The 6 WORST Cryptocurrency Investing Mistakes to Avoid

In this video, i'm gonna talk about the top six mistakes to avoid when you're investing in cryptocurrency. These are super common mistakes that beginners make all the time that can completely blow your cryptocurrency portfolio.

You know you can lose all your money, so i've done a lot of these things and i want to make this video to help you avoid these same mistakes that i've made in the past so before we get into That you know i don't warrant, this video as financial advice i'm, not a financial advisor.

I'm, a blockchain developer, who works for this technology on a daily basis, but i am a cryptocurrency investor because i believe in this technology for the long term. But i want to tell you about these things that i've, done that i've watched plenty of other people do so that you can learn from them and make your own informed decisions.

So if you're new around here, hey i'm gregory and on this channel i turn you into a blockchain master. So that's, something that you're interested in then smash that like button down below and subscribe to this channel, and if you will learn how to master blockchain step by step from start to finish, then, head on over to dappydiversity.

com Forward, slash bootcamp to get started today, so the first mistake that beginners often make is buying high and selling low, which is really the exact opposite of what you should do right. In order to make any money you need to buy low and sell high, but don't feel bad.

I ' Ve lost a lot of money investing in cryptocurrency this way, but i want to show you the most common way that people do this so that you can avoid it. So this is really common for people to look at a chart like this and watch the price of cryptocurrency go up like crazy and think.

Oh now's. The time to buy like people are jumping on this opportunity. I need to catch this train before it leaves the station right. It's like fomo, but then the very next day. The price does this all right and that doesn't necessarily mean that the cryptocurrency has tanked and that you '

Ve necessarily lost money unless you sell it, but it's really common for beginners to watch these big pullbacks in crypto and then get scared and sell it, and then they lose money. But then the next day you know recovers and then that trend continues.

So this is probably the most common ways. People buy high and sell low, but it's, the exact opposite of what you should do. So, basically, you have to train yourself to think opposite right. So whenever you see a big run up like this, typically that's, not the time to buy.

Typically, you want to wait for things to cool off before you jump in yeah. The old adage is, you know, be greedy when others are fearful and fearful when others are greedy and there's. A lot of truth to that now you can't systematically do that, because of course you would buy every single cryptocurrency that ever went to zero, but i want to show you a way that basically helps limit your risk to where you don't have to like try to call tops and bottoms, so you can use dollar cost averaging to try to reduce some of your risk.

So basically that just means buying a little bit of cryptocurrency over time and then averaging your buy-in price. It's, a really fancy word, but it's, really simple in concept. So basically let's say you want to invest a thousand dollars in cryptocurrency, then a dead, simple way to do.

This would be divide it by four and then buy into the market four different times, so you basically take 250 dollars and you know buy the same cryptocurrency at four different points in time. Maybe it's once every day.

Maybe it's once every week, once every month you know et cetera, et cetera, and that really helps reduce your risk and these incredibly volatile markets. So here's, an example: let's say you bought. You know, 150.

Let's say you bought like 250 here, 150 uh. You know once here at the top at 284, 110 and then 213.. So you basically take all these numbers. Add them up and then divide it by four to get an average buy-in price.

So if you did that over time, you basically would get an average buy-in price of 180, which would be a lot better than accidentally buying in with everything at 280 right here and that's. One of the easiest ways to avoid the mistake of buying high and selling low, so the second common mistake that beginners make is buying a cryptocurrency because it's, cheap all right and the logic usually goes something like this hey.

I'm gonna buy. You know litecoin, for example, because it's way cheaper than bitcoin right and if it ever goes up to bitcoin's price. Then i'm. Just gonna be a bazillionaire. Well, there's, a huge problem with that: okay, because you're looking at the unit price of the cryptocurrency and not thinking about the market cap.

So when you're talking about like buying a cryptocurrency because it's cheap, you're talking about the unit price right. So let's say it's like 50, compared to bitcoin being like 20 000. Well, the real problem with that is, it fails to factor in how many you know coins are actually in the supply or how many coins there are total see.

