Investing in cryptocurrency is very enticing, exciting and risky so before you jump in to make your millions make sure you’re not making these 5 mistakes. Ultimately you should have a basic understanding of how crypto currency works and how to find quality coins and projects. Check out the Beginner’s Cryptocurrency Course offered by The Entrepreneur’s Financial Group!
- Purchasing cryptocurrency on Paypal or Robinhood: This mistake often occurs with newbies in the crypto space. It’s likely that you saw a $10 Bitcoin reward on Paypal or already traded stocks on Robinhood. The disadvantages of purchasing cryptocurrency on these platforms is that you can not transfer your currency anywhere else because you do not have access to the actual crypto wallet. This means you can’t transfer coins to friends, a secured wallet of your own, and you can’t trade what you purchased for another coin. You can only purchase with cash and sell the coins back for cash.
- Panic selling at a loss: If you are investing smartly in cryptocurrency you will have the knowledge and confidence that when the coins experience volatility you will hold and not sell. Crypto is extremely volatile so don’t get too worried if the price dips, even if it dips by more than 50%. If you did your research, and the investment is good, give it time, don’t be emotional, be strategic.
- Falling for hype on social media: If you do your due diligence when researching a coin or project you will be better equipped to handle the FOMO (fear of missing out) when there is a lot of hype on social media. Sometimes the hype and chatter is good, especially if you catch it early, invest, and ride the wave when there is an influx of buyers; this ultimately pushes the price up and you’ll have a gain. On the other hand if you FOMO without research, invest in a bad coin or project, or are just too late you could lose a lot of money. Early and big investors may be making hype on social media so that people who aren’t as knowledgeable invest, this influx drives up the price, and then the early investors sell large amounts of the cryptocurrency taking a huge gain, and in an instant the price can plummet, leaving you with a loss.
- Falling for scams: This should go without saying, no one wants to fall for scams, so just like with anything else, if a project or investment seems too good to be true; it probably is. There are two scams I want to warn you about. The first involves exchanges, new exchanges are popping up everyday and can offer a lot of interest back for your investment because your investment provides liquidity to the exchange. Some of these are legit and you can make huge gains in a short amount of time with exchange projects, but some may collect your investment, fold the project, and you could never see your cryptocurrency again. The second type of scam I want to warn you about is multi-level marketing crypto companies or referral programs with crypto. One of the most recent scams was Forsage, when reviewing the compensation plan it was obvious that money you invest just goes to your upline and in order for you to reach new levels in the project you had to invest the same amount you would have made in profit from recruiting people under you – classic gifting scheme where you would never truly get ahead. You will never need to join a project/ company/ team up with someone in crypto in order to make money in the crypto world. Simple, smart, direct investments will get you ahead in a safer manner.
- Losing the 12 word secret phrase; remember not your keys, not your crypto: Once you have accumulated some crypto and wish to keep it in a secured digital wallet like Exodus, MetaMask, Coinomi, and others you’ll be given a 12 phrase recovery password when signing up. This phrase will only be shared with you once so write it down and keep it in a secure physical location! The 12 word recovery phrase is also not to be shared with anyone and is the only way you can recover and own a digital wallet. With every wallet there are public and private keys. Think of public keys like a bank account number, this can be shared with others when they transfer you cryptocurrency. Think of the private keys as your bank account password and digital signature when completing transactions, you do not want to share these keys. The 12 word recovery phrase is used to derive both the public and private keys, giving you complete ownership of the assets in the wallet and this is why it is crucial to remaining physically secure, not digitally secure on your phone or desktop. There are millions of dollars worth of cryptocurrency that have been lost forever because people lost their 12 word recovery phrase and cannot access their money, don’t be one of those people.