Learning the Ropes: My First 5 Crypto Mistakes
We’re not used to talking about finance while we’re young. We chat about cars, clothes, our country’s history, whatever we find interesting or is taught in school. When we finally face adulthood, we realize there’s a lot more to learn, including handling our own money and not making any mistakes that could cause us to lose funds or worse.
Getting into the crypto universe is like taking those baby steps again, but a little wiser. It doesn’t mean we’re a pro yet, so we do slip up. If you’re lucky enough to know a successful crypto trader or a cool uncle who’s mastered finance, they might be able to light up your way – not make it easy, though.
Many newcomers face the same mistakes I did, usually because there’s not as much awareness as there is with fiat currencies. Probably because these middlemen don’t want you to achieve your financial freedom: they want you to believe that blockchain technology is a scam and you’re going to lose money if you’re using or trading crypto.
In this article, I'll share a few mistakes I made when first diving into the crypto world, shedding light on pitfalls that many beginners may encounter. If you’re a newcomer, this guide will help you through this phase; if you’re already a pro, I’m sure you’ll recognize some of them.
Here’s an explanation of some of the pitfalls you can avoid as a beginner:
Table of contents
- What are the 5 mistakes?
- The path to success: Best practices when investing in crypto
- Takeaway
- Frequently Asked Questions
What are the 5 mistakes?
Here are some of my main failures for you to keep an eye on or maybe even relate to.
Mistake #1: Neglecting research
Source: CoinSwitch
Learning about crypto before actually putting your hands on it is key. As I’ve mentioned before, for personal reasons, I started navigating through the crypto market without an investment strategy or even knowing what a wallet password was. For that reason, I didn’t spend too much time doing my research in the beginning, since I thought it wasn’t needed.
I was wrong, though. Neglecting research when you’re kicking off a new project, experience or journey is a common pitfall that can lead to new significant mistakes and setbacks. In the crypto universe, where the landscape is dynamic and constantly evolving, staying informed is crucial. You must be comfortable with terms such as bear market, risk tolerance, and price fluctuations, so you don’t get caught by surprise. Make sure you look for the most used terminology and common mistakes while staying up to date with crypto news, trustworthy crypto traders, and other reliable sources.
Mistake #2: Making decisions based on emotions
Emotional investment is more common than you think, and even though market ups and downs are normal, they can also be alarming to new crypto investors. How come? One of the biggest beginner mistakes is believing that you know it all when, in fact, you must understand your goals, needs, and emotions.
For instance, when the fear of missing out knocks, will you be ready to not invest what you can’t afford to lose? Or maybe when there’s an exciting world of possibilities regarding short-term investments, will you be wise enough to stick to your exit strategy? Make sure you learn about crypto investments as much as possible and never make a decision using your heart.
Now, in case you’re looking for a crypto payment gateway for your online store, just like investments, there are common mistakes you can make, so you must research it thoroughly. There are many payment gateways to choose from, with so many features that it can be overwhelming. Make sure you check out reliable sources for recommendations and look for the best Bitcoin payment processors available today.
Mistake #3: Keeping crypto in online wallets
Source: Cryptic Weirdos
Since cryptocurrency is a digital currency, it requires a digital wallet for storage. But which wallet should you choose? Well, even though online wallets are more convenient, they are also far riskier than offline cold wallets. When you store your money online, you’re more prone to vulnerabilities, and scammers are more easily able to drain your crypto through hacking. It’s a risk, but you can make it safer by adding additional security layers, in case you realize it’s the best option for keeping your assets.
Above all, I’d strongly recommend you keep your money off cryptocurrency exchanges. Also, if possible, safely store your crypto in a hardware wallet, which will have software encryption to protect your private key. As it’s offline, it’s less likely to be compromised. However, you must pay attention to the device, and not lose it, since you could lose your money. If that happens, you still have a chance to retrieve it by using the master seed key – just don’t lose both.
Mistake #4: Forgetting crypto passwords or seed phrases
Source: CryptoManiaks
Speaking of losing keys, here’s the next big mistake. Whether you’re keeping your crypto offline or online, you must make sure you don’t forget your password, private key, or seed phrase. If you lose any of these, especially your backup seed phrase, which most wallets have, there may be no alternative option for recovering your crypto.
To store this essential information safely, you have a few options, such as:
- Physically storing it, you write down the keys and phrases on paper and store them in a safe box, notebook, or drawer.
