With a steady influx of newcomers entering the crypto space, it’s a good idea to look at some of the most common pitfalls that lead to getting rekt. Even experienced traders and long-time cryptogeeks get burned once in awhile by making one of these common mistakes, but being aware of potential disasters is the best way to avoid walking into them.
#1 Getting Cocky
Many of the biggest mistakes crypto traders can make stem from getting cocky. It’s easy to feel like an unstoppable genius when the market is moving in your favor, but it’s always important to remember that things can turn around at any moment. Self confidence is a good thing, but getting too confident can lead to sloppy trades and emotional decisions that aren’t necessarily well thought out. Maintaining a successful portfolio over time requires patience, skill, and often the ability to see bad decisions for what the are and cut losses.
#2 Not using strong passwords and 2FA
If something like a gmail address and “password123” is the only thing standing between your funds sitting on an exchange and you, you’re tempting fate. Blockchain may be revolutionary as a security protocol, but exchanges are not impenetrable – especially not some of them! Two-factor authentication is simple to set up and it drastically reduces your exposure to cyber-threats concerning your exchange accounts. Even so, it’s not recommended to store your funds on an exchange unless you’re actively trading with them.
Fear-of-missing-out has been the driving force behind many a bad decision. It rears its ugly head in different ways, but the most common form of FOMO occurs when a giant green candle forms on a chart. You see that candle and think, “Hooo boy, that’s so big and green! I wish I had bought in yesterday! Better buy in quickly now before it moons even more!” Of course, as soon as you impulsively buy in, listening to the wraith-like croon of FOMO whispering in your ear, a giant red candle forms and the altcoin of the day plunges back to an earlier price, leaving you rekt.
#4 Only looking at price
It’s easy to get caught up on prices. For newcomers, in particular, it’s easy to hear about Bitcoin going from rags to riches and imagine that any coin currently available for $0.05 is a steal and will inevitably follow in Bitcoin’s footsteps. Even for those who have more experience with crypto, price can still be a point of fixation. Of course, price matters, but it probably shouldn’t be the only thing you’re looking at when you’re thinking about investing. The technology behind a project, the developers involved, how it integrates into an existing market, and other fundamentals can give you the background to evaluate whether a project’s price reflects it’s value. Is the tech amazing? Is the team strong? Do you think there is a need for this coin? Do you think it’s going to succeed in the long term? If the answer to all of those questions is “yes,” then the current price might not be that important. If the answer to all of those questions is “no,” then even at $0.05 it seems like a bad deal.
#5 Sending the wrong coin to the wrong wallet
This is a real face-palmer. And, you can actually lose a lot of money if you mess this up. Sending the wrong currency to the wrong exchange address can be irreversible sometimes and the coin is lost and gone forever. You can avoid this unfortunate situation pretty easily. All it requires a little bit of self control. Easier said than done when you see signs of a big green candle forming and you want to buy in ASAP, but a few deep breaths can really save the day when you’re moving digital assets around. Double check everything. Are you sure this is the deposit address, not the withdrawal address? Are you sure this is the right currency? Did you accidentally click BCH instead of BTC? All set? Are you sure you copied and pasted the entire line? Into the right spot? Ok, good job. Now check again.
#6 Not being a part of the crypto community
Crypto is incredibly fast-paced, and it can be pretty hard to keep up with the constant influx of new awesome projects, exchange-related dramas, rumors, news, scandals and developments. Finding a good online community, like the CoinMetro Telegram channel for example, is a great way to stay informed, meet like-minded people, and expand your understanding of the revolutionary technologies surrounding this space.
#7 Listening to people on the Internet
Ok, so I know we just said how important it is to find a community. That still stands, but, it is also important to be discerning and do your own research when it comes to actually investing your money in projects. While there are lots of amazing resources online and awesome crypto communities, there are also a lot of paid influencers and shills. It is always a good idea to form your own opinions and learn as much as possible about the projects you’re interested in before making decisions about investing.
#8 Not being in control of your private keys
Whoever controls your private key controls your funds. When you think of “your” crypto wallet, that wallet is actually just a wallet that belongs to whoever has the private key. If that person is not you, then it isn’t really your wallet. Entrusting all of your funds to an exchange or a third-party wallet service is a big mistake, even if those services have the best of intentions and great security. Millions of dollars have been lost in this way, through hacks and crashes.
#9 Expecting massive gains right away with no effort
Is this possible? Yes. Is it guaranteed? Definitely not. It’s true that crypto is a highly volatile space, and that’s part of what draws many people to trading digital currencies. Things can move up quickly and drastically, but, as with all markets, they can also move down with equal force. Patience is key to crypto, particularly for inexperienced traders. Investing in solid projects and holding for a longer term is generally more likely to pay off than trying to play the market. Timing buys and sells accurately is hard work, and you’re unlikely to get it right every time.
#10 Expecting to make a huge profit from mining
There was a time, many years ago, when you should have mined Bitcoin. That time is over. Today, it requires a lot of upfront cost to make mining profitable, and even then there is no guarantee. Mining most coins today requires expensive hardware, a lot of electricity, and fees to a mining pool. Can you still make a profit? Yes, but for the vast majority of people it will take several years to recoup the cost of hardware before actually seeing any sort of profit. If you choose to mine, it should probably be because you want to do it for reasons beyond just dreams of lambos.