to remain open and active. Transaction processors charge fees to the Bitcoin network as an anti-spam tool. Fees are a fundamental feature of the Bitcoin environment and will be inescapable at some point.
While it is critical to put yourself up for success, any trading plan must account for expenses. Ignoring fees will result in lower returns for unanticipated reasons. Each transfer and exchange will be charged a price. As a result, it is critical to consider fees when determining whether or not your plan or assets are lucrative. Unless you’re a skilled high-frequency trader, the basic guideline is “less is more.”
Conclusion
Unsurprisingly, there are additional elements of the fundamentals of cryptocurrency investment that individuals frequently misunderstand. For instance, buying cryptocurrency is not a technique to avoid paying taxes. Depending on your nation and jurisdiction, you must still compute and pay capital gains tax on your cryptocurrency assets.
The three points mentioned here should act as an excellent beginning point for your cryptocurrency adventure even though there are many more. When in doubt, go to a variety of manuals and tools, including those on our website.