Some Cryptocurrency Investing Mistakes for Beginners
Some Cryptocurrency Investing Mistakes for Beginners. let's get started. So I started in crypto late. Twenty seventeen in early. Twenty eighteen. Back when the market was super-hot. The previous hot streak for crypto. It's hotter now, but. So I got it back then, so I've been in for three and a half. Almost four years ago for three and a half years, I guess, and so it's been quite a while, it's been a fun ride in the crypto space. It's still three and a half years. It's still not a ton of experience in crypto. Some people have more experience. But I've learned quite a bit of thing in that time. And hopefully, things that I share with you might be of value. If not, I'm sorry.
# 1 Mistake is don't put all your eggs in one basket
So the number one mistake is putting your eggs in one basket. So kind of the age-old that's the age-old investing thing is don't put all your eggs in one basket and that can be applied to a lot of things in life, not just cryptocurrency, investing, or investing in general. But the idea is so you have a basket of eggs and all of your eggs are in that basket. You just got them all from your chickens. And then you drop the basket and they all break and they crack and they're no good to you or, you know something. You set the basket down and someone steps on something.
There are a lot of things that can happen and that basket of eggs is ruined. But if you had that those eggs spread out in a variety of baskets, if something happened to one of them, you still have others to fall upon. So that's kind of the idea. It's kind of an easy concept, I think. Don't put all your eggs in one basket. And so in our case, don't invest only in one crypto. Now, you would probably be fine if you invested your whole portfolio in Bitcoin or Ethereum. You could probably be OK with that. And if you're very new to crypto, those are very good cryptocurrencies to start with a lower risk. They all have risks. Do that risk but lower risk and those in a lot of the other coins?
# 2 Don't invest only in low cap coin
And another thing to go along with this topic is don't only invest in low cap coins, so when I first got in, I would buy with Bitcoin and then spend my Bitcoin and buy all these low caps coins that I thought would have the potential to do three, four, 10 X. I was going along with people on Twitter and on YouTube just talking about different coins or massive potential, for example, or massive Vitron, which was some of my first coins, I first got Bitcoin and then ethereum. That's what I use to buy coins like XRP and ethereum and TRON and deep onion. Those were like my first three or four, five coins that I bought.
But I didn't hold on to any of the theories or Bitcoin, I just use that as a vehicle to buy those other low-carb coins. But so there you go. That's kind of the story with that is I wouldn't even though I know you could have Fumo and you see this coin and people keep hyping it, that, all 10X, 100 x, 50X potential, and then you want to buy in. And I'm not saying don't buy into those. You've got to be cautious especially if they're brand new coins.
But don't put all your money in those coins. So diversification, diversification is key in my opinion. There's a lot of people that will say that also or here's an example. For example, I bought a BNB, and if we look over here at coin market cap,
Cryptocurrency Investing MistakesI bought BNB. Probably when it was around 30 to 40 somewhere around there, and I was only buying BNB so I could buy stuff on like pancake swap. So and the funny thing is, is half of those coins that I bought on pancakes for. Tanked after I bought them, and they still haven't really recovered yet, and so I would have been better off just holding that BNB instead of using it to buy other coins because if you look, it's like I would have tripled my investment in BMB.
Now, some other coins I bought would be performed better. So it's overall I'm still up. But that's just things to be aware of, you know, and such as life with crypto, right? You buy one crypto and use it to buy another coin. And anyway, it's fun it's a fun crypto experience.
# 3 don't buy in all at once
OK, so the next topic is don't buy it all at once. Let's say you do want to buy Bitcoin or you want to diversify. There are three or four coins that you want to buy in and you have maybe five hundred dollars that month that you want to spend on crypto don't like at the beginning of the month. Don't just use all five hundred dollars right then. Take more of a 401k approach, which is dollar-cost, dollar-cost averaging.
For example, in my 401k, I invest X amount every month. And then it just I put it in regardless of what the market is, I don't even look at the market. I just invest once a month. Now with Krypto, a month might be too long of a span for you. So maybe take that five hundred dollar and do it once a week.
Maybe do like one twenty-five at the beginning of the week and then the next week another one twenty-five and spread it out amongst the cryptos and maybe 50 percent in bitcoin or twenty-five percent bitcoin. Twenty-five percent Ethereum and then 50 percent and some smaller cap coins. I'm not going to get into the strategy there because you can do your strategy. These are just kind of my thoughts and opinions. Just diversify and then you'll be able to mitigate your risk that way.
