2018 has been an interesting year for cryptocurrencies – many stakeholders; miners, traders, and investors have lost money as the market remains stuck in bear territory. For instance, Bitcoin has lost about 73% in its trading price from $13,500 to around $3,500, Ethereum is down more than 89% from around $903 in January to $91, and the valuation of the entire cryptocurrency market is down almost 76% from $765 billion to $110 billion.
The weakness in the cryptocurrency market has forced many new converts who bought crypto at the peak of the 2017 bull run to cut their losses and scamper for the exits. In fact, some of the long-term bulls have admitted that the length and depth of this bear market occasionally give them concerns about the validity of their confidence in crypto. However, many people are still convinced that the current weakness in the market is an opportunity to buy crypto at a discount. If you think that the market has reached a bottom and you want to ride the crypto bull in 2019, here are 4 pitfalls you should make sure to avoid.
1. Not holding your private keys
The single biggest risk you can take as a cryptocurrency trader or investor is not to hold the private keys to your cryptocurrencies. Millions of dollars’ worth of cryptocurrencies have been lost because they were kept in a cryptocurrency exchange that was compromised, a wallet service that crashed, or someone lost their wallet files. Cold storage appears to be best way to store your cryptocurrencies if you are hodling or investing in cryptocurrencies for the long term. If you are actively trading/flipping cryptocurrencies, you should conduct due diligence on the best cryptocurrency wallets to find the smartest way to store your coins while minimizing the risk of loss or theft.
2. Not spotting pump and dumps early enough
The second biggest pitfall to avoid is not being able to spot pump and dump schemes from a mile off. Over the last several years, cryptocurrencies have largely traded based on speculation, hype, and market sentiment. However, some unscrupulous elements often take advantage of the sentimental nature of cryptocurrencies to drive up the price of an inherently worthless coin (in the pump) only to sell it and cash out (in the dump), leaving ignorant folks to hold what’s left of the coin. You should pay special attention to the utility/security value of cryptocurrencies before you allow FOMO to trick you into buying shitcoins.
3. Putting more money than you can afford to lose
Greed is a powerful human emotion that all traders and investors must learn to manage in order to maximize trading gains. If you invest in a coin and it goes 2X, a $100-dollar investment will become $300 but a $1000 investment will become $3000—it doesn’t take rocket science to know that $3000 is more than $300. However, if the trade goes against you, losing $100 won’t hurt as much as losing $1000. Because of the current speculative nature of cryptocurrencies, it is still in your best interest to limit your exposure to money that you can afford to lose. Putting the money that you can afford to lose also helps you to manage the downside so that you don’t panic to sell your coins at a loss during down cycles.
4. Not know how to respond to fake news
In these days of social media, vlogging, and podcasts; anybody with a smartphone and Internet connection can style themselves as a cryptocurrency expert, guru, or professional. You might want to take some time to identify reputable crypto news outlets so that you can verify and fact-check news stories. You should also be able to identify traditional Wall Street news outlets that have an ax to grind with the cryptocurrency industry. If you don’t know how to identify and respond to fake news, you’ll find out that you are consistently in a state of anxiety as you ride the rollercoaster of fear, uncertainty, and doubt (FUD) to make hasty decisions because of the fear of missing out (FOMO).