One of the reasons that uh you know litecoin is cheaper than bitcoin is because there are more coins in existence, and so, when you're looking at the unit price, you also have to look at the market cap, which is basically the price of Each coin times the supply, and you have to compare cryptocurrencies that way, because that'll help.

You determine whether it's even plausible that a coin like litecoin would surpass bitcoin in value, because in order for that price to go from, let's say like just fifty dollars as an example up to like twenty thousand dollars.

As an example, then, the market cap would have to go up about 400 x, which means that the entire market cap would be worth trillions of dollars, which is an incredibly unlikely scenario, so that's. We have to think about other factors.

Besides, just the unit price and avoid buying a cryptocurrency just because it's cheap, the third really common mistake is looking for, like 100x gems, okay and actually making this the core of your investment strategy.

I'm, not saying you can't. Do this. Do some speculation on a really small cap cryptocurrencies that could go up like crazy, but it's really dangerous to put all your eggs in this basket and to make this the core of your strategy for lots of reasons.

So number one is beginners. Are probably going to lose money with this strategy, all right sure all coins can go up like crazy, really fast, but you know hey. What goes up must come down and, like i was talking about before, beginners are really prone to selling cryptocurrency when it goes down really fast because they get scared.

They don't want to lose money. So if you put money into an altcoin that goes up, you know two three, four five x really fast and then drops significantly. You know you might freak out and sell your entire portfolio and you might sell it at a loss.

The other thing is a lot of these. Altcoins are really new, which means they don't, have much price history and which means that they can also basically go to zero. You know: lots of people got totally wrecked in the last big cryptocurrency.

Bull run like this right. They were buying coins like this because they thought it was cheap. You know 75 cents, 50 cents, and then these things just like totally, went to zero. So you got ta, be super careful when you're talking about this stuff, so the other problem with this strategy is it takes a lot of time and effort, okay, because you have to spend all your time researching these coins and then watching them.

Like crazy, because the price can go up and down in a matter of hours, okay, so you got ta really be on your game in order to get those profits and that's, basically like a job, but it's like a Job that you can lose money at which is a really risky use of your time.

Okay, the other big problem here is that in many countries, when you pay taxes on short-term capital gains, it gets taxed at a much higher rate like normal incomes. If you just went out and got a job and earned this money as a self-employed person, so what's, the alternative to this? Well, it's buying and holding for a long period of time.

You'll pay lower taxes. This way it'll, take less of your time and energy and it's also way more likely for you to make money with this stuff over the long term. This is what i personally do. I'm, not really a short-term trader and so for a lot of beginners, honestly, just picking the number to cryptocurrencies like bitcoin and ethereum.

You know really large market cap cryptocurrencies and holding them for the long term is probably the best way to go so mistake. Number four is trying to use leverage all right, so this is a bad strategy for pretty much all beginners.

Okay. This is something that's, really only better for advanced traders, if that, so leverage is basically using borrowed money to invest in cryptocurrency that you have to pay back and two really common ways to do.

This are basically to increase your exposure and for shorting. If you think the price of a cryptocurrency is going to go up, you can borrow money and instead of buying, like you know, 10 units of the cryptocurrency, you could buy 100 units like you could basically increase your exposure by 10x.

That's. What 10x leverage okay and if the price goes up, then you make 10 times as money right sounds really attractive, but there's, a big problem with it: okay, uh, because if the price goes down enough during that time, then you can be liquidated And basically, you can lose the money that you have as collateral for that leverage, all right, that's, how most cryptocurrency exchanges work, so the other way that people try to use leverage is really common is for shorting.

So basically, they think that the price is going to go down, and so they borrow the cryptocurrency, sell it and then wait for the price to drop, buy it back return the original amount and then make a profit that way.

So this is an advanced strategy and most beginners are going to get wrecked this way too, because they're just going to be wrong when they think about which direction the cryptocurrency is going to go and they're gonna get Liquidated so in either of these scenarios, using leverage is probably one of the fastest ways to completely wipe out your trading account and leave you with nothing, and so i highly recommend avoid using leverage, especially if you're, a beginner, so mistake number five Is no diversification all right? This basically means that you've, put all your eggs in one basket, and you're betting, that that's.

