 |
January 12, 2018, 07:19:47 PM |
|
Here are some common mistakes that people have made in the crypto world.
Looking only at the US Dollar Value
Maybe all of us has fallen victim to this. Most amateurs focus on the US dollar price when trading but the goal is to have more BTC than what you had before the trade. USD numbers is really irrelevant and what you need to be looking at is how much you pay for in Satoshis (Bitcoin). For example, a hundred dollars in bitcoin can change very quickly depending on the volatility of bitcoin. What was worth a hundred dollars in Bitcoin in the morning is not necessarily going to be worth a hundred dollars in Bitcoin later during the day. So, what you want to look at and what will give you a definitive amount of profit in bitcoin is the actual Satoshi price. Hopefully that makes sense because if bitcoin tanked in value, you’re not making the expected profit when you based your trading decision on USD alone. You’ve really got to look at how much you're actually earning in bitcoin because it facilitates the trade between platforms and it represents actual growth of your assets in the crypto-world.
FOMO (Fear of Missing Out)
Fear of missing out (FOMO) comes, then you buy too high. For example, if you're hearing everybody saying: buy Litecoin right now. It's going up! It's up 25%! You want to get on it like crazy and you go to the closest exchange and you buy it without putting any thought to it. -You just have the fear of missing out you don't want to miss out on a huge run-up so you end up buying at a peak or a really high point and then what you buy starts going down. It either crashes or more often corrects itself because whatever goes up must come down even if it is temporary.
The whole gamble of crypto is knowing when buy, to hold, and when to sell. This mistake costs many people money. I saw this really hurting people that are overextending themselves.
Let’s say, for example, you only have $500 and you're FOMO-ing Litecoin. So you put $300 and it goes down and you only have like $200 left in your entire Bitcoin portfolio. you might feel more of an urgency to sell because you're losing money now in a correction and you want to put it somewhere else. You might sell it at a loss. Though if you're dealing with more money, you can just leave it in there and if it further goes down in value, you don't really care all that much because you haven't stretched yourself too thin. You're still able to play in other places so that you don't feel like you're missing out everywhere because you lost your money on a potential bad trade. Typically, when you hold, it will eventually correct itself and go back up, It's just a matter of time and having the guts to be able to hold out during a downfall. So FOMO-ing is something I think we all can relate to in some way.
Buying something because it's cheap
Now we're seeing this a lot. In the market, people are buying Altcoins when they’re at 25 cents or 17 cents. It’s totally fine for good projects and companies but depending on how you view the coins, you might get into something that you don't understand. People know that bitcoin is at around $14000. I can't buy much bitcoin, so I'm going to scroll down the list here and buy a super cheap but over-valued coin.
A lot of times, they are relatively useless coins and it's a bad trade. Fortunately, right now, there's so much money going into crypto. A lot a newbie investors have this mentality of buying things cheap so you might actually make money in the short term. But this isn't a practice that you want to get used to and you want to rely on because you will start losing money in the long term. The reason is, things may get pumped up really quickly because of hype like the McAfee Effect.
It is worth noting then everybody pumps it and the next thing you know, if you get in too late, you may be experiencing the effects of FOMO and next, you're out of money. What you want to look at is how much supply there is. If there are billions and millions of coins and something is only a dollar. you have to really think about it. In order for this to hit $2, to double the money, we have to double the entire amount of market cap and if there is so many coins out there, it's going to be a lot tougher to do that. So, the lesson it don't just look at the price. The price definitely plays a factor but don't overbuy just because it's only one cent or less than one dollar. You can buy a billion of them but make sure you like the project and you believe in it. You've done your due diligence in taking into consideration how much supply there actually is.
|
