Three mistakes every crypto investor must avoid

In today's Exponential Investor…

Massive gains
Three mistakes
Learn, understand, enjoy

Dogecoin up 296%
Voyager Token up 178%
PancakeSwap up 137%
Reddcoin up 141%
Badger DAO up 131%

All of those are crypto and their performance in the last seven days. As an investor, you look at that and think, ooh I want a slice of that action.

Fair enough.

There is no doubt there is wealth to be made in the crypto markets. There has been over the last decade if you know where to look. Of course just because something – like those shown above – shoot up in value quickly, doesn't mean it will continue like that.

Dogecoin, for example, might be up 296% in seven days. But it's also 57% down from its high just four days ago.

Some punters may have got on the right side of this run, many will have piled in at the recent top and be sitting on a quick-fire 57% loss.

This is the kind of wild volatility that is currently present in the crypto markets. The gains make it enticing. It is a fun part of global markets to play in.

But you must know what you're doing.

Three key mistakes to avoid

If you go in blindly without understanding the basics. Then you're likely coming out of it worse than you went in.

That's why I wrote my book, Crypto Revolution: Bitcoin, Cryptocurrency and the Future of Money. You can buy a copy here while we still have some left in stock.

It was to help people get started and understand what this is all about. It was even recently referred to as a crypto "Bible" in an article on The Independent.

But in getting involved, I believe you need to understand some of the key mistakes that "noobs" to the crypto markets make. Know these three key mistakes to avoid and you'll be that more clued up about how to navigate the crypto markets with a little more confidence.

1. Starting big and making costly little errors

The first mistake new crypto investors make is they go too big too soon.

They get so excited about getting into crypto they neglect to understand the fundamentals of how to use crypto. And that leads to mistakes. Tiny errors that turn into big regrets.

The most common error known to the crypto world is making a mistake on a wallet address. Get a wallet address wrong and you can lose everything in one vicious hit.

For example, let's say you're sending your bitcoin from an exchange where you just bought it to a wallet you own. And the bitcoin wallet address looks something like this…

Bc1qGKz6tseprHieZM3HUA2ZjjSvFpt9dL

But you enter that address even just one character wrong and you're stuffed. Take a look at this address…

Bc1qGKz6tseprHleZMBHUA2ZiiSvFpt9dL

Can you even spot the difference there? There are a few differences.

If you sent your bitcoin to the second address you might never see it again.

If the address with the error is an existing wallet, then sending to that wallet address means you'll never know who the owner is. The only way to ever possibly get your bitcoin back would be to hope the wallet owner sends it back.

If you're sending just one bitcoin (about £25,000) it's a massive, costly mistake to make.

You must make sure you get your wallet address 100% correct when sending bitcoin or any crypto through their respective blockchains.

It's also why I always recommend that, if you're starting off with crypto and sending to a new address, start small. Send just 0.01 to start with, just a nominal figure. Make sure it hits the wallet you expect it to hit, and only then send the rest.

If you can eliminate this mistake, then you'll be well on your way to getting the confidence to operate safely on all the different crypto blockchains.

2. Not having a plan of attack

Another huge mistake new investors to crypto make is not understanding why they're investing to start with.

For example, are you investing for short-term trading gains? That means buying and selling in and out of crypto quickly to make incremental gains.

Or are you investing long term, for 5-10 years with a view to hold your crypto as a store of value or to use it for its intended purpose in the future?

Or are you looking to buy crypto with value appreciation in mind, but along the way want to use that crypto to buy goods and services in the real world?

Knowing what you're in it for is important, because that determines how you will buy and store your bitcoin. Get this wrong and you can see opportunity disappear before your eyes — or put a long-term plan at unnecessary risk.

Let's say you're keen to do some short-term trading for your crypto. That means you'll likely be trading them on an exchange like Binance or Huobi or larger exchanges.

You need to move fast to grab opportunity when it pops up. But if you've got your crypto in a cold storage wallet or a separate online wallet, then you've got to send it into the exchange before you can trade it.

That takes time. By the time your crypto clears to your exchange wallet, the opportunity may have disappeared.

There's the flipside of that equation. Let's say you want to keep your crypto for the next ten years. But you're storing it in a wallet on an exchange. Exchanges hold the private keys to wallets, not you.

That means if the exchange shuts down, goes bankrupt or someone hacks the exchange, your crypto is at risk. You could see your crypto stolen or simply vanish.

If you want to hold crypto long term, my view is self-custody is the best way. That's using a hardware wallet like a Trezor wallet or a Ledger wallet.

When you have your strategy right and you know what you're planning to do with your crypto, then you'll know how to best store it. Get it wrong, and you put your whole strategy in jeopardy.

3. Short-termism

Finally while traders can do well, I'm of the view crypto should be viewed as a long-term game.

However, rapid-fire gains are hard to ignore, and that's what gets a lot of "noobs" into trouble. This is where "investors" want to make a quick buck. They're in crypto for fast cash; nothing more, nothing less.

They'll often chase gains – buying high, selling low and repeating the cycle.

Those who only see the short-term fiat money price gains will enter the world of crypto and then exit it just as fast – and then complain that it's one big Ponzi scheme – should see it move against them.

If all you see when you look at crypto is rolling pound and dollar signs, then you've completely missed the point.

This is a system, a network outside of centralised control. It's very much anti-establishment, libertarian in nature and an alternative financial system.

To see the truly life-changing potential returns come into play, my take is you need to have a longer term vision of all this. You need to open your mind to at least a five- to ten-year horizon.

An alternative financial system of decentralised digital assets doesn't happen overnight. Replacing old money with new money is a process. It will still happen relatively fast, but it won't happen overnight.

So don't expect 100-times your investment back in a month. In my view, it will come. But with a short-term mindset you're setting yourself up for disappointment investing in crypto.

That's not to say there aren't huge, short-term opportunities. And ultimately I can show you how to catch those. But they're not for beginners. You need a year or two in the crypto world to safely navigate that minefield.

Take the time to learn, to understand, to build confidence and you'll be a crypto investor for life. Ultimately, you won't make these mistakes, you'll enjoy the ride and you'll be a part of what I consider as the biggest wealth-creation event in history.

Regards,

Sam Volkering
Editor, Exponential Investor

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