Gon na work and most of the time you're, never gonna be a hundred percent right and you need to diversify and assume that you're gonna be wrong in some way and have some sort of hedge okay. So let me explain what i mean by that there's, a few different ways.

You can do this number. One is within your cryptocurrency investment portfolio itself, so basically uh. Instead of just buying one cryptocurrency and being 100 sure that you're right, then you might want to buy a few different ones right that are lower risk.

As a hedge, because they might outperform your top pick, so a really simple diversified portfolio would look like 50, 50 bitcoin and ethereum. These are the two biggest market cap cryptocurrencies. They both have a pretty long price history and are both very fundamentally sound investments.

So that's, not much diversification, but it's better than nothing, and this is a pretty good portfolio for a lot of beginners. So another example might look like this, where you are really confident on one cryptocurrency like you have strong conviction on ethereum, for example.

So let's say: like 75 percent of your portfolio is an eth, then maybe you break up the rest of it. Maybe like 20 in bitcoin and the other five percent is in like defy coins, for example, or maybe some other speculative alt coins that you think are going to perform.

Well that you want to speculate on. This would be another example of a diversified portfolio all right. So uh even outside of crypto, you want to diversify in some way, because there's, no guarantee that cryptocurrency prices are going to go up, something bad could happen.

The market could totally go the opposite direction, and so it's really risky to put all your available funds into cryptocurrency. Okay, there are a lot of people who do it and some of them get incredibly rich, but a lot of people are going to get completely wrecked.

By doing this, the easiest way to do this is basically just to have extra cash and don't use it to buy cryptocurrency people talk about this being like dry powder, okay, so this can be good for lots of reasons number one it's just it mitigates your risk.

If the prices go down, uh well, you could buy more or you could just not buy it all and then use that cash for other stuff right. So other ways to diversify are having other actual investments besides cryptocurrency.

So i personally do this: i'm invested in real estate, so that's, an option. Other options are you know the stock market, a really easy way to do that is just buy into index funds. So i don't personally do stocks again, i'm all in real estate, but these are both like much safer investments with a very long proven history than cryptocurrency, because these markets are totally new and so that's.

What it looks like to diversify into other assets outside of just the cryptocurrency space in general, so mistake number six is buying more than you can afford to lose. So i can almost guarantee you that if you're a beginner, you're, probably going to lose money at some point in cryptocurrency right, maybe not net over the long term, but you'll, probably lose money at some Point i mean i did this.

I've watched lots of other people, do it as well, and a lot of people buy more than they can afford to lose, and so, when they actually do lose money, whether it's, just paper losses or actual losses, then it Actually, like impacts their life in a really negative way, so that's.

What i would say is the definition of buying more than you can afford to lose. So example with this would be like if you have really big outstanding debts. You have really big purchases that need to happen.

You have really big purchases. You're, trying to save up for like a house or a car or other just big investment goals, and you take that money that you really should be using for that. You invest in cryptocurrency and then you lose it, then that has a big negative effect on your life.

That being said, it's, not always the end of the world. If you lose that money, especially if you have the means to make more money, but many people, aren't in that situation like they're kind of betting on this being their only hope, and so they put money that they really Need for other stuff into crypto and then they lose it and it has a big negative impact in your life.

Okay, so you have to be really careful when you're thinking about that. So another thing i'll say is basically it's hard to make a life-changing amount of money with cryptocurrency without putting in a significant amount that makes you sick to your stomach when you watch it go up and down up and Down all right, so you have to find that fine line of something that makes you feel like you've, really put something in, but also not so much that if you lost it it would ruin your life.

I'll put it that way, but sadly you know people make this mistake all the time i've made this mistake myself and you're thinking, long and hard about what that is before you decide to jump in All right, so those are my six top investing mistakes that people make all the time when they're investing in cryptocurrency.

These are things you should avoid completely. I've done a lot of these things, so i don't feel bad right. I've watched lots of other people. Do them too, but i want you to learn from these things. So you don't have to make the same mistakes that i've done all right.

As always, i'm, not a financial advisor. I'm, a blockchain developer. So if you like this video, as always, you know smash the like button down below subscribe to this channel, and if you want to learn more about this technology, then how can you do that? Well, the easiest way is to just jump in i '

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