Cryptocurrency trading is at an all-time high again as Bitcoin grazes the $20,000 mark. More people are looking to get into the market, but just like with regular investments, there are certain things you want to avoid. Learning how to trade cryptocurrency can be easy, but don’t jump straight into the deep end.
Here are the top five cryptocurrency trading mistakes you need to avoid.
1. Cryptocurrency Trading Is Still New
Unlike the New York Stock Exchange, which has been around since 1792, cryptocurrency trading is still new. It has only truly been a thing since the late 2000s. This means that there is still a lot of uncertainty when it comes to legal issues and what it means for value.
While it does look promising as an alternative to the current banking system, that does not mean you should throw all your money into it.
For those looking to learn more about the decentralized finance market, be sure to check out the link.
2. Don’t Get FOMO
Because it is new, you should not get FOMO, otherwise known as the “fear of missing out”. FOMO is what happens in the investing world when you think you might have missed a big opportunity of gains and end up buying in at an extremely inflated price.
Wait for a great entrance target and get in while the hype is down.
3. The Hype Doesn’t Last
The hype never lasts when it comes to cryptocurrency. This is where the term “bubble” comes into play.
A bubble is when a stock or cryptocurrency rapidly rises to a number that is not sustainable in the long run. Often, when there is a new cryptocurrency or renewed interest in a specific cryptocurrency, the numbers will inflate to reflect the talks and news, rather than reflecting what the currency or stock holds in value.
Once a bubble bursts, everyone sells out and there is a rapid and extremely big drop in price. Trends in cryptocurrency are always fluctuating, as the market never closes for them.
4. Avoid Pump and Dump
The pump and dump tactic is a group of investors deciding when a cryptocurrency is low, inflating the numbers by buying more and then selling out.
Try to avoid these schemes, as they often never work and because of the constant fluctuation of cryptos, can even lead to losses. This most recently happened with Dogecoin, where TikTok users inflated the price to then sell out.
5. Not All Crypto Is Worth Investing In
This falls into the area of understanding what you are investing in. The big names like Etherium and Bitcoin are always going to pull traction and are safer investments.
Try not to invest in random cryptos that you hear about on a shady website. These are often designed to trick people into investing, artificially creating a price rise, only for them to sell out and close the currency.
Avoid These Cryptocurrency Trading Mistakes
By avoiding these cryptocurrency trading mistakes, you can ensure that your money is always moving in the right direction. Remember that the market never closes, and there may be times where you are making trades at two in the morning. Keep the path and everything will work out.
If you want to learn more about how the world is evolving, be sure to check out the rest of our blog. If you know someone that is interested in cryptocurrency trading, be sure to share this article with them too.