8 Mistakes People Make When Buying Crypto (Don't Do This)

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This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.

We all want to avoid them, but mistakes happen, especially in a burgeoning industry like crypto. Just last year, investors lost $3 billion in cryptocurrency scams, according to Australian Financial Review. All those assets are permanently gone.

With the right information, mistakes can be mitigated or avoided altogether. Keep reading to learn how you can avoid fraudulent business and keep FOMO at bay during your crypto journey.

1) Investing Above Your Means

Risk should be managed. Massive gains aren’t made by putting your entire savings into investments. It creates unnecessary stress, as you have your whole livelihood riding on the market. 

CNBC Select suggests keeping investments around 15% of your pretax income. Personal Finance Expert, Tori Dunlap, recommends a conservative 5% of income should go towards crypto investments. If you make a profit off of this, great. But if the value of your assets drops, it won’t have a massive effect on your overall savings. 

2) Not Setting Clear Timelines

When purchasing a coin or any other asset, consider your ultimate goal and style of investing. Are you focused on long-term growth or do you anticipate a market change? Before investing, decide how long you intend on holding an asset and stick with that choice. 

Of course, crypto can be volatile. Even still, only make a decision about an asset when you believe you've done enough research to make an informed choice. Resources like Caleb & Brown’s Market Updates, are a great place to get expert insight to guide your decision-making. 

3) Not Taking Profits

It can be valuable to treat your crypto assets as a retirement account, not touching anything for years at a time. While the HODL, or “holding on for dear life” method, has proven effective, taking a percentage of profits at different stages ensures that you are securing profits from your investments. 

The market can fluctuate and, at some points, it will be necessary to ride the wave until it rises once more. But taking out some of your assets when reaching a profit goal will help you build a base for diversifying your portfolio even more.

4) Minimal Security

Projections show that 1,500 bitcoins are lost every day due to lax security methods. Security is of extreme importance in any financial endeavour. When working with cryptocurrency exchanges, security holds an even higher level of importance. The top investors know this, which is why a multi-billion dollar bunker safeguards the digital assets of the world’s wealthiest people.

In traditional banking, security is mainly the responsibility of the institution. The investor can use simple methods to keep their account secure while relying on institutions for insurance in case their funds are lost.

In decentralised finance, the onus lies with the investor. They are responsible for keeping track of their passwords, cold storage, seed phrases, and 2FA. If any step in this process is broken, you run the risk of losing everything.

Fortunately, brokerages like Caleb & Brown offer an additional layer of security beyond what you might find at an exchange. At Caleb & Brown, investors have access to an end-to-end custody solution for all of their stored assets. Even if your security is compromised, they have steps in place to help ensure your crypto isn’t lost forever.

5) Buying Cheap, Just Because

For beginning investors just wanting to get their feet wet it may be enticing to buy a whole coin of something considered ‘cheap’ (low value, small-cap) versus a fraction of something with a higher value and market cap. Who knows, maybe that small-cap coin will rise in value overnight and you’ll be a millionaire. Realistically, the market fluctuates over long periods of time. Buying a cheap coin in hopes that its value will rise can be more akin to gambling than investing.

6) Fear-Influenced Trading

You might hear the terms ‘FUD’ (fear, uncertainty, doubt) and ‘FOMO’ (fear of missing out) thrown around quite a bit in crypto. FUD is used to address generalised fear across the market. FOMO refers to the particular feeling of possibly missing out on an investment opportunity. A coin triples in value overnight, and you feel like you need to have it in your portfolio immediately. 

It can be difficult when there is lots of money involved, but you must let go of fear. Fear takes the strategy and level-headedness out of investing. It turns the market into a casino of urgency.

Fear comes with buying and selling. Market news could influence you to buy a coin for fear of missing out on potential profits. It could also lead you to sell an asset due to uncertainty and doubt. 

Whenever you make a trade think: Am I being influenced by an opinion? Am I trading because I want to, or because I’m being pushed to?

7) Sending to Wrong Address

Although not as common, sending cryptocurrencies to the wrong address leads to a permanent loss in most cases. There’s no real way to identify who’s on the receiving end. And if you could contact this person, they have no obligation to return your crypto.

When sending crypto to any address, be 100% sure that the details are correct.

8) Falling Prey to Scams

In an industry where charlatans can appear to be experts, scams are around every corner. Beware of businesses that only accept payment in cryptocurrency (specifically any of the top 5 coins).

Don’t send crypto to someone you don’t know. And if you must, thoroughly vet the individual through an online search (if their identity is public). 

Buy Crypto The Right Way

From scams to fear and opinions abound, cryptocurrency can be an unruly space for the ill-informed. Do your research before putting your hard-earned money towards any asset. And if you need guidance on any of the points above, a crypto brokerage can help.

The team of experts at Caleb & Brown can help you avoid the pitfalls of the common crypto investor. Try something different. Sign up for your free consultation today and discover all the ways you can invest in crypto.

Photo: Brokers at Caleb & Brown

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.