Are You Making These Mistakes in Crypto?
Getting into a new market is exciting. Finding a new way to make money excites even the most conservative investor. This article will point out common pitfalls that new investors in the crypto space make.
Invest In What You Know. Eager investors have a tendency to make irrational investments with the hope of making money quick. This bull market will revive the hype of investing in all things blockchain and crypto. ‘Fear of Missing Out’ (FOMO) will start to creep in and it’s up to you to stick to a strategy that will build a solid position over time. That being said, only invest in projects that you understand. Research the basics and work your way up to complex projects in blockchain.
Leverage. Stay away from leverage and day trading. Like traditional markets, outperforming indexes is extremely hard to do over time. Sure, you’ll get lucky once in a while but transaction fees will eat up your profits. It’s better to dollar-cost-average over time and resist the temptation to go all in.
Decentralized Finance (DeFi). In 2017 the bitcoin bubble was fueled by the Initial Coin Offering (ICO) craze. This new form of raising capital for projects is similar to the traditional Initial Public Offering (IPO). This bull run will be hyped by DeFi and all its innovative ways to make money. DeFi has opened up blockchain to new markets like credit, real estate and insurance.
Scams. It’s in your best interest to learn how to protect yourself from bad actors in the space. There is no regulatory body ruling over crypto so it’s a free-for-all. This makes it your sole responsibility to protect your money and assets. Here are 4 things that you want to check for when researching a project:
- Whitepaper: Make sure they have an authoritative report or guide that informs readers concisely about the issues or problems they’re trying to solve. It may also include complex concepts targeted to peers and fellow developers.
- Quality website: Projects that are worth investing have quality websites. Scammers don’t waste their time and money on a website that they’ll use for a short time. Also, be sure to look for information of the developers and partnerships the project has on their site.
- Github: Be sure to find them on Github. Spot for consistency in the development of their project. If there are few contributors and the code is rarely being touched then walk away.
- Contact: Many creditable projects stay up to date with their users. Find out if they have Twitter, Facebook, Discord or Telegram as a means of outreach. Projects that are focused on long-term growth focus on the consumer’s need. Use these platforms to interact with the developers and see if their vision is something you’re willing to support.
Apart from researching coins and projects be weary about scams despised as business opportunities. The most common one is sending crypto to an address and them promising to double it. They have gone as far as hacking famous twitter accounts so keep in mind that if it’s too good to be true, it probably is.
Take Profits, Stop Losses. It’s important to remember that markets work in cycles that are impossible to time perfectly. Don’t get too greedy and accept lost battles. Have an enter and exit strategy for when markets turn and remember that you don’t make or lose money unless you turn it into cash. Anything else are just numbers on a screen.
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