There are 9 common ways that new and experienced crypto investors get wrecked. Can we avoid them, or are some inevitable?
We will explore the 9 most common ways people lose money in this space to identify and avoid these scenarios to become more successful cryptocurrency investors long term.
Each of these pitfalls is easy to fall prey to, but they are just as easy to avoid once we know them and stay mindful of them throughout our Crypto investing journey together. Awesome, so let’s check out the 9 most common ways crypto investors get wrecked.
Crypto initially piqued many of our interests after hearing stories of people throwing a relatively small amount of money into a project.
Like a couple of hundred bucks, and then it becomes worth several thousand or hundreds of thousands, or in some cases millions of dollars over a few months or even overnight.
And although this sounds extremely appealing, it’s not the expectation we should have when deciding to invest in cryptocurrency.
Sure, there are a ton of amazing stories out there about people making massive amounts of money in a short period, but 99% of it is absolutely luck.
Why is it so? Well, first of all, the cryptocurrency market is largely unregulated, which makes it extremely susceptible to manipulation.
With the naturally high price volatility from being a brand new asset class, in addition to blatant and deliberate manipulated price movement, the crypto market valuations swing violently and radically.
High risk creates potential high reward scenarios, coupled with drastic price movements.
You can see how a lucky investment made at the perfect time into certain projects creates a perfect storm for some people to quickly make a ridiculous amount of money – assuming they take profits and retain some of the gains.
And unfortunately what a lot of new and experienced investors fall prey to gambling a significant amount of cash they cannot afford to lose in the hopes of getting that lucky moonshot that makes them millionaires overnight.
Treating Crypto as a get-rich-quick scheme will leave most of us wrecked, so don’t do it. Instead, set aside an amount of money you’re looking to invest for the long term and DCA, or dollar cost average, into positions.
Dollar-cost averaging is when you decide on a certain amount of money, like $10. You will invest at a certain frequency, like once per week, into bitcoin or similar regardless of price or other factors.
That way you are building your long term investments with less exposure to price volatility with a proven strategy that way more people have used over the past few years to build massive amounts of wealth than the small percentage of gamblers that got lucky.
Trying to Time the Market We’ve all fallen prey to trying to time the market by following so-called chart gurus, mirroring so-called trading experts trades, making decisions based on the fear/greed index, jumping to projects based on key dates on their roadmaps.
All in hopes of trying to time the market to buy at the absolute lows and sell at the absolute highs. And for the reasons mentioned above, that being that the crypto market is heavily manipulated unless you get lucky, you will get wrecked by trying to time the market.
No one can predict and time this market. Again, sometimes people get lucky, but even if we consider Plan B’s three-month winning streak at accurately predicting bitcoin’s price at the end of each month for August, September, and October of 2021, come November 2021, his $98,000 bitcoin prediction was off nearly half.
Imagine if you got into positions under the assumption that bitcoin would hit $98,000, but instead, it dropped from about a $68,000 high down to $54,000.
Don’t try to time or predict this market. Like we discussed earlier, dollar cost average into positions to hold for the long term.
Your life will be much more enjoyable and carefree once you adopt and stick to the long term DCA investment strategy with Crypto.
FOMO is a popular acronym used in Crypto investing that stands for “fear of missing out.” Most people probably got into Crypto near market tops because they had been watching the prices go up and up and up, and each leg up, the searing pain of waiting too long to jump in gets worse and worse until finally, they FOMO in.
They FOMO in, and it either goes up a bit more before crashing, or it starts crashing.
Another scenario people FOMO into is, let’s say something big is on a project’s horizon like Cardano’s smart contract launch? People FOMO-d into Cardano like crazy leading up to the super exciting smart contract launch date.
The price reached a new all-time high of about $3.09 a few days before and then following the launch, Cardano didn’t all-out crash, but it has been a slow, painful downtrend to where it currently is at the time of this video which is about $1.
FUD is a popular acronym in Crypto that stands for “fear, uncertainty, and doubt.” People that capitulate to FUD sell most, if not all, of their positions in certain cryptos because of a few reasons.
