How not to Buy Cryptocurrency. Three Mistakes from which no one is Immune

How not to Buy Cryptocurrency. Three Mistakes from which no one is Immune

Investments in cryptocurrency are associated with increased risk. The most obvious reason is the very unstable exchange rate of bitcoin and other cryptocurrencies. But in many, if not all, cases, grief investors suffer losses due to their own fatal mistakes. In this article, we have collected the three main omissions when buying cryptocurrencies.

1. Spontaneous Purchase

When buying a cryptocurrency, you need to clearly understand why you are doing it. It can be a long-term investment or a tool for speculation. The time of purchase will depend on the choice because for success you need to correctly determine the moment. In addition, it is important to immediately consider your actions in case of a sharp rise or fall in the exchange rate.

Many grief-investors decide to buy a coin in the wake of a sharp rise in the exchange rate and the resulting hype, having a very bad idea of ​​the principles of the crypto market and the features of the asset they purchased.

With significant depreciation, which is the norm for cryptocurrencies rather than the exception, crypto asset owners are often emotional and can act impulsively, so you should decide in advance to respond to abnormal situations, indicating the levels of profit or loss.

For example, in the summer of 2021, the “flagship” of digital currencies Bitcoin lost about half the price, falling from a record 60 thousand dollars to $ 32-34 thousand. The fall, in particular, was provoked by Chinese regulators. But as of November 28, the main cryptocurrency, according to CoinMarketCap, was already trading at $ 54,333 per coin, which is much more than in the summer, but still 10% below the maximum value.

So, buying a cryptocurrency at an all-time high is not a good idea, even if there is a frenzy going on right now around this or that coin. After a bullish rally, a downturn is very likely. It is better to wait until the crypto price of the asset you are interested in is at least 80-90% of its all-time high, or even less.

2. Wrong Choice of Exchange Service

The definition of Cryptocurrency Exchange includes several groups of services with different functionality and legal status. If you do not understand very well what we are talking about, you should read about the differences between crypto exchanges, before buying coins with their help. The terms of exchange and subsequent disposal of purchased assets can vary significantly depending on the type of service you use. It would be an obvious mistake not to ask yourself whether an instrument meets the goals with which you buy cryptocurrency. In the future, this can bring you a lot of inconvenience.

Another mistake would be dealing with the black market. Currently, the number of chat rooms for OTC cryptocurrency trading is growing in messengers. Such platforms usually have their own system of recommendations and reviews, but there are no guarantees. The scale of cryptocurrency fraud in Telegram is so large that the Internal Services Revenue Service (IRS) has drawn attention to it. Therefore, buying cryptocurrencies on Telegram and other unregulated OTC markets is considered one of the most unreliable ways to own digital assets.

A reliable method of buying cryptocurrencies is considered to be conducting transactions on one of the large and well-known crypto exchanges that are subject to regulatory requirements, as well as identifying their customers and countering money laundering schemes. But here, too, there are pitfalls. Even using the services of the exchanges described above is not a hundred percent insurance against problems, up to complete loss of assets. There are enough precedents of this kind, and you can easily find them if you are interested in this question.

Leaving aside potential risks associated with the exchange itself (which are also present), here we come to the third mistake.

3. Irresponsible Storage

Even if the coins were bought on one of the most reliable crypto exchanges, leaving assets on the exchange wallet is not the safest option. Such services focus on large amounts of cryptocurrency, which attract fraudsters.

Cryptocurrency wallets often become the target of hackers. The biggest attack in the history of the crypto industry is considered to be the hacking of the Mt.Gox exchange, which resulted in the theft of digital assets worth more than $ 450 million (at the rate at the time of the attack). Due to this, the site ceased to exist. The process of liquidation of Mt.Gox continues to this day, as well as lawsuits that were initiated by customers of the site, hoping to get their money.

A hardware wallet is considered the safest way to store cryptocurrency. It will keep your assets safe from external threats… But not from yourself. If you lose access to your funds because you forget your wallet password, it will be much more pleasant than losing them due to a hacker attack.

That’s why when using any wallet (including hardware ones) you should make a backup copy of the seed phrase (a set of random 12, 18 or 24 words to regain access to the wallet). Usually the seed-phrase is printed out on paper and stored together with important documents. This is necessary in order not to lose access to the wallet and with it all your crypto-savings.

If you think such measures are reinsurance or a waste of time, you should know that as of early 2021, $140 billion worth of bitcoins are stuck in wallets with lost passwords. Apparently, many have only lost the opportunity to get rich because of their own laxity. We hope you are not among these poor souls.

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