In investing, you cannot completely eliminate the risks that arise, whether they are internal or external. The same goes for the cryptocurrency market; if you join without anticipating the unpredictable risks, the chance of bankruptcy is very high. Refer to 5 cryptocurrency investment experiences in the article below to proactively invest more effectively.
The risks of investing in cryptocurrencies
Many people have fallen into bankruptcy due to cryptocurrencies, including ‘sharks’ who must also manage to survive if the market shakes. The cryptocurrency market is constantly changing; in an instant, your money can ‘evaporate’.
To overcome market fluctuations, you need to understand and anticipate potential risks.
Market risks: The increase and decrease in the price of digital currencies reflect supply and demand in the market. Influences from interest rates, enacted policies, ICO project terms, insider news, technological breakthroughs, etc., can cause cryptocurrency values to change unexpectedly. There are controllable or uncontrollable factors for which you can only reduce their impact on your finances.
Security risks: Participating in the cryptocurrency market, security issues are always prioritized. Since all activities are conducted online, if you do not set up account and wallet security, the risk of losing money is very high. Trading on untrustworthy exchanges and accessing malware can also lead to hacks, loss of private keys, and exposure of information.
Legal risks: Cryptocurrencies are still not truly recognized as currency in many countries. Governments are constantly looking for ways to regulate and impose laws in various forms to limit the use of cryptocurrencies in transactions to prevent money laundering, illegal trading, tax evasion, etc.
5+ Mistakes Leading to Bankruptcy Due to Cryptocurrencies
Tracking mistakes in the process of investing in cryptocurrencies helps you gain valuable experience. Knowing where you went wrong allows you to adjust and make better decisions, thus acquiring your own investment experience.
Whether you are a new investor or an experienced investor in the cryptocurrency market, you should pay attention to the 5+ serious mistakes leading to bankruptcy when investing in cryptocurrencies below:
Not researching the market
This is an easy mistake to make, especially for a newcomer to the market. Many people do not know how to filter information, find and analyze information because there are too many things a new investor has to approach, from project information, transaction details, price fluctuations, investment activities in the market, to simple lessons on how to invest, choose cryptocurrencies, place orders, advice, selecting exchanges, and creating wallets.
Therefore, many people cannot grasp how the market is fluctuating, whether it is increasing or decreasing, what causes this change, and what impacts there will be if they participate in investing. Not researching the market and rushing to place trade orders will lead you to lose money when the market is declining, which can result in bankruptcy in a short time.
Investing based on trends
This investment form is very familiar to those who do not have much experience. When you have to sift through thousands of data points, you suddenly see a hot coin that many people are touting and calling for investment.
You may not trust it, but if too many people choose that coin, you will question and wonder whether to participate or not. And often at this point, most traders decide to invest based on the crowd.
There have indeed been cases where following the crowd has succeeded, but this number is very small compared to the occurrences of losses. Especially when you are deceived by a group of people with sophisticated plans to lure investors into investing in a ‘junk’ coin.
Not cutting losses immediately when exceeding the safety threshold
Cutting losses is not simple if you lack experience in the market. But if you take the time to explore and learn, you will use loss-cutting to protect your assets. Many cryptocurrency investors have fallen into bankruptcy because they did not cut losses when exceeding the safety threshold. This market fluctuates very strongly every second; even a second of delay is enough for your money to disappear.
Regardless of the market, you should define your safety threshold during the investment process, especially in the digital currency market. Many traders have the mindset that if a coin has dropped below the safety threshold, they still try to hold on to their losses, hoping the price will turn around.
According to historical transaction data, the prices of strong coins will increase again, but to break even takes a very long time. Not to mention new coins, junk coins that only appear for a short time and then disappear. If you cut losses before exceeding the safety threshold, at least you will still retain part of your finances.
Not using technical analysis charts
Technical charts and analysis are very important in the investment process, as they provide you with a detailed view of the portfolio, assess project effectiveness, and make appropriate buy/sell decisions.
Many experienced investors rely on charts to evaluate a specific coin, thereby seeking opportunities to achieve desired profits. It would be a pity if you do not utilize these charts in your investment process.
In addition, new participants may not know how to use charts because it is very difficult to apply and fully understand them, and they can easily get discouraged due to the time and effort required. Therefore, people often ignore charts and focus on other information or trade based on crowd psychology. This is very dangerous and risky when dealing with cryptocurrencies.
Always wanting to receive quick and easy profits
Who participates in investing without wanting quick profits, especially in a dynamic market that operates 24/7 like cryptocurrencies? You can quickly make a profit or quickly incur losses; before you realize it, the trade has already been completed. Therefore, the notion of getting rich quickly through cryptocurrency investment is entirely understandable. However, investing requires time and effort.
Thousands of people create investment accounts every day, thousands place orders, but how many actually achieve their desired profits and become wealthy from cryptocurrencies? You should not bet your money on a field filled with risks, especially when you do not have much experience and knowledge.
