Five Common Mistakes To Avoid In The Crypto World
Understanding the common mistakes that people make when dealing with bitcoin and other crypto assets is essential for those who want to avoid those mistakes. Not every single time that someone makes one of these mistakes he or she will suffer as a result, but if we don't pay attention to them these mistakes can occur often until they become a part of our behavior, an outcome that is not at all desirable. The list that I have made is by no means exhaustive but I have tried my best to include the most common mistakes in it so that it can be useful to the readers. Take a look at the list and see if you are making any of the mistakes. If so, you should probably rethink your practices and try to improve your understanding of cryptocurrencies. However, I am sure you know these things better than I do but I just write this so that I can share my knowledge with you.
It is difficult to think of any situation in life where panicking is beneficial to us. A calm and collected mind can solve complicated problems swiftly and accurately. It happens quite often that inexperienced Bitcoin investors panic when the crypto market is shaken, as it is so often, by some kind of major hack or some other unfortunate development such as what happened to FTX. In these situations bitcoin's price usually goes down a little bit but it bounces back quite quickly. Inexperienced investors go into panic mode and sell all their Bitcoin assets when the price is so low. Of course there are always people ready to buy bitcoin so they don't find it difficult to sell their assets, but only to regret it later when bitcoin regains its previous price. In order to avoid ending up in this situation we should be able to control our emotions.
2 LOSING YOUR SEED PHRASE
This is a serious mistake to make because in such a situation you can't access your bitcoin at all. Keeping the seed phrase safe and private should be a Bitcoin investor's highest priority in terms of finance. How would you feel if you had a safe where you kept some of your most valuable assets and you had lost its key? I can tell you how I would feel in such a situation: sad. Your seed phrase is as important as a key to a coffer containing gold. No matter how secure the coffer might be, once we lose the key we lose access to its contents. It should be noted, however, that the loss of the key to your physical coffer is arguably easier to remedy than the loss of your Bitcoin seed phrase because in the latter case there is virtually no remedy.
3 KEEPING YOUR BITCOIN IN A CENTRALIZED EXCHANGE
This is an obvious mistake but unfortunately one that is fairly common. One would think that after so many centralized exchanges have crashed people would recognize the high risk of keeping their Bitcoin assets in them but the ease of access that these exchanges provide is irresistible to new Bitcoin investors. There is, arguably, some merit in keeping some altcoins in centralized exchanges for a short time when you need to exchange them for other altcoins but when it comes to Bitcoin, never moving it out of your non-custodial wallet is recommended because this way you can be certain that you have the private key yourself.
Decentralized exchanges are gaining in popularity with each passing day so it is to be hoped that less people will keep their bitcoin in centralized exchanges in the future.
4 BUYING USELESS NFTS
It never ceases to amaze me how much money some people are willing to pay for some NFTs. Some of these buyers might think they know what they are doing but the inexperienced investor who thinks NFTs are a good investment usually learns his lesson the hard way. I know that some people love the NFTs that they own but, for the most part, once you buy an NFT you start regretting your decision to buy it. That having been said, I want to make it clear that NFTs can be anything digital. If a beautiful work of art has been turned into an NFT then buying such an item can be seen as laudable. When I say that most NFTs are useless I am referring to those which lack any kind of artistic value and are traded merely on the basis of the fact that people want to make profit from them. The situation is some manifestation of the greater fool theory, which I don't think is something anybody can say they approve of.
5 BUYING MEME COINS
Just like useless NFTs, meme coins lack any kind of fundamental value. They are popular a few days and then they lose the popularity that they enjoyed. Avoiding meme coins altogether appears to be a sound strategy for beginners and experienced investors alike. The concepts such as decentralization and blockchain are too sublime to be associated with such frivolous concepts as meme coins. Decentralization was adopted by bitcoiners as a way to regain their financial independence from banks. Meme coins' architecture is not generally sufficiently decentralized or trustless and even if it was it wouldn't make much difference. They are mockeries of true cryptocurrencies such as Bitcoin.
Those were the 5 common mistakes of the crypto investor. Understanding that those mistakes are common is concerning because so many people are affected by the consequences of the mistakes. At least when we know them we can avoid them.
I don't endorse any particular coin or NFT. This article was written for entertainment purposes only. The responsibility for your decisions lies with you only. Consult professional financial advisors before any investment.