In this blog post we will talk about some of the most common mistakes that crypto beginners make. Everyone makes mistakes, the important part is to learn from them and become a better trader or investor in the long run.
1 ) Forget to safely store their backup / recovery phrases.
Whether this would be your 2FA backup to an exchange, or even worse your recovery phrase to your Ledger (Trezor, or other) wallet. If you are willing to share your KYC details with an exchange, the first one you could easier get back. The latter is near impossible, depending on the wallet type you have. If you still have access to the wallet best thing to do is send your cryptos to another wallet and reset the wallet.
But please activate 2FA when possible, there are far too many hacks going on and having 2FA activated have saved many including ourselves from losing our crypto. Check our guide on how to safely store your cryptos at a secure wallet.
2 ) Sending their coins to the wrong wallet address
An unfortunately very common mistake made by many crypto beginners. Either they send for example their Bitcoins to the wrong Bitcoin address, or they send one type of ERC20 token to another ERC20 token’s address at an exchange. In the best of times your transaction will either fail due to an incorrect address (checksum) in the worst, you will never see those cryptocurrencies again.
A lot of cryptocurrencies addresses have built-in fault checks or checksums. Which notices if you have mistyped and put in an incorrect Bitcoin address for example. With Ethereum you can turn your ETH addresses to checksums yourself by uppercasing the letters in the address. You can use tools like these to checksum an address quickly.
3 ) They don’t have a clear trading strategy in place
This is a common mistake made by many in and outside the crypto space. Without a clear trading strategy crypto beginners often jump from one coin to another, they buy in too late after rushing in, they sell too early because they were expecting a quick profit. Overall they are impatient and there’s too often a price to pay for that.
Do you even know why you are investing in this specific altcoin? When are you planning to sell it, if ever? Everybody will make mistakes, it happens, what matters is that you learn from them. Start out small, there are more user friendly exchanges like Coinbase that are great for beginners. If you don’t know how to start with crypto this guide will help you invest smarter.
4 ) Gets scared after seeing volatile movements
‘My coin has lost 20% in value, that is it I’m out’. Sure if you can’t handle Bitcoin and cryptocurrencies wild volatile movements, which are far more extreme than what stocks and commodities would ever see then you are probably making a good decision. But if you want to stick around you need to understand that cryptocurrencies are still very volatile, due to many reasons (unregulated, price manipulations, low liquidity, etc).
And movements of 10-30% in a day can happen, and you need to try and understand why they happen before you panic. And you also need to be aware that sometimes FUD happens, which essentially means that others are trying to manipulate people to sell cheaply so they can buy at lower prices.
5 ) They live in their own altcoin bubble
It’s easy to think that your cryptocurrency is massively underperforming during a bear market. That might be true, but if you would look out from your bubble you might notice that plenty other cryptocurrencies are also not performing well.
And number five is especially concerning if a crypto beginner doesn’t have a crypto trading strategy in place (#3), as they tend to make hastier decisions with little planning done before. Why did you invest in the first place? Do you believe in the company (foundation / organisation) behind the coin? Are they still on track on delivering what was promised? Keep calm.
6 ) Overholding (bagholding 2.0)
Yes, we want to call this one overholding, as we essentially are referring to two different types of things. The first one is that someone holds for too long, they don’t take any profits when their coin is performing really well. Plenty of people missed taking any profits during the 2017 bull run because they became greedy and wanted more profits. Yet again, with a trading strategy including taking profits, you will thank yourself if you get some profits rather than no profits. Don’t be a crypto beginner that ends up having lots of money back in the days but nothing today.
The other one is your typical bagholding person, who maybe came in during a pump or time when this cryptocurrency was performing well. Then the bear market came, or perhaps the team kept missing deadlines and achieved little. Now fast forward to today, plenty of coins sitting there with little value and what should we do in a situation like this?
Be thankful that you now have the opportunity to learn from this. Evaluate why this might have happened, and try and do something better for next time around. Every entrepreneur loves failures as they are the perfect opportunity to learn something new.
7 ) They store their coins at an exchange (only one & for too long)
Your go-to routine should always be after buying a new cryptocurrency at some exchange, to send it back to a safe wallet where they are the only ones with complete control over the funds. Far too often many of us get lazy and store a bigger chunk of our portfolio at exchanges because we think those hacks won’t happen to us. Don’t be one of those who lost their Bitcoins at next Mt. Gox, your Nano (XRB) at the next Bitgrail scam, their funds at the next mysterious QuadrigaCX scandal, NEM at the next Coincheck hack, etc.
We have written guides on helping people protect their coins, but we have also written about the need for exchanges to meet the growing demands of securely storing our funds at exchanges. Innovations like the SAFU fund from Binance is a great example of this. Because even this might go against what crypto beliefs stand for (be your own bank)- the mass adoption of masses probably wants our exchanges to work like banks.
8 ) Thinking that a coin with a very low price have greater potential
“Look at Ripple (XRP) it is only worth $0.32, compare that to Bitcoin or Ethereum, surely that means it has lots of growth potential”.
Nope, that’s not how it works. You can’t compare the price of cryptocurrencies by their USD, EUR, GBP value, because like stocks they have a different amounts in supply. Of course, Ripple will have a far cheaper USD price because there are 42 billion XRP in the circulating supply. Compared that to 17 million Bitcoins. It’s better to compare market caps between two cryptocurrencies, to kinda get a sense between them. But you can’t use market caps as a metric solely to determine if one coin is under- or overvalued.
Those are our main tips and observations from seeing many mistakes being made by crypto beginners. So hopefully if you are starting with crypto then please read through this guide and try to learn from the mistakes others have made before you (including us in the beginning).
Bonus items – more mistakes crypto beginners make
There are many more common mistakes that crypto beginners or even more experienced traders make, including:
- Investing money they can’t afford to lose. Spending rent money, student loans, mortgage repayment money into crypto is just a terrible idea. Start with a sum you can afford to lose if worse happens.
- Not having stop losses while day trading
- Don’t set any profit targets (what do will all that money make you if you never use it or cash it out)
- Sending ETH, BTC, LTC, or whatever to either Twitter promoters promising they will send 10x back to you. Or some Telegram trader group which will give you exclusive trading tips, etc.
- Cloud mining. Promising great returns for little effort. 99% of the times you won’t make money, and not more than you put in.
- Thinking that crypto will be their way out of a mundane life. To a future where they don’t have to work, where they will drive that fancy car (Tesla vs Lambo).
- FOMO / Doing no research. Ok, this one was more or less included in #3 (They don’t have a clear trading strategy in place), but we wanted to make sure you read it again. Research before you invest in anything, including crypto. Don’t jump in when the price has risen 200% in a day. Be smart about your investment, and neither FOMO nor investing without doing research is particularly smart.
Other guides we recommend
- What is a crypto market cap – All you need to know!
- The best way to investing in cryptocurrency
- The top 8 crypto exchanges in 2019
- 7 most popular privacy coins
Per Englund – Founder of Go CryptoWise a cryptocurrency and tech fan that wants to see better and smarter products and services that makes our lives better and easier