This article was contributed by Cynthia Madison who works as an author at SmallBizClub.

Investing in crypto is considered risky because the market is volatile, and you can’t make correct predictions of what the prices will be. But although cryptocurrencies are somewhat inconsistent, knowledgeable investors take advantage of high volatility levels when there are more chances of earning more money regarding the risks.

So, whether you want to start investing or have been for a while, here are five mistakes to avoid if you want to be a successful investor.

Lack of a plan

The cryptocurrency industry is pretty overwhelming when it comes to the number of terms and practices to grasp. This is why some people start on the wrong foot by jumping into crypto wallets and mining pools without having a plan.

Before investing, have you thought about how much money you want to make? Or the risks you’d be willing to take to get to your goal? Do you want to invest for a longer period or just to test the waters?

If you want to invest for the long-term, you should know that Bitcoin, for example, will go up in value over the years, which means it’ll be harder to mine. The market capitalization of the project also matters when looking into a crypto investment.

You may know that Bitcoin has yet to reach its supply limit of 21 million coins, but Ethereum, for example, has an unlimited supply. Regardless, when comparing two or more cryptocurrencies, also consider their past uptime percent and risks before starting to invest.

Lack of proper security

When it comes to the information on the internet about crypto, you should be wary of the sources you use and read from because many scammers will advise you wrongly. Don’t get fooled by giveaways or offers where people claim to double your crypto in seconds. Look for verified accounts and official websites for accurate information.

Secondly, know that cryptocurrencies are not headed by third parties (financial institutions), meaning that you are responsible for your own money security. You’ll need to protect your private key, password and seed phrase somewhere safe (not on your computer, phone, or cloud). It’s also advisable to activate two-factor authentication on all exchanges and wallets to maximize security.

For keeping your money safe, there are software wallets for each cryptocurrency or hot and cold wallet solutions that will help you manage your digital assets. One of the best crypto wallets for Bitcoin is Badger, where you can buy, store, send and swap tokens while having access to cash Dapps.

If you’re interested in the bitcoin price, know that it can fluctuate due to supply and demand, media coverage and investors’ opinions, so you should consider these factors before taking action.

Although blockchain is one of the safest places to trade and hold your money, people can take advantage of your computational power to mine, so you need to be careful where you mine and store your coins and take safety precautions to avoid getting your data stolen.

Buy high, sell low

This strategy is still relevant, but not on the crypto market, because crypto volatility comes at high risks, regardless of your gains. People make two tremendous mistakes when it comes to this strategy:

  • They fear missing out on an opportunity (FOMO). When they see a project that increases in price, the risk of that asset going down is most likely. They may be losing money on gas fees (on Ethereum) or have stuck and failed transactions. This is why you don’t invest when emotions are leading.
  • They sell low due to fear, uncertainty and doubt. Seeing their assets going down may tempt investors to sell them, but while they don’t pay attention to the whole project, after selling, their coins can go back up in a few days or weeks. Investing will teach you to wait patiently for assets to regain their value in a matter of time.

It’s easy to be influenced by other people’s opinions and follow what others are doing. Still, everyone is holding their coins and investing differently, which is why you should learn to evaluate your assets and take a decision thoroughly thought.

Not having a diverse portfolio

Depending on your objectives, your portfolio can be more or less diverse. Bitcoin and Ethereum (or other leading cryptocurrencies) should be good enough for long-term investments. They also provide a safety net for your wallet and can offer you constant earnings (even if they’re not considerable).

On the other hand, if you’re looking for higher returns, it would be best to lower your risks by spreading your investments into more projects not to be overexposed. There are three types of coins on the market, classified after market capitalization:

  • Large-cap coins have a market cap of more than $10 billion and are considered the lowest-risk investments. Bitcoin and Ethereum are one of them.
  • Mid-cap coins have between $1 billion and $10 billion in market cap and are considered risky, but they usually have profit potential.
  • Small-cap coins have a market cap of less than $1 billion and are riskier to invest in due to their susceptibility to dramatic swings. These will make the most profit, but they’re unstable.

Investing the money that you can’t afford to lose

Finally, the latest mistake many people make is investing way too much money without fearing losing them. Investing in crypto will make you earn money, but you may also lose some money due to the market’s volatility. Therefore, you should only put in the money you can afford to lose so that you still have financial resources if something happens with your investments.

The idea behind this advice is to avoid risk, more than guarantee you of making money, and because cryptocurrencies were built like this and due to communities, you can only be safe and make less money, or earn huge income and be exposed to higher risks.

Wrapping up

In conclusion, you should never hurry and let yourself be influenced by other people’s actions when investing in cryptocurrencies. You should only educate yourself as much as possible and take decisions after monitoring the market and calculating potential risks.

About the author

Cynthia Madison is an author at SmallBizClub with a solid technical, business, and financial foundation. She’s responsible for providing share-worthy articles that deliver value straight to the point. Cynthia enjoys watching thought-provoking TED talks on technology advancements in her spare time. She lives a “never stop learning” life.