In the past few years, we have witnessed a tremendous rise in the popularity of Bitcoin and other cryptocurrencies where massive gains in their prices have attracted a swarm of investors, be it retail or institutional.
It was then when the bitcoin’s price rose from $5,000 in March 2020 to 52,000 in February 2021 when the whole world finally appreciated this digital currency and its potential in improving the current financial system. That’s a 10 fold increase in price. And with such an increase in price and profitability, Bitcoin has also brought in many newbie traders in the market due to ease of access.
That being said, not every coin can be like Bitcoin, giving exceptional gains in return. However, many traders often commit mistakes by not properly investing their hard-earned money in the crypto market and making it go all in the drain. And that is why it is important for all investors to study the crypto market before jumping into it.
To make things easier for you all, we have compiled a list of common crypto investment mistakes that people do in India. Let’s have a look at them.
Lack of proper research: Falling for shills
This is one major area where we need to keep our consciousness in neutral gear. Shilling is an act of promoting crypto projects just for the sake of getting some monetary benefits in return. It is exactly like what some influencers do on twitter.
Many YouTube channels, Telegram groups, and Twitter accounts with a big crypto audience often promote crypto projects which aren’t good but pay well to the influencer. And due to this, many newbie traders fall into this trap and invest their hard-earned money in a bad project and go in a loss.
It is important for a crypto investor in India to do his/her own thorough research on the crypto project he/she is investing in. Some of the things that he can watch out for are the team behind the project, objective or aim of the project, current market conditions, and many more.
Not considering technical analysis
Yes, charts and graphs do seem to be a bit complicated for a beginner but for the most part of their time, they will save you from going into losses. Following the graphs and charts will save you from losses that will incur from market fluctuations. You must watch out for patterns in the graphs and use various technical analysis techniques to predict the price movements.
To recognize patterns you must be well aware of technical analysis, for which the internet can come to your aid. Some of the patterns that you need to watch out for are Double-Down, Double top, Bullish Flag, Bearish Flag, Fibonacci Retracements, etc. Making investment decisions on the basis of these patterns will help you not lose your money in the crypto world and make good profits
Panic Selling
According to the wise buddha in the crypto world, money travels from an impatient investor to a patient investor. Cryptocurrency prices often fluctuate in the market either due to regular market correction or due to bad news in the market.
And when the prices fall, many nervous hands start selling their cryptos in the market to save themselves from further loss. However, they often tend to forget that the very market which is in the red blood bath also bounces back in the lush green morning after a day or two.
As they say, you don’t make a loss unless you SELL your crypto for a loss. If you haven’t sold them, you haven’t made the loss. And that’s the point of holding your assets.
Not Having An Exit Plan For The Profits Incurred
It is important to have an exit strategy in the crypto market. Whenever a newbie trader makes a good entry into the market, he/she often forget to take an exit at right time with proportionate profits.
Not having any exit plans will only entangle you in the swamp of the cryptomarket. Once a newbie has made a good entry into the market, he/she often tends to forget to take an exit at the right time with proportionate profits. The crypto market is more like the stock market. Market fluctuations are bound to happen.
After every upward movement in price, a pullback is very natural. That’s how the market corrects itself. Hence, to maximize your profit, it is important for you to cash out your profits in small fragments when the market is going on an upward streak. This will save you from the market dips that will occur subsequently in the form of a market correction. If you are buying crypto for trading on a regular basis then you must have an exit strategy so that you can book your profits and then move on.
Looking For The Next Bitcoin In A Short Term
In the last decade, Bitcoin has gained a staggering figure of 99,99,900% gain in price from being a mere $0.055 asset to a whopping $55,000+ asset which has made the world talk about it. However, there were some other coins that are also following the price movement journey of Bitcoin. Some of them are Ethereum, Litecoin, CNX, and many more.
Such price hikes often lure the traders to find the next Bitcoin & invest in it. However, they tend to forget the simple fact that not all coins are the same, not all coins grow, and not all coins yield the same level of profits or even profits in general anyway. There are more than 8,000 coins/tokens in the market and the chances of every coin performing exceptionally well like Bitcoin are very less. From a short-term investment point of view, the possibility of finding crypto like Bitcoin with a massive gain is very unlikely. Hence a trader should always make investments from a realistic approach.
Investing All Of Your Money In Just One Coin
Many times, a newbie trader tries to invest all of his money in one go, in one single coin, risking his entire fortune at stake in the greed of maximizing his profits. He/she may get lucky, but it is not advisable to leave all your hard-earned money on just a simple ‘possibility’ that your chosen crypto will perform the best. What if it doesn’t?
And that’s the reason why many financial advisors often stress on the word ‘maintaining portfolios’. It is important to maintain your portfolio with different crypto assets at different proportions so that when the crypto market takes a hit, your portfolio doesn’t get that serious damage since not all coins drop with the same intensity and magnitude. Hence, the impact of loss can be reduced.
Conclusion
The world of crypto has just started to bloom. Make sure you stay clear of shills in disguise, emotional decision-making, and ignorance. Only then you can enjoy the real essence of the market.
So what are you waiting for? Now that you have learned what not to do, it’s time to learn what exactly you need to do. Check out our next academy article.
