Mistakes you should avoid from while trading cryptocurrencies

 

The attractiveness of digital currencies is increasing day by day. On the one hand, rising public awareness and increasing acceptance of these types of currencies have caused their prices to rise. On the other hand, this area is still daunting and frightening for newcomers; because most processes and terms are not tangible and clear. In short, bouquets are very easy to water in this area. So in order to help those who do not want to get expensive experiences the hard way, in this article, we explain the common and costly mistakes that are usually made by newcomers to the field of cryptocurrencies.

Do not engage in FOMO

FOMO, or fear of missing out is a common term in the field of digital currencies. The term describes the motivation to buy digital currencies when markets are pumping up.

Common sense says that the rise in prices has reached a point where many are looking to make a profit and leave the market, and it is reasonable to wait for prices to fall to enter the market. Many newcomers cannot cope with the feeling of being left out of the party. Apparently, it’s too late to get to this journey.

The more intense and noticeable the uptrend, the more likely it is that the price will return and correct; But if you succumb to your emotions and buy, please refrain from emotional sales and do not make the second mistake.

Do not sell anything emotionally

You need to have a big heart when trading in volatile markets such as digital currencies. Most beginners are shocked to see the first big red candlestick and hit the sell button. You can use Stop Loss to stop further damage. To do this, you must have already decided on it and determined your strategy; Not that you’re not paying attention when you’re watching your capital run out.

Digital currencies are volatile, and if you cannot handle it, you should not invest in this area. There is no guarantee that the downtrend will be reversed, yet Bitcoin has experienced several price falls over its short history and has since reached a new high.

Do not underestimate fluctuations

Anything brilliant is not gold. Most digital currencies are volatile, and even the most popular currencies such as Bitcoin and Ethereum are no exception. A 5 to 10 percent price change in one day is a fairly common occurrence in the digital currency market. Bitcoin lost 50% of its value in just a few days in March 2020.

The market is always moving up and down. The digital currency market is likely to remain declining for months and years; then if you are entering the digital currency industry, be prepared for sharp fluctuations and bear markets.

Have mercy on your nerves and do not check prices every 5 minutes

Investing in the digital currency market can be very exciting at times, especially when prices go up and your net worth goes up. The first time you experience such a thing, your brain dopamine levels rise sharply and you feel very happy, and even without realizing it, you check the prices every 5 minutes to get that feeling again.

When it is shown on the other coin, you will probably be disappointed and even worse you will feel helpless and despair. Digital currencies are volatile, and checking prices at short intervals is like forcing yourself on an air train! So it’s best to keep this in mind and check prices at longer intervals (if you are a day trader, do not take this advice seriously).

Protect your private keys

Cryptocurrency traders need to ensure the security of their private key to protect their assets. The private key is a long and unique string of characters that allows access to funds. The private key can be summed up in a Seed Phrase. Recovery terms are unique words that are the key to accessing your digital currency treasures. These phrases are usually 12 to 24 word bits.

The private key and the phrase recovery protect your capital from the bite of fraudsters and hackers; so you should never share it with anyone. You do not need to disclose these two to receive any service, so do not be fooled.

A classic example of such a mistake occurred in 2015 on Bloomberg TV. The presenter gave the other two presenters a package containing a QR code that contained some bitcoins. One of them opened the gift and the code of the private key in HD quality was displayed in the TV images. A Reddit social network user received the gift by scanning the code. The lesson of this story is to always keep your private key private.

It is not necessary to buy/sell a full unit of a currency

Most newbies think that they have to spend thousands of dollars to buy a bitcoin if they want to enter the digital currency space. This is not only a misconception, but also a psychological barrier to the acceptance of digital currencies. In any case, such a thing is not true.

Bitcoin and other exchangeable digital currencies can be converted into smaller units (note; this feature does not include unique tokens). For instance, one bitcoin can be divided into 100 million Satoshi (the smallest unit of bitcoin). Users can enter the world of digital currencies by buying a few hundred Satoshi.

Save your two-factor recovery codes

The use of 2-factor authentication (2FA) is essential to protecting centralized account services (such as security programs or exchanges) as well as personal security. However, digital currency users often forget to back up the information they need so that they do not have a problem if their access to their mobile phone is blocked for any reason (such as losing a phone, stealing or upgrading software).

Without this information, you will have a lot of trouble proving that you are the real owner of an account. You should expect to record a video, tell the date, hold your passport and a handwritten text, and possibly prepare your family tree (which was a joke!) So you can verify your identity. Do it again. So always back up your recovery code.

Mind your step; do not send funds to the wrong address

Blockchain transactions are irreversible. If you make a transaction and find out that something went wrong, there is no way you can get your digital currencies back. In addition, there is no law requiring a third party to return the funds.

Therefore, you should be very careful in sending cryptocurrencies to the correct addresses, as well as providing the correct address to others to receive funds.

Use address tags to minimize errors, and get used to using Memo tags to accurately identify destination addresses. Since digital currencies such as XRP, Stellar and IAS are needed to identify the recipient of the transaction. To transfer any of these digital currencies, you must enter a destination tag. Otherwise, the transaction may be problematic or lost altogether.

