Avoid These 5 Big Mistakes When Investing in Crypto – MakeUseOf

There are now millions of people worldwide who have invested in one or more types of cryptocurrency. Bitcoin, Cardano, Ether, there’s a huge list of coins to choose from, but it’s hard to know which one is right for you. What’s more, people make so many mistakes and miss so many red flags when investing in crypto.

So, let’s talk about the biggest mistakes to avoid when investing in cryptocurrency.

1. Investing Because a Coin’s Worth Just Went Up

One of the most common mistakes that beginners make when investing in crypto is buying a particular coin just because its price or market share recently increased. The thing is about the majority of crypto value jumps is that they don’t usually last. Cryptocurrencies fluctuate massively in value, and that’s just the nature of the industry.

Take Dogecoin, for example. In October 2021, its value saw a relatively sharp increase, from $0.234 to $0.308 per coin. Many saw this as a good sign for Dogecoin, but the excitement wasn’t to last. Just a few days later, its value was almost back to where it started. Dogecoin has also seen big jumps because of big names promoting it, such as Elon Musk. But such price hikes usually come and go in less than a week or two. So it’s important to think twice before relying on a sudden increase like this.

2. Investing Before Researching The Coin

When an industry booms, it’s natural for criminals to try and capitalize on investors to make a buck, and the crypto industry is no exception. A hugely popular scam at the moment is the creation of scam coins (less affectionately known as s**t coins). This involves launching a coin, promoting it (sometimes even with the help of celebrities or social media influencers), and then jumping ship once enough has been invested.

An example of this was Squid Coin, launched after the release of Netflix’s most popular show in history, Squid Game. This crypto managed to raise about $3.4 million of investment funds before the developers pulled the rug and made a run for it with all the money. Unfortunately, it’s common for more inexperienced investors to fall for scams like this, and there are millions of such individuals out there right now.

So, to avoid investing in a risky coin, it’s always good to thoroughly research the company first to know exactly who you’re dealing with.

3. Investing in Just One Type of Crypto

There’s nothing wrong with starting with one kind of crypto coin. Everyone has to begin somewhere! However, people often make the mistake of relying on just one coin. And, regardless of how promising that coin might look right now, putting all your eggs in one basket can be risky, especially in the world of cryptocurrency, where a coin can be skyrocketing one minute and then crashing the next.

So it’s not a good idea to invest a significant amount of money in just one coin, especially if you’re relatively new to the crypto industry. Try familiarizing yourself with multiple coins first (refer to the previous point: research before investing!).

4. Following the Current Crypto Hype

Have you ever noticed that specific coins get a ton of publicity? Maybe a celebrity promoted them, or they’re associated with a big name (such as the aforementioned Squid Coin). Regardless, sometimes there is a surge of hype surrounding a coin, but that doesn’t necessarily mean it’s a good investment opportunity. People can lose big bucks because they jumped the gun when things seemed to be going well for their chosen coin.

5. Buying a Coin Just Because It’s Cheap

This is a tricky one because some can’t afford to invest a lot in crypto. While this is totally understandable, it’s sometimes a lot more worthwhile to invest in a fraction of a coin that’s got a reliable future. People often make the mistake of buying multiple coins for a lower price, but this can often result in putting your money in less established, and therefore less promising coins (of course, the opposite may also be true). So be aware of this before you decide which coin to invest in.

The Crypto World is Unpredictable

There’s no way to know for certain where any given coin will go next, and that’s why it’s important to ensure that your investment is as well-researched and reliable as possible. So make sure you avoid these pitfalls when deciding where to put your cash.

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