One, maybe some bad media was released about the project like a hack, failed or delayed launch, a founder leaves or got into trouble, or maybe a competitor hits the scene and starts trying to get market share.
Sometimes people experience FUD from things unrelated to Crypto that could affect the market, like a new covid variant, interest rates increases, or fears of a housing crisis.
FUD also happens if a person isn’t comfortable with the sheer volatility of the crypto markets, and watching the wild swings of the value of their portfolios causes them to lose sleep, so they sell everything.
When crypto investors make moves based on FUD, they miss out on opportunities to make gains.
For example, maybe that got scared back in June of 2021 and sold everything when bitcoin went from at that time, new all-time highs of about $64k down to as low as $29k that quarter.
You can decide how long you want to invest in and hold the project, like if it’s a short term play, like a month to a year, or a long term play you want to hold over a year.
Or you can decide at what price point you want to sell it, like if it doubles in price, triples, or similar. Then stick to your investment plan.
Creating an investment plan and sticking to it is key to becoming a successful crypto investor.
As crypto investors, it is very natural to second guess every move, and it’s very tempting to want to revert decisions made. Create a plan for each project and stick to it.
Second-guessing everything will leave you emotionally wrecked, as well as the value of your portfolio over the long term.
There are scam websites set up to look like official ones to try and steal login credentials or your private keys.
There are endless ways we can all get scammed as crypto investors, but if you follow a few simple rules and stay aware of key things to keep in mind, you should stay safe.
Scammers want your login credentials to your crypto accounts, all of your financial accounts, your cell phone provider, your private key, which can be in the form of 12 or 24-word phrases.
They want you to install software on your computer they claim will turn a profit for you, they want you to click on links from text messages, email, or direct messages on social media to direct you to fake sites or that will install malware on your device, and they also want you to send them crypto or fiat cash.
At the end of the day, if anyone asks you to install mining or any software they claim will make you a profit, or if anyone asks you to send Crypto or money they say will generate profit for you, steer clear.
They are trying to steal your money. Also, never give anyone or type into fields on a web page, in an email, or similar to your 12 to 24-word seed phrase.
Because you will lose all the Crypto in that wallet, 100%, if you want to learn more about how crypto wallets work, you can better protect and secure your funds.
If anyone claims they can make you money, that involves sending them money, installing software, or clicking on a link to sign up for a product or service, they are a scammer. So watch out, stay mindful.
Never. A good rule of thumb is to never send money or Crypto to anyone you don’t know ever unless you’re willing to lose it all and get wrecked.
Many people in Crypto make investments in projects based on recommendations of crypto influencers, their friends, family, advertisements, or random people they chat with in person or on the internet.
This is fine unless you decide to invest in it without doing your due diligence and personally taking the time to research the project.
Jumping into a project without doing your research will usually leave you wrecked. So like we discussed earlier, do not FOMO in because you could be getting scammed by someone, or you may find yourself invested in a project you don’t want in your portfolio.
When you hear about a new and exciting opportunity, take a day or week or so, however much free time you have without rushing into it, And if you decide based on your research that it’s a good match for you.
Decide how much you are going to invest, how long you are going to stay invested in it, or at what price point you are going to sell, then start to dollar cost average into a position.
Rushing through complex processes like a new NFT mint, staking, yield farming, trading on decentralized exchanges, and all kinds of different crypto activities available to engage in will leave you wrecked.
It’s important to take your time, double and triple check the wallet addresses you are sending funds to and remember, if you accidentally send money to a scammer and did not give them your seed phrase or private key, they don’t have access to your wallet.
Treating Crypto as a Set it & Forget it Investment Crypto is a new and emerging digital asset that we are all extremely early in as investors.
Staying up to date on the latest news, regulations, project developments, hacks, technology, tax laws, etcetera is crucial to being successful in this space.
Treating Crypto as a set it and forget it investment is a one-way ticket to the wrecked city. Now, although it may sound overwhelming, it’s not that much daily or weekly upkeep that you need to do.
With the significant amount of upward price potential and opportunity to generate massive wealth in a relatively short period Crypto presents us with, the upkeep is extremely worth it.