Currently, the craze for cryptocurrencies is unprecedented, and opportunities are everywhere. However, behind the potentially life-changing wealth opportunities, if you are not careful, you may lose everything overnight. I'm not saying this from a textbook, but summarizing it from my own experiences and mistakes.
As a large number of newcomers flood into the cryptocurrency market—many of whom have never even been exposed to investing—these lessons become particularly important. Today, we will discuss the five most serious mistakes beginners often make ( and how to avoid them ). If you read to the end, I will also share why these lessons are especially crucial under the current control of the Federal Reserve Chairman Jerome Powell (Jerome Powell).
Error 1: Invest only what you can afford to lose.
This phrase sounds like a cliché, but it is the most common mistake and a trap that gets most people into trouble. You often hear, "Only invest what you can afford to lose." But for many beginners, this is just empty talk.
The cryptocurrency market changes rapidly, and it won't wait for you to adjust. Sometimes, you wake up and your account may have been halved. So, ask yourself: how much are you willing to lose?
Practical exercises:
Take out the amount you plan to invest.
Reduce this amount by half.
If this number makes you uncomfortable, you've invested too much.
If the money you invest is something you cannot afford to lose, you are not investing, but gambling. In the cryptocurrency market, this can be fatal.
Before entering cryptocurrency investments, make sure your basic safety net is in place. This means saving at least three months' worth of living expenses in a secure account that is unrelated to the crypto market. It may be boring and not glamorous, but it's the only way to ensure your financial security during market downturns.
I have seen many people lose their life savings on platforms like FTX that have collapsed, and many of them may never get that money back.
Bottom line: Before dealing with cryptocurrencies, make sure your emergency funds are secure.
Error 2: Blindly following internet celebrities
Cryptocurrency influencers are everywhere. Whether on Twitter, YouTube, or TikTok, you'll always see someone claiming they've discovered the next big hit, like "the three altcoins that can make you rich" or "the hidden gem that will skyrocket next week!" But what most people don't know is that these influencers are often paid to promote these projects.
Do you really think they have a positive outlook on these coins? Think again. Many people were paid between 10,000 to 100,000 dollars to make these videos, and they actually haven't invested in these projects at all. The sad reality is that many of the projects they promote don't even have a real product. Basically, you are paying for someone else's marketing.
Solution: Follow my "3T Principle" before investing:
Technology (: What problem does this project solve? Is there a real demand? Is it addressing a real issue, or is it just another imitator?
Token Economics )Tokenomics(: How many Tokens are there in total? Who controls them? What is the distribution method? If the distribution is too centralized, the project may be at risk.
Team )Team(: Who is behind the project? What have they done before? Are they transparent and trustworthy?
Think about Logan Paul's CryptoZoo. No product, no real value, and the tokenomics are quite questionable, destined to fail.
Before investing in any project, do thorough research and do your homework. Never trust other people's hype.
Error 3: Buy high, sell low ) FOMO sentiment (
This is one of the most painful mistakes for beginners. It's theoretically easy to understand, but when emotions take over, it's easy to fall into the trap.
Look at the Dogecoin craze in 2021. People rushed in at 70 cents because of FOMO, fearing they would miss out, thinking Dogecoin would rise to 1 dollar. In the end, it crashed.
Solution: When you want to buy because you are afraid of missing out, this is your red warning signal, pause for a moment.
The reasons are as follows: If a coin has already risen by 500%, you are no longer an early investor; you are late. You are chasing a coin that has been hyped up, hoping to get lucky. But more often than not, you are just caught up in the hype, and when the frenzy subsides, your investment will also collapse.
Practical advice: If you feel like you are chasing a big bullish candle, take a step back and wait for the market to calm down. The market is cyclical and there will always be new opportunities. However, if you are chasing hype, you are likely to lose money.
Error 4: Investing heavily in a brand new cryptocurrency without a product
The appeal of new coins is very strong. They are fresh, exciting, and everyone loves to fantasize, "What if this is the next big hit?" But I have to tell you: most new coins are not.
New coins are like startup companies; 90% of them will fail. You wouldn't invest your life savings into a startup that has no product, no revenue, and no track record, and the same logic applies to cryptocurrencies.
A reliable project should at least have a Minimum Viable Product )MVP(, which is something that can be used today, not just an idea or a white paper.
Why it matters: Without a product, what you're investing in is just a dream. And dreams don't yield returns.
Practical advice: Unless the project already has a tangible product, do not chase the "next big hit." The price may be tempting, but the product and execution are key. Stick to investing in coins that have actual products or can truly solve problems.
Error 5: Using leverage ) disastrous formula (
Leverage sounds great: "Double your position, maximize your profits!" But what they don't tell you is that leverage can also double - or even triple - your losses.
In 2022, Bitcoin fell by more than 50%. If you used 2:1 leverage, you didn't just lose 50%, but you were wiped out. Leverage amplifies losses, and there's nothing more dangerous than that.
When you use leverage, a slight drop in price can lead to your account being wiped out. This not only hurts your wallet but also affects your mental health. Watching your account balance plummet like a free fall is a feeling no one wants to experience.
Practical advice: Unless you are a professional investor who clearly understands leverage and its risks, completely avoid using leverage. Protect your principal. As long as you can stay in the market, there will always be more opportunities. The market will come back, but your principal may not.
