Cryptocurrency Investing Tips And Mistakes To Avoid

Last Updated July 23rd 2021
15 Min Read

Are you thinking to start your cryptocurrency investment journey and want to know the best investing tips? Or maybe you are a trader, and you believe that you are making too many mistakes. Below, we present you the cryptocurrency investing tips and the mistakes you should avoid.

Cryptocurrency Investing Tips

Cryptocurrency Investing Mistakes To Avoid

Cryptocurrencies are expanding significantly, and they have become an excellent investment opportunity. There was scepticism around them at their beginning, but now as many banks and financial institutions are investing in Bitcoin large amounts of money and launching their cryptocurrency services, scepticism is gradually fading. 

With such news, attention has already turned to cryptocurrencies and Bitcoin actually has the largest number of active addresses since 2017 when it hit $20,000. 

So, if you are thinking to start your investment, here at Trading Education, we have prepared the best cryptocurrency investing tips and the most common mistakes to avoid.

Cryptocurrency Investing Tips

Cryptocurrency investing tips are always useful as they help investors and especially newbies in cryptocurrency to shorten their road to success.


Educate yourself about cryptocurrency

You need to take cryptocurrencies seriously and eliminate the impression that they are a way to get rich quick. In the traditional way of saving money, we are more likely to save our money through banks and financial institutions. If we need help or if we make a mistake by sending money to the wrong address, then we can call customer service, and they will return the transaction. 

You have to keep in mind that this can not happen with cryptocurrencies. No one owns them; they do not have a CEO. They are entirely decentralized, and if you are a victim of a scam, then there is no going back. Therefore, take cryptocurrency and blockchain technology seriously, and this way, you will be able to distinguish the things that are legitimate on the internet and those that are a scam.

1. Choose the strategy you are more comfortable with

There are several strategies with which you can benefit with cryptocurrencies. However, taking into account your experience, you should choose the strategy with which you are most comfortable. Day Trading, for example, requires more skills and knowledge in reading charts and predicting market movements. In contrast, HODLing does not require any specific knowledge because you can only buy a coin and wait for its value to increase. So it all depends on your experience and desire to learn.

2. Understand volatility

By nature, cryptocurrencies are volatile, meaning that their price often rises and falls. In fact, this is seen as a good opportunity to profit from investors and if you manage to understand volatility in essence, then you will be able to devise a better investment strategy. In addition, you have to mentally prepare yourself for price swings and not get emotional or too surprised. Expect everything when it comes to cryptocurrencies!

3. Beware of scams - Do you own research

The internet is known for the opportunities it offers to make money, but also for many scams and hacks that have occurred throughout history. Even cryptocurrencies in their start have been described as scams by many people, even by influential celebrities. Today, scams are offered in the world of cryptocurrencies in the form of "opportunity" to invest. 

Sometimes when you wake up in the morning, you may have your email filled with offers that look legitimate, but they are scammers trying to take advantage of any potential victims. You may have offered to invest in "real cryptocurrencies", but in fact, they are a scam.

OneCoin is one of the most famous cryptocurrency scams. A Bulgarian lady, Ruja Ignatova, promoted the coin as entirely legit and attracted investors by collecting a total of $4 billion. Authorities identified it as a Ponzi Scheme. Therefore, beware, do not rush, research and move forward in your trading adventures.

4. Take your profit

If you have been HODLing your investment for a long time and you see that you have enough profit to take, do not hold too much and take your profit. One might think that maybe you are in a hurry, but if you have a 600% profit, for example, then you have nothing to wait for. If you continue to HODL after 600% profit then this may be excessive because when we talk about cryptocurrencies, you never know, they can crash, and you will gain no profit whatsoever. In fact, you run the risk of losing even the money you invested.

5. Try to invest at the right time

We could call this differently as the "buy low and sell high" rule. Investing at the right time is the most crucial component when it comes to cryptocurrencies, especially for HODLers. For example, if we go back to 2017 when cryptocurrencies experienced a drastic price increase, those who had invested at a time when the price of Bitcoin was very low, made huge profits when the price rose. Although this has to do with a bit of luck, however those who stay up to date will always know when to invest their money in cryptocurrencies. 

