Investing in crypto is an opportunity to get a lot of returns. On the other hand, prices can rise and fall quickly. Therefore, experts classify investing in crypto among risky investments. However, many losses are caused by mistakes.
To make sure you don’t make those mistakes yourself, WANT editor Robert Kroes lists them.
#1 Not enough Crypto knowledge
If we give you 100 euros to invest in the stock market, it makes sense that you would first do some research. ‘In which companies can I score returns’ and ‘What terms are used in stock market trading’? Are then logical questions. Yet there are many people who invest in crypto without (much) knowledge.
They often go off on stories in the media or prices of sharply rising crypto currencies and then randomly decide to invest a sum of money. Unfortunately, that’s not how it works.
So to increase your chances of making a return, you must first educate yourself on the subject. Fortunately, you don’t have to do this for nothing, as we showed earlier that by gaining knowledge you can earn crypto coins for free.
Bitcoin (Image: Pexels / Alesia Kozik)
#2 Investing with the right amounts and calculating the right returns
Once you have gained some (basic) knowledge, the next important question is on the table. How much money are you going to invest? If you invest with money that you need for your fixed expenses there are 2 problems that can cost you returns:
First, you are tied to a fixed time to withdraw your investment because you have bills to pay. If the price is just then in a dip you can lose a lot of money;
If there is indeed a bearish trend going on in crypto, the proceeds from selling your crypto may turn out to be insufficient to pay the bills. This will put you in financial trouble.
This is why it is important to invest only with money you can spare. In this article, we explained how to find out if you can spare money and if it is wise for you to use it for crypto investing.
Of course, it is also important to keep up to date with the live Bitcoin price and the prices of the top 25 crypto. On the site of Tradeincrypto.com you can check the live Bitcoin price and the prices of the top 25 crypto 7 days a week and 24 hours a day.
Crypto (Image: Pexels / Karolina Grabowska)
#3 Making sloppiness and calculation errors in crypto
When transferring crypto from one wallet to another, it is important to make a good note of the wallet’s address. This is because due to the pseudonymity of crypto trading, a wrong transaction cannot be undone. So that means that if you copy the wallet address incorrectly, you will lose your crypto.
Wallet addresses are very long so many platforms offer the option of “copy paste. Still, it is good to check that your wallet address is correct even after pasting. You do this by checking the first 2 and last 3 characters after you paste.
A second category of mistakes are the calculation errors you can make when investing in crypto. For example, a common mistake is this price calculation. If a price falls by 50%, many beginners in crypto will automatically answer that it must also rise 50% to get back to its old level.
If you do the calculation you will find out that this is not correct. In fact, to compensate for a 50% drop, a price must rise 100%.
The third mistake that many beginning crypto investors make is that they overestimate themselves. This is because they often forget to include two items in their calculation of returns. These are:
The tax. This is because you have to pay tax on crypto. This is calculated on the balance you have in crypto on January 1. How high the tax is depends on your actual assets. This is because the profits you collect through the year can be part of your assets (if you don’t spend the profits).
The transaction fees of your crypto exchange or trading platform: another cost that people often forget is the transaction fees that an exchange charges. Because of this, if you use a crypto strategy that requires a lot of transactions such as the Dollar Cost Average strategy, you can lose a lot of return because you have to pay transaction fees on every transaction.
Crypto (Image: Pexels / Karolina Grabowska)
#4 Not daring to lose a crypto
As an investor in crypto, of course you always want to make a profit. Unfortunately, reality is more unruly and crypto currencies can record hefty losses. For many novice crypto investors, it is difficult to take losses and exit.
Yet even the most successful investors will lose billions in crypto. Therefore, dare to cut your losses and get out if prices fall too much.
#5 Trading based on FOMO and FUD, or emotion
Choosing the right time to enter or exit can cause headaches. Many people see the price of a crypto skyrocketing and are afraid of missing the boat (called Fear of Missing Out, FOMO). Experienced investors use rational strategies and have often seen this rise coming. Conversely, the same applies to rapid price declines.
Being guided by negative news (called Fear, Uncertainty and Doubt), they also decide to sell quickly, while much of this FUD consists of rumors that only temporarily lead to price losses.
Therefore, never be tempted to crypto investing based on emotion, but choose a strategy in advance and agree with yourself that you will stick to it even if the market moves extremely.
Bitcoin’s well-known logo (Image: Pexels / Roger Brown)
Practice investing in crypto breeds art
As we can see, there is quite a bit involved if you want to invest wisely in crypto. To avoid getting cold feet, it is of course always a good idea to practice investing in crypto without financial risk. This can be done, for example, by creating a free account at virtueelbeleggen.com.
Here you can practice investing in crypto with virtual money, i.e. without risk.