Some call Bitcoin the fastest way to make money; others believe that it is the easiest way of flushing the savings down the drain. Surprisingly, both arguments are true in their own right. Crypto success or failure boils down to investment know-how, experience, and luck.
There’s plenty of advice online on what to do when starting a crypto portfolio. But today, we’ll focus on the three most common mistakes among novice traders. If you avoid them, your savings will be much safer in the long run.
DON’T Make Spur-of-the-Moment Decisions
Cryptocurrencies are the most volatile of investments. The current upward trend of the Bitcoin price looks eerily similar to its surge and subsequent crash in 2018. While the social media and news outlets were full of instant millionaire stories, most traders who came to the party late lost thousands of dollars. When the cryptocurrency is so volatile as to rise 5% because of a tweet, there’s no point going for your BTC wallet at every price fluctuation or exciting headline.
Some crypto players believe Bitcoin is about to hit another record price by the end of 2021, only to lose 90% of its value in the coming years. Their predictions range from $100,000 to $300,000 for 1 BTC before the rates plunge. It doesn’t mean you should immediately go buying Bitcoin. Instead, you should analyze who is behind these forecasts and who is going to profit most from an influx of new buyers. Research and analysis are the name of the game. At least, if you do your homework, there will be no shifting blame if some of your predictions don’t pan out.
DON’T Rely on One Cryptocurrency
Keeping all your eggs in one basket is never a good idea. It is true for trading stocks, investing in real estate, or keeping cash in a bank. Bitcoin remains the primary cryptocurrency with the largest market capitalization — over 50% of the total crypto market cap. But whenever BTC drops, so does your whole portfolio. To mitigate risks, diversify your cryptocurrency investment.
Luckily, it’s never been easier to convert ZEC to BTC, ETH, or XMR, and vice versa. But before you do, check out the coin’s market cap, study the recent price charts, and research the team behind the token. While there is no guarantee that all altcoins will rise in value over time, a varied collection of tokens will protect you from losing savings in one fell swoop. Besides, the more you learn about altcoins and experiment with exchanges, the more chances of success your investments will have.
DON’T Ignore Security Precautions
Cryptocurrency exchanges are notorious for losing tokens. Although security breaches have dwindled since the early days, they are still a regular occurrence. iCE3X allegedly became one of the recent victims. The platform found discrepancies in Litecoin and Bitcoin balances, though it’s unclear whether the exchange suffered a security breach or not. The company is now closed for all trades to locate the source of the discrepancy and resolve the issue. This serves as a reminder for all crypto enthusiasts to take security seriously.
You want to minimize risks at every turn. First, research the popular exchange platforms, analyze genuine reviews, and consider the charges. Choose a reliable cryptocurrency wallet. Both single-currency and cross-currency wallets can be secure. Still, keeping all your coins in one place is not recommended — we’ve already discussed it. Don’t leave your crypto in a wallet provided by the exchange service, as it’s at a high risk of a security breach. When your crypto portfolio grows, consider investing in a hardware wallet.
Your financial security will also depend on your knowledge of a national tax system and the ability to file your return forms correctly. After all, any money you make off crypto conversions is considered a capital gain in the US, and therefore taxable. If you fail to include your crypto assets in the tax paperwork, get ready for IRS breathing down your neck.
DO Your Research and Keep a Clear Head
Hopefully, these three common crypto conversion mistakes haven’t deterred you from buying BTC, ETH, or ZEC. Treat your purchases and exchanges with the same level of critical thinking. As long as you care about your crypto as you would about any other investment opportunity, your money should be safe. If you’re new to the crypto world, start with a small sum you’re ready to lose if it all goes wrong. Experiment with conversion opportunities before you turn a larger portion of your savings into cryptocurrency.