We all make mistakes. If we're smart, we learn from them. If we're really smart, we learn from other people's mistakes and get to identify a bunch of expensive errors that we now know enough to avoid. Here are three giant cryptocurrency trading mistakes that everyone needs to dodge.
1. Not Doubting The ICO
You might have missed the launch of Bitcoin and lost the chance to buy the biggest digital currency when it only cost a few cents, but there are plenty of new coins being launched every day. The first five months of 2018 alone saw the launch of 406 ICOs which together have raised close to $10 billion.
Not all of those coins are going to generate a profit for their early investors. It's possible that none will. But it's also possible that hidden among those digital coins for gaming companies and data storage firms and every other industry are a few that might just rocket in values.
Assuming that all those ICOs are going to succeed would be a big mistake. Do the research. Read the white paper. Join the Telegram group. Check the backgrounds of the people launching the coin. Ask yourself whether the coin has a real use or is just an easy alternative to selling shares. Make sure that you only buy coins at an ICO that you believe have a future based on their own fundamentals.
2. Confusing Price With Market Cap
If you want to buy a Bitcoin, it will currently cost you about $6,800. (Or it did when I was writing this. It will probably cost you $3,000 now. Or $30,000. Who knows?) But while Bitcoin remains the most expensive digital coin, there are plenty of alternatives that can be bought for almost nothing. Ripple is less than 60 cents. Tron is under five cents. A Dogecoin is a third of one cent. Anyone can afford to buy an altcoin even if they don't have thousands of bucks to buy a Bitcoin.
But the price of the coin isn't its most important characteristic. Even if you don't want to spend several thousand dollars, you can still benefit from Bitcoin by buying Satoshis, the cents to Bitcoin's dollars. You don't have to own an entire coin to earn from its movements.
More important are a coin's market capitalization and its volume. Those will tell you how many of the coins are in circulation and how much they're being traded. Coins with low market caps and low volume will struggle to find buyers and can be moved by just a small group of traders. They might be cheap but they'll be high risk.
3. Buying on FOMO
A lot of people are likely to have come into cryptocurrency in December 2017 when the coin was heading towards $20,000 and everyone was wondering what they had missed. They probably regret it now. If you're starting to feel afraid that you're missing out, it's likely to be too late: you've already missed out.
Instead of buying on the rise, look at the pattern of a coin's movement. Try to determine the likelihood that it will continue to rise and only buy if you can see what's pushing the price up... other than other people's FOMO.