Author: Abhaya Anil Compiled by: Plain Language Blockchain
Currently, the cryptocurrency craze is at an all-time high, and opportunities are everywhere. But behind the wealth opportunities that may change your life, if you are not careful, you may also lose everything overnight. I am not saying this from a textbook, but from the mistakes I have experienced personally.
With a large number of newcomers pouring into the cryptocurrency market - many of whom have never even touched investing - these lessons have become particularly important. Today, we will discuss the five most serious mistakes that beginners often make (and how to avoid them). If you read to the end, I will also share why these lessons are particularly important in the current situation where Federal Reserve Chairman Jerome Powell controls the market.
Error 1: Investing money you can't afford to lose
This sentence sounds like a cliché, but it is the most common mistake and the trap that puts most people in trouble. You often hear: "Only invest money you can afford to lose." But for many beginners, this is just empty talk.
The cryptocurrency market moves quickly, and it won't wait for you to adjust. Sometimes, you may wake up and your account may be cut in half. So, ask yourself: How much are you willing to lose?
Practical exercise:
Take out the amount you plan to invest.
Cut that amount in half.
If this number makes you uncomfortable, you have invested too much money.
If you invest money you can't afford to lose, you are not investing, you are gambling. In the cryptocurrency market, this can be fatal.
Before entering cryptocurrency investment, make sure your basic protection is in place. This means saving at least three months of living expenses in a safe account that has nothing to do with the crypto market. It’s boring and not cool, but it’s the only way to ensure you’re financially secure in the event of a market downturn.
I’ve seen many people lose their life savings on platforms like FTX that collapsed, and many of them may never get that money back.
Bottom line: Make sure your emergency fund is secure before you touch crypto.
Mistake #2: Blindly following influencers
Crypto influencers are everywhere. Whether it’s on Twitter, YouTube, or TikTok, you’ll always see someone claiming that they’ve discovered the next big thing, like “The top three altcoins that will make you rich” or “The hidden gem that will skyrocket next week!” But what most people don’t know is that these influencers are usually paid to promote these projects.
You think they’re really bullish on these coins? Think again. Many people are paid $10,000 to $100,000 to make these videos when they don’t actually invest in these projects. The sad reality is that many of the projects they promote don’t even have an actual product. You’re basically paying for someone else’s marketing.
Solution: Follow my “3Ts” before investing:
Technology: What problem does this project solve? Is there a real need? Is it solving an actual problem, or is it just another copycat?
Tokenomics: How many tokens are there in total? Who controls them? How is the distribution? If the distribution is too concentrated, the project may be risky.
Team: Who is behind the project? What have they done before? Are they transparent and trustworthy?
Think of Logan Paul’s CryptoZoo. No product, no real value, and questionable token economics, it is doomed to fail.
Before investing in any project, do your homework and do your own research. Never believe the hype.
Mistake 3: Buy high and sell low (FOMO emotion)
This is one of the most painful mistakes for beginners. It is easy to understand in theory, but it is easy to fall into the trap when emotions take over.
Look at the Dogecoin craze in 2021. People rushed in at 70 cents because of FOMO (fear of missing out), thinking that Dogecoin would go to $1. As a result, it collapsed.
Solution: When you want to buy because of fear of missing out, this is your red warning sign, pause.
Here’s why: If a coin has gone up 500%, you’re not an early investor, you’re late. You’re chasing a hyped coin hoping to get lucky. But more often than not, you’re just getting carried away by the hype, and when the hype fades, your investment will crash with it.
Practical advice: If you feel like you’re chasing a big bull candle, step back and wait for the market to calm down. Markets are cyclical, and there will always be new opportunities. But if you’re chasing hype, you’ll likely lose money.
Mistake #4: Investing Big in Brand New Coins with No Product
The allure of new coins is strong. They’re new, they’re exciting, and everyone loves to fantasize “What if this is the next big thing?” But I’m here to tell you: most new coins are not.
New coins are like startups, 90% of them fail. You wouldn’t invest your life savings in a startup with no product, no revenue, and no track record, and the same is true for cryptocurrencies.
A viable project should have at least a minimum viable product (MVP), something that works today, not just an idea or a whitepaper.
Why it matters: Without a product, you’re investing in a dream. And dreams don’t pay off.
Practical advice: Don’t chase the “next big thing” unless the project already has an actual product. The price may be attractive, but it’s the product and execution that matter. Stick to coins that have an actual product or solve a real problem.
Mistake #5: Using Leverage (A recipe for disaster)
Leverage sounds great: “Double your position and maximize your profits!” But what they don’t tell you is that leverage can also double—or even triple—your losses.
In 2022, Bitcoin fell by more than 50%. If you used a 2:1 leverage, you didn't just lose 50%, you lost everything. Leverage amplifies losses, and nothing can be more dangerous than this.
When you use leverage, a small drop in price can lead to your account being wiped out. This not only hurts your wallet, but also affects your mental health. Watching your account balance drop like a free fall is a feeling no one wants to experience.
Practical advice: Unless you are a professional investor who clearly understands leverage and its risks, avoid using leverage altogether. Protect your capital. As long as you can stick to the market, there will always be more opportunities. The market will come back, but your capital may not.
Brian
Kikyo
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