Mistakes That Make You Lose Money With Cryptocurrencies

When a person decides to invest in the markets, they should know that they are taking risks . If we are also talking about cryptocurrencies, the risks multiply. The crypto market is very small and in an early phase of consolidation and adoption . It is in its most volatile stage and although it is easy to make a lot of money with them, it is also easy to lose money.

Thanks to cryptocurrencies, many people have started in the world of financial markets. Bitcoin and the other digital currencies based on a 'blockchain' allow entering the markets quickly, easily and with very little capital. We can say then that it is a market with little liquidity , very volatile, and with a large number of inexperienced investors. All the ingredients are in favor of a bad decision making us lose part of our portfolio.

 

How to lose money with cryptocurrencies

It is as necessary to know how to obtain profitability with our investments as to know what mistakes can make us lose money. Trading this market is very risky and can be very frustrating if you don't have the right strategy. We are going to analyze what are the main reasons and errors why people lose money in this market.

Invest when the market is bearish

The market moves in cycles. Buying cryptocurrencies when the price is falling is like the saying 'catch the knife while it falls'. The most common way that people lose money in this market is because they enter when the price is going down looking for an opportunity to buy cheap, but seeing that the decline continues and there is no sign that the price is going to move back to the rise end up closing their positions in losses.

To avoid this we must be aware that there is a very low probability of buying at minimums. Whenever we decide to buy Bitcoin or other cryptocurrencies, we must be willing to understand that the price can mark losses before moving in the direction we are expecting. You also have to look at the market with a long-term perspective . To enter the market and try to get profitable in small time frames you need to have extensive knowledge of technical analysis.

Not really knowing where you are investing

To be sure of where we are allocating part of our capital, we must study the operation of the chain of blocks. If, after having a solid understanding of the possibilities of this technology, you have a positive vision, then it is worth investing. If, on the contrary, we are not very convinced that Bitcoin can have a future and be useful, it is better to refrain from this market, even if the price gives us an investment opportunity.

A positive feeling in favor of technology will make us have a more long-term vision. However, if we think that Bitcoin may have an expiration date, we will not hesitate to get out of a losing position if the price falls drastically.

Closing positions hastily

The investor can enter the market as a means of saving or looking for a return in Dollars or their local currency. It is important to be clear from the outset what type of investor you intend to be in order to carry out an appropriate strategy.

In the case of the saver, the person is buying in stages from time to time. If you have entered a bad position and the price falls, a long-term perspective will help you withstand a market downturn without psychology causing you to close your position at a loss. The easiest way to lose money with cryptocurrencies is to buy when it has been going up for a while and sell when it is going down. As for traders, the 'stop loss' must be defined before taking the position through technical analysis. Not having a clear strategy will make volatility turn against us and take us out in losses.

Not managing the portfolio well

Another very common mistake that makes you lose money is not distributing the portfolio correctly . In the cryptocurrency market, being too exposed to Altcoins can be very negative. A cryptocurrency portfolio must have more than 50% of the total capital in Bitcoin.

For the saver, entering 'Altcoins' should only be long-term in projects that they particularly like or that offer the possibility of ' staking '. For traders, 'Altcoins' should in principle only be a means of increasing capital in Bitcoin. The parent cryptocurrency is consolidating as a safe haven asset . It will always be positive to enter alternative currencies when they give an opportunity, but not to store them without setting objectives for taking profits, as well as the maximum number of Satoshis that you are willing to commit.

Always go 'All-in'

In addition to not correctly distributing the portfolio, another much more serious mistake is not having one. Among traders with little capital it is common to see how they risk all the investment in each position they take. Going 'All-in' on an investment is a risk not worth taking. Betting more also brings more benefits, but a very pro-risk mentality ends up turning the financial market into something similar to a casino or a game of chance . Any serious investor has correctly divided his investments and his trading portfolio regardless of the capital available.

Focusing too much on graphics

Looking too much at the charts can make us lose money with cryptocurrencies. Trading on small time frames can cause anxiety. In general, the smaller the time frame in which you operate, the more pending you should be on the chart. The market can create dependency because you continually have the feeling that you may be missing an opportunity. It is not advisable to expose yourself too much to the market or make too many operations.

The crypto market is very young and still has a long way to go. It will offer plenty of opportunities to earn money and there is no need to be afraid of missing the boat. It is the perfect time to find out, gain experience and gradually learn to correctly manage a portfolio that offers us some profitability to increase our savings capital and with it the future well-being of ourselves and our families. Fortunately, all these errors are easy to correct with the proper information.

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