Also, instead of buying all at once and also even when you're buying periodically or doing the dollar cost average, you might consider doing a limit order. Now, a limit order is a little bit more technical than a market order. A market order is what most beginner investors, they're just going to do the market order, though, just because it's the easiest thing to do, especially like on just Coinbase, you can just buy. So without even worrying about it and the market order are just going to take it whatever the market happens to be a time. At that time, once you buy it, you're going to buy it for that price.
And if it has a heavy, heavy volume like Bitcoin. You won't lose too much on a market order, but if it's lower volume, there's a potential for the price to swing quite a bit when you place that market order. And that may not be what you want to do. So you could try a limited order. And so I'll just do I'll just show you an example of a limit order on Coinbase Pro.
Cryptocurrency Investing MistakesBut it's going to be the same on any exchange that offers limited orders, and most of them do. And so let's say I have and I'll do kind of a buy and sell limit order. And let's say you wanted to buy Bitcoin, but the market's going up and you're just not sure you think that it might go down. So what you can do is see the market price right now. Is that 50 thousand or fifty-seven thousand, let's say nine fifty. What you can do is you could say, I want to place a buy order. I want it to be limited. Just click on Limit and I want to buy one BTC. This would be awesome if I had this kind of money to spend on DTC.
But I think the market's going to go down and I don't want to pay what the market price is. I want to pay fifty-six thousand. OK, so once you place this buy order, it is not going to go through until bitcoin drops to fifty-six thousand or below, and then it'll execute your trade. So that way you wound up buying it at a lower price and got more for your money.
OK. And the same is for a sell order, let's say it's like 10 p.m. and a particular coin, your favorite coin is just peeking like crazy. It's morning and you're like, I think it's going to go up. I don't want to buy it right now with the market price. I think it's going to go up a little bit more while I'm sleeping. So I'm going to set a limit cell. So let's take Bitcoin as an example, and I'm going to take that same BTC, one BTC. I think the price while I'm sleeping or not paying attention, I think it might go up to fifty-nine thousand.
And so what I'll do is I'll just put this fifty-nine thousand there and then I'll place the sell order. What's going to happen is it's not going to sell your bitcoin until it reaches that price that you set in this case. Fifty-nine or greater. And so you made a little bit more on your money as opposed to just going for the market order. Now I'm not saying market orders are bad and there are times when you may want to just do it, do it market order quickly, and just not worry about it. But many more experienced investors do limit orders or stop-loss orders, things like that.
# 4 stop the get rich quick mentality
Now, the next topic. Don't have a get-rich-quick mentality. My approach is more of a long-term approach. And it's easy to get caught up with the Fumo and get rich quick, and I'm going to invest a thousand dollars and in one month I'm going to have made twenty thousand dollars or whatever, whatever the case might be, you could take that approach if you want. I just caution against that. You just probably will get disappointed if you. That's the way you think.
But. I like to have the safer investments diversify, and then I will play with more speculative type coins, brand new coins that I think are going to do well and might do two or three hundred bucks in that coin. And if it tanks, it is not going to hurt me at all. But if it does, well, great. That's awesome. So my once again, my approach is more long-term.
And also it helps that if you have a plan, an exit strategy if you will, a plan for taking profits along the way, it's always a good idea to take profits along the way, maybe 10 percent here of a particular coin, if it's going up 10 percent there or whatnot. And then maybe you might want to recoup your investment, your initial investment first and then everything left after that is just pure profit. Well, pure profit minus any government taxes. I won't get into that.
Also, along with this quick get rich quick mentality, which you shouldn't have, don't chase every single shiny object coin that you see trending on Twitter or random YouTube. People like me talking about it on YouTube videos. You know, there's plenty of people on Twitter. They're like, oh, check out this movie, check out this Elon, Elon gets the coin, check out this bonfire coin. It's going to the moon, it's going to do four hundred x. Don't fall prey to that. I'm not saying you don't, you shouldn't invest in those. You may want to do your research, check those coins out, and make sure you look at the market.
Cryptocurrency Investing MistakesFor example, when you know, when BMB was hyped way up or doing well, it kind of what a stock if you bought right here on April 12th. Four, five eighty-five. And then all of a sudden it goes down to four sixty-five. That's kind of a gut punch and you feel really bad and you might have a panic sell and you'll wind up selling for a loss. But then again, if you would have just waited and held and have been held, it would have gone up. Two, six, twenty-four. So there are some patients there, and if you do happen to buy one, it's high. If it's a good coin and you hold, then chances are pretty good that it'll recoup and go higher. Of course, it depends. It's cryptocurrency. Anything can happen.
