Whether you’re an experienced investor or new to the investing world, you’ll quickly learn the importance of diversification. Investing your hard-earned money into multiple investment types spreads out the risk, so you can keep earning money when any of your investments are underperforming.
Diversification has led many people into cryptocurrency, a highly volatile, decentralized digital currency. If you’re eager to explore the world of digital currency and blockchain technology, it’s important to avoid these investing mistakes:
Investing More Than You Can Afford to Lose
While you can visit My Canada Payday website and similar payday loan providers when you’re caught short at the end of a pay cycle and need a fast and convenient helping hand, you can’t rely on these platforms if you’ve simply invested more than you can afford to lose. This error is yours to resolve.
This means that you’ve put more money into cryptocurrency than you can comfortably afford, and its highly volatile nature has meant that you’ve lost it. Whether you’re gambling or investing, you should only ever spend spare money that you don’t need or rely on for everyday living.
Investing Without Understanding the Basics
You should always have at least a basic understanding of what you intend to invest in, be it cryptocurrency, real estate, precious metals, or something else. Jumping in without understanding how wallets, blockchains, or private keys work can lead to avoidable errors, such as trusting the wrong platform or sending money to the wrong address.
Before parting with your funds, learn the fundamentals of cryptocurrency. Familiarize yourself with how transactions work, basic security, and the difference between custodial and non-custodial wallets.
FOMO Buying
FOMO, ‘fear of missing out,’ buying means that you see a coin’s price skyrocketing and decide to jump in near the peak. Next thing you know, the prices have corrected, and you’re stuck holding losses. In simple terms, if everyone is already talking about a particular coin’s increasing value, you’re probably already late.
Instead, set entry points in advance and stick to them. Most cryptocurrency investors use dollar-cost averaging (DCA). This investment strategy involves investing a fixed-dollar amount in cryptocurrency at regular intervals, regardless of the price, to reduce the risk of market volatility and eliminate emotional stress.
Panic Selling
Don’t treat cryptocurrency any differently from your other investments. This means that if there is a sudden drop in value, you shouldn’t panic and sell at a loss. You should expect volatility, and prices regularly recover later.
If you’re worried about having emotional reactions to value losses in your investments, choose them wisely. Decide your risk tolerance before investing so that short-term swings don’t evoke as much of a knee-jerk reaction.
Not Prioritizing Security
Leaving crypto on an exchange is akin to leaving cash on a table in public. If a crypto platform is hacked or your account is compromised, it’s gone. That’s why you should never underestimate the value of additional security measures, even if it seems inconvenient. There are a number of worthwhile measures, including:
- Using hardware wallets, also known as cold storage, to store most of your assets offline to protect against remote hacking.
- Never take photos or screenshots of your 12-24-word seed phrase or recovery phrase to access your crypto wallet, or store it on digital devices. Instead, write it down and store it in a secure location.
- Use authenticator apps for 2FA, rather than SMS-based 2FA, which puts you at risk of SIM-swapping attacks.
- Use non-custodial wallets rather than third-party services.
- Avoid public Wi-Fi.
- Use strong, unique passwords.
- Don’t share your private key or seed phrase with anyone.
- Don’t use the same password for multiple accounts.
Falling for Scams
According to the FBI’s 2025 Internet Crime Report, cyber-enabled crime defrauded Americans of nearly $21 billion, with cryptocurrency among the costliest at over $11 billion. Among the most costly tactics used by scammers are:
- Compromised corporate emails
- Tech support fraud
- Personal data breaches
- AI pressure techniques with fake social profiles, voice clones, identification documents, and believable videos depicting loved ones or public figures
Never send cryptocurrency with the belief that you’ll receive more, and always double-check URLs before clicking on them. You should also avoid unsolicited messages.
Not Having an Exit Strategy
Your goal might be to make money by investing in cryptocurrency, but it needs to be more specific than that. Many investors don’t plan when to sell, so they tend to hold on to their cryptocurrency for too long or sell it too early. To reduce the risk of making costly mistakes due to poor timing, define targets. For example, you might tell yourself that you’ll sell your crypto when it’s up 50% or 100%.
Trusting Influencers Without Question
Performing basic research is integral to success in the world of cryptocurrency investing. However, that doesn’t mean that you should immediately trust any ‘influencer’ who’s telling you what the next ‘big’ thing is. You can’t be sure that they don’t have undisclosed incentives. They could also simply be wrong.
Instead, treat all crypto advice as a starting point for your own research. For example, if a supposed expert tells you that new token listings demonstrate new opportunities for developers, you can use that information as a jumping-off point for learning what the new tokens are and whether some are more desirable than others.
Ignoring Tax Obligations
Crypto gains are taxable in most developed countries. They are generally treated as capital gains or income, with tax rates ranging from 10% to over 50%. Even if you just swap coins, you likely need to pay tax. To avoid hefty penalties from unpaid taxes, track every transaction and understand your local tax rules. If you’re unsure, consult a local tax professional.
Losing Private Keys
If you lose your wallet seed phrase, your funds are permanently gone. It’s as simple as that. Not even the wallet provider can recover them without it. According to research by the Association for Computing Machinery, millions of dollars in Bitcoin have been permanently lost due to people misplacing or forgetting their keys. To reduce the risk of this happening, store backups securely, ideally offline and in multiple locations.
Using Unsafe Platforms
If you’re new to cryptocurrency, you might choose your preferred platform based on the one that offers the most desirable features or promises. For example, a platform might promise fixed, high, or guaranteed daily or monthly returns.
As alluring as it may be to ‘double your money in a week’, it’s almost certainly a sign of an unsafe or scam crypto platform. Before signing up for a new platform, check its regulatory status, read third-party reviews, and assess the domain’s age to see how long it has been active.
Being new to cryptocurrency investing means it’s not unexpected that you’ll make some mistakes. However, awareness of the common and damaging ones may reduce the risk of making them yourself and losing your hard-earned money.
About Author