- Use a hardware wallet, like Trezor or Ledger, which is a physical device that stores all your keys, as mentioned above.
- Splitting and distributing it in safe places, so you’d turn your information into multiple parts and store each one in a different location.
Regardless of which wallet or storage option you choose, it all comes down to your needs and preferences. The vast majority of mistakes start with us, so we must be aware of the consequences whenever we pick an approach or alternative. This way, we’ll know how to avoid failures or losses, while being cautious with our actions.
Mistake #5: Wrong wallet address
Crypto transactions between digital wallets are how you take custody of your crypto in various forms, such as crypto trading, sending funds from one party to another, paying for goods and services, or getting paid. However, a common mistake of new crypto investors, like I used to be, is mistyping the wallet address when you’re attempting to transfer money. When this happens, the crypto is sent to the wrong address and may be unrecoverable.
There are recovery services available to help with this kind of situation, but it could be very costly. For that reason, always double-check the address when you’re sending or receiving crypto, whether it’s yours or theirs. And an extra tip is to never reuse your public address. That’s advised because if you link different payments by reusing the same address, a third party will be able to access your transactions through a blockchain explorer. Though it might not be a risk for all crypto users, it could be for you someday.
An alternative to copying and pasting addresses is to use QR Codes, to ensure that you don’t input the wrong address. It’s quite easy and very useful.
The path to success: Best practices when investing in crypto
Now that you’re aware of my mistakes, you must be wondering what the best practices of crypto are. A few rules apply to both old wise crypto investors and new users, helping us along the way. Although volatile, this crypto investment and daily usage journey can be a rewarding experience when approached with careful consideration and strategic planning.
Learning from my mistakes, I’ve identified these key tips:
- Take time to thoroughly research in detail, sticking to the fundamentals and deeply understanding crypto and its projects. Stay up to date with whitepapers, news, market trends, and trustable forums. An informed decision-making is the foundation of successful investing.
- Pay attention to government regulations, such as taxes and reports. Stay on top of governance changes, and always make sure you’re following your country’s legal duties.
- Craft a well-defined investment strategy, aligning it with your financial goals, and risk tolerance, and considering diversification across different assets. This also applies in case you get paid in crypto and decide to invest some of your money.
- Prioritize the security of your crypto. Choose reputable wallets and exchanges, enable two-factor authentication methods whenever possible, and secure your private keys and passwords. Risk avoidance and safety measures are never too much.
- Acknowledge and embrace volatility in the crypto market – you can use it in your favor.
Takeaway
Maybe calling these actions a mistake is too harsh a word since some of the better practices came about later when I deepened my understanding of crypto. Still, there are plenty of instances where you can come across these failures and they can lead you to something bad, such as losing money. But the good news is that you’re either learning from my mistakes or relating to them because you’ve been there before and learned too. This is the best way to improve your skills and become a pro in a brand-new world.
Frequently Asked Questions
What are some basic security measures to consider when dealing with cryptocurrencies?
Basic security measures include using hardware wallets, adding two-factor authentication (2FA) methods to your accounts, and being cautious about sharing personal information. There are plenty of security measures for you to stay safe, so make sure you’re informed.
Can you recommend any resources for further education about cryptocurrencies?
Nowadays, many reputable websites, online courses, and forums talk and teach you about cryptocurrencies. You might want to take a look at the Blockonomics YouTube channel, where we explore diverse topics on crypto, and also subreddits like r/Bitcoin and r/Cryptocurrency.
What are some telltale signs of someone trying to scam you?
Scammers commonly use unsolicited information, guarantee profits, and coerce you into taking action. Be cautious of requests for personal information or money. Verify platforms and projects thoroughly before making any investments.
Are cryptocurrencies still a good investment despite the potential risks?
Yes, definitely. It's essential to constantly research about it, though, diversify your portfolio, and only invest what you can afford to lose. If you need personalized guidance, make sure you consult with industry experts.
What should I do if I've already made some of these mistakes in the crypto world?
Same as anyone else in this crypto atmosphere: learn from your mistakes and adjust your strategy. You’re not alone. Consider seeking advice from experienced traders, and always prioritize the security of your assets. Regularly review and update your security measures to stay ahead of potential threats. And don’t forget to stay informed about how to keep your crypto safe.
Further reading
Most Used Crypto Terminology Explained - The Only Guide You'll Need
Crypto Security - How to Protect your Digital Assets: Ultimate Beginners Guide
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