Cryptocurrency investing has been a prime topic of conversation in 2021 due to the bull run, this looks like it is going to dominate 2022 which is why it is grasping the attention of prospective investors. Although prices are higher than 2021, it can still be a viable option for those looking at building an investment portfolio. Although crypto investing can be risky, the rewards are great if done in time and invested carefully.
With the influx of new investors, it is only normal for people to need some helpful advice when starting, especially the mistakes that can easily be avoided. In this article, we will do just that, we will go through some tips and mistakes to avoid in cryptocurrency investing.
Have A Strategy For Crypto Trading
When you start to invest in cryptocurrency, chances are that you have seen some of your friends make a bit of extra money and has in turn encouraged you to do the same. With this being said, it is very easy to get sucked into the recommendations that have been made. This is great, but it can be difficult sometimes to sieve through the scams and the good recommendations; there are a lot of people out there after money. There has been an influx in crypto scams compared to 2020 with people losing an average of about £20,000.
A way to avoid this from happening can be a little tricky at first but it will get easier. When you are overloaded with information about cryptocurrency, it is best to stand back and look at this critically. How many users does it have and what problem does it solve should be the first questions, then find out if the project has actually done anything tangible that shows that they are doing what they say they are.
There are many articles out there trying to give advice on cryptocurrency and which coins are best to invest in, but the chances are that they don’t have your best interest at heart and can also just be trying to promote their own currency or organisation. So instead of making the same mistake as many others, ensure that you are only taking advice from professional brokers or from reputable sources. A safe way to invest is to set a limit on how much you are going to invest in a certain project and don’t stray from this budget as more investors lose money than make it.
Diversify Your Portfolio
There are many different currencies with crypto, and as you know, cryptocurrency prices are extremely volatile. With this being said, it only makes sense to spread your money across a range of different currencies just in case one drops suddenly which will, in turn, result in you losing your investment. It doesn’t pay to have all your investment in one currency as they fluctuate.
To get the best returns, have your eggs in a couple of well-researched baskets rather than one. This will help to protect you from being overexposed if a currency plummets. The best way to do this is to do your research and find what projects are working well and see what they have done to earn your trust.
Cryptocurrency Mistakes To Avoid
Buying Just Because Prices Are Low
Have you ever heard the saying, if it looks too good to be true, it usually is? Well, this is certainly the case with some cryptocurrencies. Cheap prices don’t always mean that you are getting a bargain, in fact, they are low for a reason. If you see cryptocurrency dropping users, you can gather that there is something fishy about it. Cryptocurrency is pretty insecure, and developers may leave the project and not update it which can cause a drop in users.
Going All In
If you have been hearing a lot about a certain cryptocurrency, it is only normal for you to have the urge to put all your investment money into it. Many trading platforms recommend that you maximise your spending, but in reality, this is a one-way ticket to being broke in record time. Instead of giving in to temptation and investing all your money into one project, invest around 5-10% of your capital and diversify as this can help you expand and also save you from any major dips that could potentially lose you a lot of money.
Falling For Scams
When the world sees a recovering market, there are many people who try to take advantage of this. This is especially the case with cryptocurrency and it is very easy to fall into their trap. Like we said before if it sounds too good to be true, it usually is. Don’t take information at face value, instead, do your research and ensure your trading platform has two-step verification at the minimum.
If you have hired a broker and they have advised you on purchasing some of these smaller projects that arent reputable and you lose money, there is a chance you can get this recovered by using wealth recovery solicitors who provide a range of different services including investment fraud.