The other example is now, at the time of the coronavirus, Bitcoin almost touched $3000 at the start of 2020 and then the price gradually increased. At the moment it is currently standing at just over $15,800. A HODLer, someone who has invested in March of 2020, now enjoys profits if he wants to get them, or can still wait, in the hope that Bitcoin will grow in value.

6. Choose a secure cryptocurrency exchange

From the many cryptocurrency exchanges that operate out there, try to choose the best one. It is important to select an exchange that has low fees and is safe. In particular, pay attention to the security of the exchanger you will select. Exchanges often know to be victims of hackers. 

The most famous exchange hack is the Mt. Gox exchange, which was hacked in 2014, thus losing 850,000 bitcoins worth $450 million at that time. In fact, the case of Mt. Gox is one of the biggest scandals in the history of cryptocurrencies. Therefore it is very important to choose an exchange that has high security. eToro for example is a brokerage which is valued for high security through which you can invest in cryptocurrencies without any hesitation.

7. Understand hot and cold wallets

So, as aforementioned, cryptocurrencies cannot be stored in the bank like traditional currencies. Cryptocurrencies are stored in so-called wallets. It is essential to understand the difference between a hot and a cold wallet. Hot wallets are connected to the internet. So they are online websites where you can store your cryptocurrencies. eToro wallet, for example, is an easy to use platform that supports more than 120 cryptocurrencies.

Meanwhile, cold wallets are hardware, usually in the form of USB where you can store your cryptocurrencies. They stand out for more security because they are not connected to the internet. Therefore they cannot get hacked.

8.Take privacy seriously

Obviously, there are people you trust, for sure. But, after all, when it comes to cryptocurrencies, be cautious and do not trust everyone. It is best not to share any passwords or private keys you have with anyone. Especially private keys. No one should have access to them except you because private keys are the ones that protect your funds from theft.

9. Consider using a crypto trading bot

The cryptocurrency market operates 24 hours a day, 7 days a week. So the opportunities to benefit from the investments in crypto are many. Therefore as a welcome option would be the use of automated trading software or otherwise known as trading bots.

According to the Cryptonomist researches have shown that 86% of trading is done by bots. Trading bots work on their own, and you can automate your investment strategy using them. They are valued for saving investors’ time as they operate even on weekends when you will be hanging out with your family or hiking in the mountains.

10. Do not follow the crowd

Sometimes in cryptocurrencies, an impression is created that everyone should invest in a certain period, so do you. This is the wrong approach. You need to stick to your plan most of the time. There are many "experts" out there trying to convince you which coin to invest in. Sometimes they can be right, but often they can also be wrong.

If we go back, in 2017, during the crypto boom, the impression was created that everyone had to invest. So those who did not have much knowledge of how things were going, bought while the price was high. It did not take long; the prices fell to the ground, and buyers ended up desperate. So, judge the way the market is developing by yourself, and make your decisions.

11. Understand cryptocurrency correlation

Crypto correlation means that cryptocurrencies are linked to each other in such a way that their price goes in a similar direction. Bitcoin, for example, is correlated with Ethereum. Most altcoins are correlated with Bitcoin. So if the price of Bitcoin goes up, so does the price of altcoins. 

But there are cases when the price of altcoins exceeds the rising price of bitcoin by a larger percentage. Therefore,  if you understand the correlation between cryptocurrencies, then your investment strategy will bring you more profit.

12. Stay updated

After all, it's good to stay updated. Follow the news and read crypto content as much as possible. Often various events in the world affect the price of cryptocurrencies, so stay informed, in order to predict price movements as well and accurately as possible.

Cryptocurrency Investing Mistakes To Avoid

cryptocurrency investing mistakes

Investors make many mistakes, whether out of lack of knowledge or out of emotion. Because of these mistakes, they leave a lot of money on the table. Below are some of the mistakes you should not make as a crypto investor.

1. Investing only in one coin

One of the most common mistakes investors make is investing in just one coin. Although cryptocurrencies are correlated, some of them perform better than others. Undoubtedly Bitcoin is the favourite cryptocurrency for most of the people. But, in many cases it is precisely some new, unknown cryptocurrencies that can have 300-400% growth within the day, thus being very profitable. So, take your time, analyze the market and invest in more than one cryptocurrency. Indeed, the chances for profit will be greater.