The desire for quick and easy profits will lead to significant financial losses for investors. Once you lose everything, you can only leave the market and look for another opportunity, as you cannot change anything.
5 Valuable Cryptocurrency Investment Experiences
To avoid making the above mistakes, you should spend time researching and studying carefully before investing. Refer to the following 5 valuable cryptocurrency investment experiences:
Choose a suitable cryptocurrency investment form
In the stock market, you can buy and sell stocks, bonds, mutual fund certificates, etc.; in the digital currency market, you can trade coins directly on exchanges, stake coins, deposit savings in coins, mine coins, etc. A variety of cryptocurrency investment forms are being introduced to meet the needs of each trader.
Depending on your risk appetite, you will find and choose a suitable investment form. If you prefer direct trading to benefit from price differentials, consider direct buying and selling on the exchange; if you prefer safety and long-term profits, you can participate in staking coins, depositing, lending coins, etc.
Investors should experience all forms of investment to know what it is and whether it suits them.
Monitor and filter investment information correctly
Every day, hundreds of new ICO projects are introduced, many coins are listed, and the news about the cryptocurrency market is vast. You will spend a lot of time trying to read all the news in this field; without careful selection, you will only waste your time.
Finding the right information you need, reading and researching correctly helps you understand the issue and come to accurate conclusions. In investing, seizing opportunities faster than others is how to earn perfect profits; if you know how to filter information, find and detect reliable data, investors will enhance their effectiveness in seeking profits.
You can learn how to search for information, follow economic calendars, read available analysis articles, and monitor the websites or news outlets of ICO projects, coins, exchanges, etc. Many news sites specialize in updating financial market news daily, which is a treasure trove of data for you to understand every corner of cryptocurrency.
According to many experts' cryptocurrency investment experiences in searching for information, you should define what your investment goals are, choose a suitable form, the desired coin, and then delve into research instead of reading vaguely and encountering whatever you come across. This saves time, helps you understand the investment subject, analyze in more detail, and find better investment opportunities.
Focus on experience, accumulate knowledge first
As mentioned above, if you wish to seek quick and easy profits in the cryptocurrency market, the risks you face are very high. The best way is to proceed slowly and steadily, focusing on experience to accumulate knowledge first.
In the process of practicing investment, you will discover many situations and circumstances due to market fluctuations. You will understand the operations of placing orders, how to use analysis charts, reading market data, etc. Once you get used to it, encountering many mistakes will give you experience, preventing you from making those mistakes again, and allowing you to draw many useful lessons.
Experience is an important part of achieving success in investing, especially in a highly dynamic market where the desire for quick wins must be changed. Articles about the investment experiences of many previous investors are also a way for you to avoid making serious mistakes.
Learn how to diversify risks
In investing, you should not put all your eggs in one basket, meaning you should not concentrate all your money into a single coin. This will significantly diversify your risks; you need to build an effective investment portfolio to ‘survive’ after market shocks. This is an important cryptocurrency investment experience that is often overlooked by many.
For example, if you have a portfolio consisting of 4 coins: ETH, BTC, BNB, ADA. Suppose BTC drops in value due to the FED - the Federal Reserve of the United States raising interest rates, at this point, although your money will be affected, you still have 3 other coins to survive in the market. Conversely, if you only focus on BTC, your money will decrease after this fluctuation and you will have to wait a long time to recover your capital.
How to diversify risk while still achieving good investment results? This means that even if you divide your finances, the returns should still be good compared to concentrating on one coin. The best way is to find and select a list of reputable coins.
Need to find, study, and analyze carefully to select a coin among thousands of others in the market.
Build a portfolio suitable for your finances, assess your risk appetite to establish an appropriate capital allocation ratio. You might allocate 40-50% of your capital to large, stable coins, 20% to potential coins, 10% to new coins, etc. This ratio depends on each person's assessment and needs.
It is necessary to make adjustments and changes after some time to eliminate and replace with better coins. You also monitor the investment effectiveness, the safety threshold of the portfolio, and make exclusions or additions as needed.
Choose a reputable cryptocurrency exchange
Exchanges are where concentrated investment activities occur with a huge number of participants. The buying/selling of cryptocurrencies happens entirely online, so the risk of having accounts hacked and data stolen can occur.
If you invest in a low-reputation, fraudulent exchange, when linking to the wallet address containing your cryptocurrencies, your money can be completely lost without you realizing it. To solve this issue, you must first secure your own information: from accounts, wallet addresses, OTP codes, etc. Many people choose to use cold wallets or store them in notebooks rather than keeping them on computers.
Next, you need to find a reputable exchange to trade confidently, where user rights are protected if any issues arise. You can refer to Binance... This is an exchange with a large user base, highly rated for its reputation and safety for investment.