Crypto investments are becoming increasingly popular. Almost 15 years after the launch of the first crypto currency, Bitcoin. There are around 200,000 Bitcoin transactions every day, as of metrics captured in November 2022. The world counts over 420 million global crypto users, and the trend shows more and more users are entering the market. It’s no wonder why: The blockchain market is highly valuable, estimated to be $10.02 billion in 2022.
Yet, it is fair to say that while the crypto market is one of the fastest-growing industries around the globe, it is also one of the most devastating. When things go wrong, the results can be terrible, as demonstrated by FTX founder Sam Bankman-Fried who reportedly lost 23 billion dollars to the global crypto crash of 2022 shortly before he was arrested over fraud. Binance founder Changpeng Zhao is the crypto billionaire who lost the most to the crisis, reporting a net worth drop of around 82 billion dollars.
Despite the loss, Changpeng Zhao still remains the wealthiest crypto investor even after the market crash. But for everyday investors, the crash has poked an irreparable hole into the family budget. The truth is that you can’t always avoid abrupt and unforeseeable crashes in any market. Yet, the crypto market is likely to encounter ever more sudden fluctuations due to still being in its infancy.
That being said, the majority of users are confident that crypto currencies are the future. As such, many perceive fluctuations as an inevitable aspect of a growing market. Crypto investments are more than a hobby. They are, for many, a means to build a second source of income that will become highly relevant in the long-term future. The crypto belief is also fueled by distrust in traditional currencies that can be too easily manipulated.
To put it in simple terms, crypto investors are multiplying. But, many fail to learn the essential safe trading practices to prevent harmful losses. While experts could not predict the crypto crash, experienced crypto traders were able to recover from it. On the other hand, amateur investors’ financial situation was left in shambles. Here are some of the everyday trading mistakes that affected their ability to recover.
They don’t educate themselves
One of the main reasons why crypto investors fail is because they don’t take the time to educate themselves on the topic. Indeed, while investing in cryptocurrencies can be a lucrative opportunity, the market has proven countless times its volatility and unpredictability. Therefore, without proper education and knowledge about the industry, investors can end up making poor decisions that inevitably lead to financial loss.
Seasoned investors, especially, are the most at risk as they try to apply their knowledge of traditional investment strategies to the crypto market. Crypto trading is not comparable to either stocks or real estate investments. Unfortunately, successful conventional investments do not guarantee crypto success. Experts such as James Crypto Guru are a valuable source of knowledge and training when it comes to the crypto world. With almost two decades of investment practice and not far from 15 years in the crypto market, James is equipped to share tips about the specificities of this market and strategy development. More importantly, he has also seen the emotional side of trading and understands the mental toll crypto investments can take on someone’s health. This, as much as a lack of education, can lead to dramatic losses.
They don’t follow the latest trends
Every market has unpredictable aspects. The crypto market has already shown through the global crash of 2022 that uncertainty can’t be fully ruled out. Yet, while it can’t be ruled out, it doesn’t mean that it dictates every movement on the market.
Crypto investment is a risky endeavor that requires extensive research in order to make wise decisions. From following the Bitcoin price prediction stats in real-time to keeping up to date with the latest crypto news, investors can’t afford to ignore developments in the industry.
There are 3 key reasons to keep up to date with the crypto trends:
- They can dictate long-term and short-term strategies
- They can help prepare for future foreseeable but unavoidable fluctuations
- They also highlight the market growth
They choose impatience in a volatile market
Selling too fast is a common mistake in any trading market. Stock market investors have burned many feathers through impulsive decisions.
What prompts the decision to sell in a volatile market? The answer is in the question itself. When the market is volatile, investors are looking to sell fast to reduce losses. However, in a fluctuating market, value can drop and rise fast. As such, selling as soon as a drop is noticed could actually lead to much bigger losses, as investors can never recover the lost value.
On the other hand, focusing on a long-term strategy can be more beneficial in the face of high volatility. When it comes to the crypto market, the strategy of hodling (hold on for dear life) requires investors to keep their crypto currencies for at least over a year. Experts note they see the best profits when selling their crypto after hodling for 3 to 5 years or more. As such, it is fair to note that some of the most profitable crypto investments focus on passive long-term waiting.
They put all their eggs in the crypto basket
Crypto investments can be an effective and valuable part of your investment portfolio. Yet, enthusiastic crypto investors make the mistake of focusing too much on crypto and dedicating too much of their investment budget to the market.
This can be harmful for many reasons:
- Hodling, the most effective investment strategy, is designed for long-term outcomes. So, there are no immediate wins, and your assets are frozen until they are ready to be sold.
- Crypto fluctuations are still frequent and can lead to extreme losses.
- With new currencies being created every day, the crypto market remains one of the least predictable and regulated investment platforms.
Financial planners recommend dedicating 2% to 5% of your investment portfolio to crypto. Enthusiastic crypto investors can go as far as 10% as long as their portfolio is diversified and can take a potential loss.
There is no denying that the crypto market is growing and changing as we speak. There is still a long way to go before crypto investments can become mainstream and better understood. But in the meantime, if you are considering starting a portfolio, make sure to avoid these costly mistakes.