Do not enter the cryptocurrency market without any knowledge

The crypto market is significantly different from traditional financial markets. The industry is evolving rapidly, and updates are constantly changing the rules of the game. It is important to familiarize yourself with the world of digital currencies to know where you are investing.

Once you understand this technology, you can read the Whitepaper before investing in a currency or project, identify its uses, and make sure you do not invest in the currency by accident. Many people enter this field without following the DYOR (Do Your Own Research) law, which is one of the most important laws in the world of digital currencies.

In some cases, social media influencers are also involved in promoting these scams. Therefore, research any project or plan yourself, read the white papers and connect with the digital currency community so that you can clear your doubts.

Do not fall into the trap of fraudsters

The total market value of digital currencies is now over two trillion dollars, and it is natural that where there is a lot of wealth, people want to cheat to get it. The cryptocurrency market is full of scammers and spammers. This is important when you know that in a decentralized world, there is no such thing as customer support. With one mistake you may lose all your digital currencies. Here are some of the most common scams in this area:

Free Donation Scam

In this method, scammers promise that if you deposit a certain amount of digital currency into the wallet they declare, they will give you a free digital currency (often twice the amount sent by the user). These methods, known as “donation scams”, are very common on social networks such as Facebook, Twitter and Telegram. Scammers can create fake accounts or hack celebrity accounts to continue such scams.

Phishing scams

This type of scam is not limited to the world of digital currencies. Scammers use phishing techniques to capture individuals’ email accounts, social network accounts, and other password-protected accounts. In the world of digital currencies, fraudsters aim to gain access to your digital assets. The common method is to trick users into using a fake website instead of the original website. The user enters their information on a fake website and actually gives it to the scammer; Therefore, it is better to check the website address again before entering personal information.

Scams related to the initial supply of coins

ICO stands for Initial Coin Offering. ICO is a fundraising project to create a project related to digital currencies. In ICO-related scams, project owners persuade people to buy new tokens through the ICO. As soon as a significant amount of tokens is sold, the scammers disappear with the money raised. There is no specific method for detecting ICO fraud. It is therefore advisable to check the tokens thoroughly before investing in them.

Be careful Unit bias

Unit bias in the field of digital currencies means that the investor values ​​having a whole unit of digital currency more than he wants to have a fraction of it.

For instance, a person entering the digital currency space could spend $4,000 to buy an atrium, or they could spend the same amount to buy a fraction of a bitcoin. However, sometimes with the same amount of money, buying a full coin makes the investor feel better than a small fraction of a more expensive coin.

Although buying a whole unit of a currency may seem appealing, its value has nothing to do with the nominal price. However, there is no harm in diversifying your portfolio and investing in multiple digital assets until you have done the necessary research.

Always consider different commissions and expenses

Transaction fees are an integral part of the use of digital currencies. For each transaction, you have to pay a small fee as a commission to the exchange platforms as well as the blockchain network that you use. Commissions in the cryptocurrency industry are generally relatively lower than those received in the traditional financial world.

However, the advent of Defi as well as the high demand for smart contracts has greatly increased commissions. If you do not pay attention to the commissions and expenses, it is not unlikely that sometimes the commission will be higher than the value of your transaction.

Do not engage in FUD

The term FUD is derived from the Latin terms fear, uncertainty, and doubt, and is used to describe the trivial negative reports and news that circulate around the digital currency industry.

One recent example of this is the ban on digital currencies in India. Although the Indian government has not formally announced any bans, news sites are constantly publishing content that makes this seem certain and imminent. Such news raises doubts in the hearts of digital currency holders. Fad causes these people to sell their assets, which can be a costly mistake.

Do not react to FUD until you have a definitive knowledge of the subject, or have done sufficient research on the news.

Currently, the environmental effects of bitcoin mining and the backbone of Tether supply are two topics that can be categorized as FUD.

 

Beware fall into pumps and dumps trap

Groups on social media provide signals for buying and selling digital currencies. But are these signals useful? The answer is a resounding no. These groups are often inefficient and unhelpful because there is no way to accurately predict the market, especially the cryptocurrency market.

Let’s look at how these groups work. For instance, a telegram group with 50,000 members decides to pump a coin. They agree to invest their money in a specific coin at a certain time. This concerted action will lead to a huge amount of money entering the market. Until new buyers come to their senses and realize that the game is coming to an end, smart actors and whales are off the market with lots of profit, leaving newcomers alone with overvalued coins in a price bubble.

The bottom line

Although the purpose of this article is to highlight the issues that can confuse newcomers to the world of cryptocurrencies, it is important to consider all the positives that entering the world of digital currencies brings to us.

The most important wealth transfer throughout history is happening, so do not be afraid; it sounds a little scary though. Just make sure you do a lot of research and then do more and more work in this area.

The common mistakes made in this article reflect misconceptions about digital currencies or what they do. Scammers are more aware of the mechanism of these currencies than the general public, which is why they try to target novices.

The digital currency community, on the other hand, is supportive and helpful, and users of Reddit or Twitter social networks are eager to help or encourage investors who are new to the cryptocurrency world.

It’s better to ask a seemingly silly question than to make a costly mistake. The digital currency community is more generous than you might think. Just take your steps carefully and learn from the mistakes of the brave pioneers who have taken this path before you.