Common mistakes and risks in cryptocurrency investment

1. Lack of research

Wrong practice: blindly following others or market hot spots without in-depth research on cryptocurrency projects.

Risk: Investing in projects without practical applications, technical support or team background may lead to capital losses.

2. Overinvestment

Wrong practice: Investing all or most of the funds in the cryptocurrency market.

Risk: Market fluctuations may lead to significant losses and lack of capital liquidity.

3. Not using stop loss

Wrong practice: Not setting a stop loss point when investing, allowing losses to expand.

Risk: When the market suddenly falls, the loss may exceed expectations.

4. Pursuing high leverage transactions

Wrong practice: Using high leverage to trade, small risks.

Risk: High leverage magnifies the profit and loss ratio, and small market fluctuations may also lead to huge losses.

5. Frequent trading

Wrong practice: Frequent buying and selling, trying to profit from every small fluctuation in the market.

Risk: Transaction costs accumulate, and it is easy to make wrong decisions due to market fluctuations.

6. Ignoring safety measures

Wrong practice: Trading on unsafe platforms or storing cryptocurrencies in unsafe wallets.

Risk: Hacker attacks or platform failures may result in stolen or lost funds.

7. Being emotionally influenced

Wrong practice: When the market fluctuates, being influenced by panic or greed, making irrational decisions.

Risk: Emotional trading often leads to buying high and selling low, causing unnecessary losses.

8. Not complying with laws and regulations

Wrong practice: Ignoring local laws and regulations and conducting illegal transactions.

Risk: May face legal sanctions, including fines or imprisonment.

9. Not doing tax planning

Wrong practice: Ignoring the tax issues of cryptocurrency transactions.

Risk: May suffer additional financial losses due to tax issues.

10. Blindly following the trend

Wrong practice: Blindly following the so-called "hot" or "next big thing".

Risk: These projects may not be fully verified and there is a high risk of failure.