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The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
5 Most Serious Crypto Assets Investment Mistakes Beginners Must Avoid
Written by: Abhaya Anil
Compilation: Vernacular Blockchain
Currently, the craze for cryptocurrencies is unprecedented, and opportunities are everywhere. However, behind the potentially life-changing wealth opportunities, if you are not careful, you may lose everything overnight. I'm not saying this from a textbook, but summarizing it from my own experiences and mistakes.
As a large number of newcomers flood into the cryptocurrency market—many of whom have never even been exposed to investing—these lessons become particularly important. Today, we will discuss the five most serious mistakes beginners often make ( and how to avoid them ). If you read to the end, I will also share why these lessons are especially crucial under the current control of the Federal Reserve Chairman Jerome Powell (Jerome Powell).
Error 1: Invest only what you can afford to lose.
This phrase sounds like a cliché, but it is the most common mistake and a trap that gets most people into trouble. You often hear, "Only invest what you can afford to lose." But for many beginners, this is just empty talk.
The cryptocurrency market changes rapidly, and it won't wait for you to adjust. Sometimes, you wake up and your account may have been halved. So, ask yourself: how much are you willing to lose?
Practical exercises:
Take out the amount you plan to invest.
Reduce this amount by half.
If this number makes you uncomfortable, you've invested too much.
If the money you invest is something you cannot afford to lose, you are not investing, but gambling. In the cryptocurrency market, this can be fatal.
Before entering cryptocurrency investments, make sure your basic safety net is in place. This means saving at least three months' worth of living expenses in a secure account that is unrelated to the crypto market. It may be boring and not glamorous, but it's the only way to ensure your financial security during market downturns.
I have seen many people lose their life savings on platforms like FTX that have collapsed, and many of them may never get that money back.
Bottom line: Before dealing with cryptocurrencies, make sure your emergency funds are secure.
Error 2: Blindly following internet celebrities
Cryptocurrency influencers are everywhere. Whether on Twitter, YouTube, or TikTok, you'll always see someone claiming they've discovered the next big hit, like "the three altcoins that can make you rich" or "the hidden gem that will skyrocket next week!" But what most people don't know is that these influencers are often paid to promote these projects.
Do you really think they have a positive outlook on these coins? Think again. Many people were paid between 10,000 to 100,000 dollars to make these videos, and they actually haven't invested in these projects at all. The sad reality is that many of the projects they promote don't even have a real product. Basically, you are paying for someone else's marketing.
Solution: Follow my "3T Principle" before investing:
Technology (: What problem does this project solve? Is there a real demand? Is it addressing a real issue, or is it just another imitator?
Token Economics )Tokenomics(: How many Tokens are there in total? Who controls them? What is the distribution method? If the distribution is too centralized, the project may be at risk.
Team )Team(: Who is behind the project? What have they done before? Are they transparent and trustworthy?
Think about Logan Paul's CryptoZoo. No product, no real value, and the tokenomics are quite questionable, destined to fail.
Before investing in any project, do thorough research and do your homework. Never trust other people's hype.
Error 3: Buy high, sell low ) FOMO sentiment (
This is one of the most painful mistakes for beginners. It's theoretically easy to understand, but when emotions take over, it's easy to fall into the trap.
Look at the Dogecoin craze in 2021. People rushed in at 70 cents because of FOMO, fearing they would miss out, thinking Dogecoin would rise to 1 dollar. In the end, it crashed.
Solution: When you want to buy because you are afraid of missing out, this is your red warning signal, pause for a moment.
The reasons are as follows: If a coin has already risen by 500%, you are no longer an early investor; you are late. You are chasing a coin that has been hyped up, hoping to get lucky. But more often than not, you are just caught up in the hype, and when the frenzy subsides, your investment will also collapse.
Practical advice: If you feel like you are chasing a big bullish candle, take a step back and wait for the market to calm down. The market is cyclical and there will always be new opportunities. However, if you are chasing hype, you are likely to lose money.
Error 4: Investing heavily in a brand new cryptocurrency without a product
The appeal of new coins is very strong. They are fresh, exciting, and everyone loves to fantasize, "What if this is the next big hit?" But I have to tell you: most new coins are not.
New coins are like startup companies; 90% of them will fail. You wouldn't invest your life savings into a startup that has no product, no revenue, and no track record, and the same logic applies to cryptocurrencies.
A reliable project should at least have a Minimum Viable Product )MVP(, which is something that can be used today, not just an idea or a white paper.
Why it matters: Without a product, what you're investing in is just a dream. And dreams don't yield returns.
Practical advice: Unless the project already has a tangible product, do not chase the "next big hit." The price may be tempting, but the product and execution are key. Stick to investing in coins that have actual products or can truly solve problems.
Error 5: Using leverage ) disastrous formula (
Leverage sounds great: "Double your position, maximize your profits!" But what they don't tell you is that leverage can also double - or even triple - your losses.
In 2022, Bitcoin fell by more than 50%. If you used 2:1 leverage, you didn't just lose 50%, but you were wiped out. Leverage amplifies losses, and there's nothing more dangerous than that.
When you use leverage, a slight drop in price can lead to your account being wiped out. This not only hurts your wallet but also affects your mental health. Watching your account balance plummet like a free fall is a feeling no one wants to experience.
Practical advice: Unless you are a professional investor who clearly understands leverage and its risks, completely avoid using leverage. Protect your principal. As long as you can stay in the market, there will always be more opportunities. The market will come back, but your principal may not.