Top 5 Beginner's Mistakes in the World of Cryptocurrency and How to Avoid Them

In today's world, only a lazy person doesn't hear about cryptocurrency, and it turned from a niche issue into a global phenomenon that attracts millions of people. The opportunity to quickly multiply capital, get rid of intermediaries and participate in a decentralized economy makes them incredibly attractive. However, as in any new field, newcomers often make mistakes that can cost them dearly.

For example, a traveler in an unfamiliar city runs the risk of getting lost without a map or a reliable tool like a free phone number tracker to check their geoposition. Similarly, an inexperienced crypto investor can easily lose their funds due to lack of knowledge. And here in the digital space, as in real life, control plays a key role. But in real life people have a lot of lifesaving apps and tools, for example like Number Tracker which helps them not to get lost and keep track of the location of their loved ones, ensuring safety. But at the same time in the world of cryptocurrencies there are no tools that would allow people “not to get lost” and not to lose their assets, to make clear decisions and control everything in order not to become a victim of scammers or their own inexperience. So today we are going to discuss exactly the most common mistakes of beginners in the world of cryptocurrencies and learn how to avoid them.

Mistake 1: Investing without Market Understanding

Many newcomers enter the crypto world with the hope of making a quick buck. They hear about the impressive successes of others - someone bought bitcoin at $100 and sold it for $60,000, someone invested in a little-known altcoin and became a millionaire. However, these stories hide another reality: the vast majority of people lose money because they do not understand the market.

One of the main problems is following hype. For example, in 2021, the Shiba Inu token soared 60,000,000%, making several investors fabulously rich. Against this backdrop, thousands of people started buying it up without analyzing it, but after the peak, the rate plummeted and most of the newbies lost money.

So what to do before buying something and avoid mistakes? First of all, as cliché as it may sound, you need to study the market before investing. To do this, you need to familiarize yourself with its whitepaper - an official document where the developers describe the goals, technologies and mechanisms of cryptocurrency. It's also worth studying the team behind the project: if the developers have no experience in the blockchain industry or are hiding their identities, it could be a red flag.

Moreover, you need to understand market cycles. The cryptocurrency market is subject to high volatility, and phases of growth (bull market) are followed by periods of decline (bear market).Many beginners buy assets at the peak of the price, not realizing that this may be the end of growth, not the beginning.Analyzing historical data, understanding market trends and news will help you avoid emotional decisions and protect your capital.

Finally, you should not invest all your funds in one project, even if it seems promising. The cryptocurrency market is unpredictable, and even the most promising coins can suddenly depreciate due to external factors or problems within the ecosystem. Portfolio diversification reduces risks and allows you to minimize possible losses.

Mistake 2: Using Unreliable Wallets and Exchanges

Beginners often store all their crypto assets on centralized exchanges, not realizing that they can lose them at any moment. In history, there have already been several high-profile cases when major platforms shut down, leaving users without funds.

For example, in 2019, Canadian exchange QuadrigaCX declared bankruptcy after its founder died suddenly, taking with him passwords to wallets containing $190 million in client funds.

Another risk is hacks. In 2022, more than $370 million went missing from crypto exchange FTX, and tens of thousands of users never recovered their assets.

How to avoid making a mistake:

1. Use cool wallets. The best way to store cryptocurrencies is with hardware wallets (Ledger, Trezor), which are not connected to the internet and thus inaccessible to hackers. They provide a high level of protection but require caution: losing the seed phrase (the mnemonic phrase for recovery) means losing access to the funds.

2. Choose exchanges with a high reputation. You should not store large sums of money on platforms with a dubious history. It is better to use exchanges that have been on the market for a long time, have licenses and positive reviews. But be aware that even reliable platforms can be attacked, so it is important to withdraw the bulk of your funds to safer depositories.

3. Set up maximum security. Enable two-factor authentication (2FA) on all cryptocurrency-related services. Use complex, unique passwords and store them in secure managers. Always record and store the seed phrase in a secure location, preferably offline.

Ways to store cryptocurrencies: pros and cons

Mistake 3: Ignoring Personal Data Security

The cryptocurrency world is anonymous, but that doesn't mean your data is safe. Scammers have plenty of possibilities in their arsenal, e.g., engineering techniques, phishing attacks, and fake websites to gain access to users' wallets.

In 2020, hackers hacked Twitter and posted ads on behalf of celebrities (Ilon Musk, Bill Gates, Barack Obama) offering to double the bitcoins sent to them. Naive users transferred more than $120,000 to the scammers in just a few hours.

So, to avoid losses due to carelessness in handling cryptocurrencies, you should follow a few simple but important rules. First, never share your private keys and SEED phrases. These are the primary data for accessing your funds and they should never be entered on third-party sites or shared with others, even if they appear to be trusted. As losing these keys can lead you to a complete loss of control over your assets.

You should also be aware of phishing attacks (which now become increasingly sophisticated). Always check the URL before entering your details on an exchange or wallet. Make sure you are on the official website and avoid clicking on links from unknown sources.

In addition, use VPN tools to increase your security while accessing cryptocurrency platforms. Due to using VPN, you can encrypt your internet connection and hide your location to protect your data from snooping and possible attacks.

Mistake 4: Neglecting Risk and Money Management

The desire to get rich quickly often leads newbies to make hasty and unjustified financial decisions. They may invest all their money in one asset, counting on rapid growth, or use leverage without realizing all the consequences. Some even go to extreme measures - taking loans or mortgaging property, hoping for a quick profit. However, the cryptocurrency market is known for its volatility, and one sharp price movement in the wrong direction can lead to a complete nullification of the deposit.

For example, during the market crash in 2021, thousands of traders lost millions of dollars due to liquidation of margin positions. They used leveraged funds hoping for growth, but the sudden downturn caused their trades to automatically close with complete capital destruction.

What are the points to consider here? Invest only the amount you are willing to lose. Never risk money that is meant for life. It is also important to diversify your portfolio, i.e. keep assets in different cryptocurrencies, and part of your funds in stable assets (USDT, gold).Moreover, you should not use leverage without experience (it allows you to trade with amounts exceeding your real deposit, but at the same time increases risks).One unfavorable price jump can lead to a complete liquidation of the account. That is why you should use it only after thoroughly studying all the nuances and with minimum odds.

Mistake 5: Lack of an Exit Plan

Another common mistake is the lack of a clear exit strategy for an investment. Many beginners buy cryptocurrency, hoping that its price will only go up, and do not think about when and under what conditions they will lock in profits. This leads to a situation where the investor holds on to the asset for too long, ignoring market signals, and then loses a significant portion of their potential gains.

A good example is the situation with bitcoin in 2017. Its price reached a record $20,000 but collapsed to $3,000 just a few months later. Many investors who did not record profits at the peak remained in the minus and waited for years for the market to recover.

How to avoid the mistake:

• Define goals. Decide ahead of time what time horizon you're aiming for - whether you want to lock in profits after a year or hold the asset long-term, such as 10 years.

• Use an exit strategy. One of the best approaches is to sell in installments. For example, sell 20-30% of the asset when certain price levels are reached. This helps lock in profits and reduce risk.

• Do not give in to greed. Many investors lose everything because of the expectation of “impossible heights”. It is better to sell a part at the peak than to take risks and miss the moment. You should exit your position gradually, locking in profits and reinvesting more consciously.

Marathon, not Sprint

Mistakes are an integral part of any investor's journey, but in the crypto world, they can cost too much. The main thing is not to look for only quick wins, as well as to build a strategy for years to come. Be careful, study the market and remember that control, knowledge and awareness are the three pillars on which success in the digital economy is built.