2. Investing all the money you have

They do not unintentionally say "Invest only what you can afford to lose". You should know that cryptocurrencies can also disappoint you because their price can crash depending on several factors. It should be borne in mind that cryptocurrencies are driven by software created by the human mind through coding. By nature, they are characterized by volatility which means that there are frequent fluctuations in prices. Therefore, never invest all the money you have. Invest only what you think you can afford to lose in case their price crashes.

3. Following the hype

Often investors get hyped up by following the news and the social media buzz. Thus they are influenced by this news, and the hype created and make investments at the wrong time or sell their coins at the wrong time. Although it is good to stay updated, it does not mean that all news and forecasts are accurate. So you need to have a plan that you follow and not be influenced by the hype created around you.

4. Trading with emotions

Emotions do not help traders at all. On the contrary, they only harm traders because they can take wrong decisions if they fall under the influence of emotions. Emotions are, in fact, one of the main causes of significant losses that traders may have experienced. Because of them, a trader can buy or sell at the wrong time. Therefore, learn not to be influenced by emotions and stick to your plan.

5. Overtrading

After all, we are humans, and we get tired. When we get tired, we make more mistakes. So take breaks sometimes from trading. Do not try to make a lot of trades during the day, because trading is time-consuming and it is difficult to catch a lot of good trades during the day. You need to know that the more trades you make, the more fees you will pay and tax obligations will arise.

6. Ignoring taxes

Many new investors in cryptocurrencies do not even think about tax obligations. Any government of a country that has given cryptocurrencies legal status, of course, also taxes those who engage in any crypto activity. Therefore, do not start investing in cryptocurrencies believing that you will not have to pay taxes. Research and read the laws of the state in which you live regarding how they regulate taxes regarding cryptocurrencies. So at the end of the year, you will not get surprised!

Ready to dive into crypto market?

Learn To Invest In Cryptocurrencies With Trading Education

The way you learn to invest in cryptocurrencies is fundamental. That's why here at Trading Education, we take teaching trading very seriously and try to train our students and equip them with the most sophisticated tools for trading.

Trading Education is a trading academy, where knowledgeable trading professionals share their trading experience with the students. The articles section for trading is like a library in which you will learn all the things you are preoccupied with for trading.

The trading courses we have prepared are among the best and created in such a way as to make learning trading as easy and as fast as possible

Start Your Cryptocurrency Investment With eToro

eToro is the most reputable brokerage in the world. eToro is characterized by its high security and is a user-friendly platform.

eToro is a complete legit brokerage regulated and licensed by the relevant authorities. The platform has many features, and one of the best in virtual trading, where you can practice trading with 100k thanks to this feature.

Also, eToro is known for its "Copy Trading" feature, and the platform supports more than 90 cryptocurrencies.

eToro – The Best Cryptocurrency Exchange for both investors and traders

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eToro have proven themselves trustworthy within the industry over many years – we recommend you try them out.

Key Points

  • Cryptocurrencies are expanding as financial institutions are buying Bitcoin and offering crypto services.
  • Bitcoin has the largest number of active addresses since 2017.
  • Educate yourself and beware of scams when trading cryptocurrencies.
  • Many investors fell victim to OneCoin who was a Ponzi Scheme directed by Bulgarian lady Ruja Ignatova.
  • If you gain profit, it is preferable to take it and not wait for much longer.
  • Mt. Gox lost 850,000 bitcoins worth $450 million in 2014 due to a hack.
  • It is important to not share your passwords or private keys with anyone.
  • Unreputable coins many times turn out to be more profitable than the reputable ones.
  • Invest only what you can afford to lose.
  • Get rid of emotions and be aware that cryptocurrencies are taxed.

Certainly, we hope these tips will help you in your trading journey. If you have liked this article, give us a like and share it, in case someone else would like to benefit from it.

You should keep in mind that the tips in this article are not rules that you must follow. These are just tips that we have gathered from our experience here at Trading Education, and we have decided to share them with you!

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