Six useful tips about cryptocurrency for beginners and professionals
The best trading tactics often come from years of investing in cryptocurrency markets.
With this handy guide any beginner can learn how to come up with the best trading strategies and avoid common cryptocurrency mistakes.
Six cryptocurrency tips
If you want to invest in cryptocurrencies, here are six tips:
1. Have a strategy for crypto trading
It isn’t easy to separate genuine cryptocurrency recommendations from the scams; there are lots of sharks out there waiting to take your money.
Reports of crypto investment scams surged to 7,118 in the first nine months of 2021. This was up 30% on the whole of 2020, according to Action Fraud, with the average loss per victim at £20,500.
So when you’re confronted with a lot of information about a cryptocurrency, take a step back from the hype.
Try to look critically at the project or platform. How many users does it have? What problem does it solve? Avoid coins that promise the Earth but haven’t delivered anything tangible.
2. Manage risk
Some people offering crypto trading tips might not have your best interests at heart. So
don’t get stung making the same mistakes as others.
Set limits on how much you invest in a particular digital currency and don’t be tempted to trade with more money than you can afford to lose.
Cryptocurrency trading is a high-risk business and more traders lose money than don’t.
3. Diversify your crypto portfolio
It doesn’t pay to have too much invested in one single cryptocurrency. Or as they say: don’t put all your eggs in one basket.
As with stocks and shares, spread your money out among different digital currencies.
This means you don’t risk being over-exposed should one of them plummet in value – especially as the market prices of these investments are highly volatile.
There are thousands to choose from, so do your research. Examples include worldcoin and safemoon.
4. Be in it for the long term
Prices can rise and fall quite dramatically day to day, and novice traders are often duped into panic selling when prices are low.
Cryptocurrencies are not going to go away. Leaving your money in the crypto market for months or years at a time could offer you the best rewards.
5. Automate purchases
Just as with regular stocks and shares, it can help to automate your crypto purchases to take advantage of pound-cost averaging.
Most cryptocurrency exchanges, including Coinbase and Gemini, allow you to set up recurring buys.
This is where crypto investors tell the platform to purchase a fixed amount of their preferred cryptocurrency every month – for example, £100 worth of bitcoin. It means they get a bit less of the currency when prices are high, and a little more when prices are low.
That takes the stress out of trying to time the market by either buying a currency at what you think is the lowest possible price or selling at the highest price. It’s something that even market professionals struggle to get right.
6. Use trading bots
Trading bots can be useful in some circumstances, but they aren’t recommended for beginners looking for crypto investment tips. Often, they are just scams in disguise.
If real algorithm existed that timed your buy and sell trades to perfection, everyone would be using them!
Five common crypto mistakes
The latest research from UK regulator the Financial Conduct Authority showed that about 2.3m Brits own cryptocurrency in one form or another.
It’s very easy to get caught up in the hype of news headlines. Crypto mistakes are startlingly common, and below we list some of them.
1. Buying just because the price is low
Low prices do not always represent bargains. Sometimes prices are low for a reason! Watch out for cryptocurrencies with falling user rates.
Often, too, developers leave a project and it stops getting properly updated, making the cryptocurrency insecure.
2. Going ‘all-in’
Some of the more suspect trading platforms suggest you should maximise your money by betting as much as possible. This is a quick way to the poor house.
Better crypto investment tips would be to only use a certain proportion of your investing capital — say 5% — and always keep an emergency cash fund in an easy access savings account that never gets invested in the market.
3. Thinking crypto is ‘easy money’
There’s nothing easy about making money through trading any kind of financial asset, whether stocks and shares or commodities like silver and gold. The same can be said for cryptocurrency.
Anyone who says different is probably trying to trick you into making crypto mistakes.
4. Forgetting your crypto keyphrase
If you have a hardware wallet for storing your crypto offline, forgetting your keyphrase is like losing the keys to a bank vault.
Without your keyphrase, all your cryptos will be irretrievable.
5. Falling for scams
Be very wary of crypto deals that sound too good to be true. We outline four common crypto scams you could be careful of:
Cloud multiplier scams
Fraudsters sometimes contact victims by email or text with an “investment opportunity”. They promise to give investors double or triple the amount they have put into bitcoin if they send their cryptocurrency to a particular digital wallet.
REMEMBER: Offers of free money should always be viewed with great scepticism
Pump and dump
Criminals can easily inflate or deflate the price of very small or unknown cryptocurrencies, sometimes sending
the value of these currencies skyrocketing.
Sometimes criminals will own a lot of a particular cryptocurrency (through pre-mining much of it before it is available to the general public).
When unwitting traders rush in to try and grab a piece of the action, the criminals wait for the price to increase before selling all their coins and causing the price to crash.
They can pump up the price by promoting it on social media, before selling it at the higher price.
Malicious wallet software
The best crypto tips will tell you to stick with big name crypto wallets, such as Ledger, Trezor, Exodus or MetaMask.
Dodgy or unknown wallets that you find on Google Play or the App Store can steal your crypto funds with dodgy code.
With so many cryptocurrencies on the market, it can be difficult to tell what’s real and what’s not.
When you invest in fake coins, criminals can steal your identity and often your hard-earned money.
Don’t take anyone else’s word for it and use as many sources as possible to do your own research on coins before you buy them.
Know your crypto lingo
There is a lot of jargon out there in crypto land and often it can be difficult to decipher.
Use this helpful list to make the most of the best crypto tips and dodge common cryptocurrency mistakes that could blow up your trading account.