Bitcoin and other cryptocurrencies are all about decentralization, privacy, and anonymity. But that doesn’t mean they’re immune to theft (or “hacking”). This article will show you how easy it is for even savvy investors to lose money in the crypto world—and what you can do about it.
Crypto is volatile.
After reading this, you may ask yourself: “What does this mean for me?” Well, let’s break it down. There are two main pieces of information that you need to know about cryptocurrency:
- Cryptocurrency is a high-risk investment.
- The value of a cryptocurrency can change quickly.
You’re guaranteed to lose money if you invest in a coin at its peak price and then see its value drop significantly before selling. Cryptocurrency isn’t like buying stocks or bonds, where regulations protect against losing all your money. These coins aren’t investments so much as they are bets on what will happen with them.
In short: if someone tells you that trading crypto is like playing casino games online, know they’re right!
FOMO & your own greed.
It’s easy to fall victim to FOMO when you’re watching the price of a cryptocurrency go up and up, but it’s important not to let your emotions get in the way of sound investment decisions.
Still, no one can deny that greed is part of our nature as human beings. The desire for more money, and more possessions is strong and instinctual. It drives us to build a society where we are rewarded for our hard work and ingenuity. But greed can also lead us astray.
Greed makes us feel like good people. It helps us convince ourselves that there are no consequences beyond increased happiness if something goes wrong with an investment decision. But do not be fooled into thinking there won’t be repercussions if things don’t go as planned!
Not diversifying will make you lose money
Diversifying your portfolio is a great way to minimize risk and maximize gains. Investing in different asset classes, such as stocks, bonds or commodities, can reduce the impact of any investment failing.
For example, if you invest all of your money in Bitcoin and the price crashes by 50%, that could wipe out all of your profits from previous investments and leave you with nothing but losses from day one. Instead, you would have been better off spreading those funds across multiple cryptocurrencies or traditional fiat currencies.
The same principle applies to exchanges. Don’t put all of your eggs in one basket!
You’re making emotional decisions.
The first thing to know is that cryptocurrency is a highly volatile market that can experience both highs and lows. If you’re making emotional decisions, you might not be thinking clearly about the future of your investments. Investors are likely to make irrational decisions when they allow their emotions to influence their investment strategies.
According to studies, investors are prone to making these mistakes when facing losses or gains and when they feel rushed or pressured by time constraints.
The best way to avoid being ruled by emotions like fear and greed is by conducting research before committing money. Especially if you’re investing with an eye toward long-term growth!
Lose money by falling for scams
It’s easy to find a cryptocurrency scam. There are plenty of sites that rank scams, and most people are aware of the common warning signs. The problem is spotting them in the first place when you’re blinded by greed or simply don’t know any better. If a site looks too good to be true, it probably is—but plenty of people fall for these schemes every day!
The best way to avoid scams is to research before investing in anything new. Researching crypto scams can be time-consuming and difficult but mandatory if you want to protect yourself against losing money.
Conclusion
Cryptocurrency is still a very volatile market, and it’s important to remember that you can lose money with crypto just as quickly as you can make it.
The key is keeping your emotions in check, making sure you diversify properly, and not getting caught up in the hype.
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