# 5 don't borrow from family
Also, the next topic is. Don't ask your family for money so you can buy Krypto with it. Don't borrow from family. Also, I would go in there, don't borrow from the bank or just take out a loan to buy Krypto with it, because all of a sudden that adds immense pressure on you. And it just really, really hypes up the pressure and then also guilt. You'll feel guilty, especially if you borrowed money from your parents or something like that. I know this sounds probably totally basic and dumb, but I'm sure people have done it and they might have lost out. So don't I just caution against borrowing money to invest in Krypto.
# 6 don't invest that rent money!
The next one I want to talk about is investing more than you can afford to lose. Don't invest your rent money. Don't invest your food money for the week. And Krypto thinking that it's going to two or three X the next week, it could happen, but it also could take two to three weeks and then you might panic because, oh, you need some money to pay for your rent and then you sell it at a loss. And it's just to have that amount of pressure on you is just not good.
So my thought and it's just the basic approach that most people knows don't invest more than you can afford to lose at any one time, maybe just have some savings built up, maybe a little crypto saving where you put some money in there each month or whatever from your paycheck. And that's just money that you're going to play with and that you want to invest with whatever you want to invest where you can invest in stocks, invest in crypto. And that's just money that you know, that if you have something happens to it, it's not going to affect you too much. That would be my advice. And then follow that other advice is to diversify, diversifying dollar-cost averaging, all those kinds of things.
# 7 Understand realize Vs unrealized
And then let's talk about realized versus unrealized gains. I love it when people say, oh, I just made one hundred thousand dollars and I just made twenty thousand dollars. Did you though you only did if you sold it, you those are so unrealized versus realized gains, it's only a realized gain if you sell it for Fiat. So even though it goes up, you didn't make that money until you sell it.
Also, you didn't lose that money until you sell it. If the market goes down and you don't sell, you didn't lose it. That is unrealized losses as well. But if you do sell, that becomes a realized loss. Unfortunately, at least here in the United States, you can put those on your taxes, your losses. But just keep that in mind, you didn't really when you didn't really or you didn't profit until you sell and you didn't lose until you sell as well if you sold for a loss.
# 8 New Yield farms
And then my last topic is yield farm's yield. Farms always promise a super, super high return. And they are good. Some of them are good like I love pancakes want. And that was one of the main ones’ kinds of first came on to this to the scene. I love pancake swap and. You just have to be careful. Like, for example, a lot of these old-timers come out and they promise like ten to twelve thousand percent, and your family starts happening. If I don't get it now, I'm going to lose out on that percentage.
Cryptocurrency Investing MistakesSo let me take a this is something that I fell prey to alpaca finance. Now, it wasn't very much, but so I went to alpaca finance first, dropped the very first day, I thought I was awesome. Like I got in like six hours after it launched. And I'm like, this is awesome. I rarely get in this early on a coin. And right when it was a release is that eight dollars. And so I waited for a little bit and I bought it like at six dollars and fifty. Then within just a day it already dropped to two dollars and seven cents.
Now I did take my advice and I only did like it. Three or four hundred dollars’ worth. So but it still is a gut punch like, man that was dumb and like, well, I'll just wait for hold because it is yield farming. I had it staking and I'm earning more and more coins. So if you hold long enough, eventually you can, you know, get those back. But you have to hold a long time sometimes for that to happen. And it went down, down, down, down. And then it was at like at one point like 70 cents. I'm like, man, that was dumb.
Cryptocurrency Investing MistakesSummary
Some Cryptocurrency Investing Mistakes for Beginners, Anyway, those are my top eight things to avoid when investing in the markets is run for everyone. Again, don't put all your eggs in one basket. Don't buy all at once, maybe take a dollar-cost averaging approach and also consider doing limit orders instead of market orders, don't have the get rich quick mentality. And also don't ask your family for money to invest in Krypto. Don't invest, invest more than you can afford to lose.
That's just an age-old saying. And just remember of realized gains versus unrealized gains and realized losses versus unrealized losses and just be leery of brand new yield farms, also just new cryptos to general in general and always, always do your research. Don't just take the advice of random YouTube words like me and random people on Twitter who aren't financial advisers, but trust your gut and that can probably help you out. So hopefully some of these ideas helped you. And if you've had some of done some of these mistakes yourself and if you have other tips for people, I mean, we can all learn from each other. And thank you for reading this book. That is Some Cryptocurrency Investing Mistakes for Beginners.
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