Everyone has to start somewhere and even the more experienced crypto investors mess up from time to time. It is a very fast-moving industry with always something new being released. Just when you think you have nailed it, something else comes along and sends you back to the start.
There are a few common mistakes that people overlook when they first come into this space and it is better to be aware of them earlier rather than later.
Chasing pumps – We have all done it. Buy high and sell higher right? Well, that, as you may have figured out by now, is easier said than done. It is very easy to get caught up seeing that ever-increasing green candle and jumping in headfirst and FOMO kicks in.
There are times to buy into a pump of course. If a trend has broken upwards and closed above the trendline, then yeah, cool, go for it. But, once it has already pumped and caught a 10-20% increase? Not so much…
Although, that being said, there are some cases in which this would be acceptable. What are the fundamentals saying? Is there so very juicy news or a product release that will increase the value of the product? Is a competitor struggling? Has the project been successfully listed on a tier 1 exchange?
These are all great indicators that 10-20% might just be the start. If there is no real apparent reason for the pump, be cautious jumping in.
Impatience – The killer and one of the hardest habits to kick. I am still working on creating diamond hands. I have often sinned and became a paper-handed individual. This is not recommended. It’s bad seeing a coin you’re not in pump, it is worse seeing a coin you were once in pump. It is sometimes not worth thinking about.
If you are seeing this happen to you often, don’t take it as a bad thing. If anything, you are good at spotting great projects early!
Just work on your hand-strength and don’t be persuaded and influenced when you see other projects flying high. If you have done your research, your time will come.
After all, the only person you should be competing against is yourself. Not your friend and certainly not some fake avatar online which posts fake profit and losses.
Selling early – Similar to the point about impatience above, selling early in slight profit only for a project to go on a rampage and 10x over a few weeks. If you are in profit, there are a few rules we try to stick by.
Take half leave half – This is especially good if you are uncertain about a project. If you have done well enough to select a project that has done 2x or more there’s no harm in taking that profit or at least your initial investment off the table. This leaves you in a “can’t lose” scenario, your initial investment is safe and you still have a strong position.
The 1/3 rule – I like to think I came up with this but I didn’t. In the likely event of you reading all the blocmates content and then putting your newfound knowledge to good use and a project you picked does a 3x, you can then use the ⅓ rule.
Reinvest ⅓ in another project.
It is a no brainer. Complete risk-free and you get to see your hard-earned returns realised and sat in bank… or even better reinvested further. Compounding is a seriously powerful tool.
Selling too late – Or not letting go. This is a product of greed and greed is a very powerful emotion! It is probably some inherent caveman gene still leftover from when we had to hunt and scavenge, if there was surplus you would protect it with your life. Although cavemen don’t make great investors.
I have been prone to this myself recently. Autofarm, a Binance Smart Chain project, soared from $750 to $13,000 plus and guess who was holding some on the way back down to $3,500? This guy… It isn’t all bad, once I shook the greed, guilt and fear off my back I took half out at a nice 5x and reinvested it whilst holding the remaining investment to see how it plays out.
Not DYOR – Not doing your own research is a killer. It is so easy to follow an anonymous account on Twitter that posts their winners and blindly jumping into whatever they say. (I am looking at you crypto wizard fans out there).
More often than not, these guys don’t post their losses. We post our full portfolio on our Patreon, losers and all available for everyone to see.
There are several articles we have previously written that will help you DYOR and help you investigate further. Head HERE to read more.
So you have done your own research now what? Well, you have to make a plan. You can’t expect to take over the world without a plan. You wouldn’t even go to the shops without some form of plan, so don’t do it when it comes to investing.
What is the plan? Are you aiming for a certain amount of money? A certain return in %? Is it a little more long-time and you’re looking to invest a certain amount of money over a certain amount of time? Find one and stick with it.
Mine? Well, I want to make enough through the investments that I can then find a nice high APY savings pool or yield farm protocol, so that the interest I make is more than enough for me to live comfortably off.
Once I achieve this I can continue to write and do the things I enjoy for the rest of my days or do nothing, I am pretty good at that. So far, so good.
I know everyone in our Telegram jokes and it is a common saying in crypto to “buy the dip”, but there are times when buying the dip could be a bit of a bad idea. I mean, for Bitcoin you will be fine just buy as much as possible (not financial advice, I am just joking…), but what is the point of buying a dip if tomorrow there is going to be a further dip?
I know what you are thinking if you knew that was going to happen you wouldn’t be reading this article… Stick to this rule – dips in uptrends are for buying. Read our article on how to use the Fibonacci to understand this further.
Low price = undiscovered gem – This is a personal favourite of mine. If you find a coin that is less than $1, don’t go remortgaging your parent’s house and going all-in on it. Low price, more often than not, means high supply.
Bitcoin has a high price tag because it has high value and it has a relatively low supply (21 million)… EVER
ADA has a low price tag of around a dollar, but there are 32 billion ADA and there will be 45 billion once the full supply is reached.
The metric you want to be assessing is the market cap. This is the supply x price.
Once you know this you can take a look at other projects with a similar market cap and assess if your coin is under or overvalued. Of course, you will be biased so more than likely you will undervalue it. Check your bias.
Seek other channels for your information and read opposing opinions on your projects. You need to understand both sides of the fence before investing and what the risks associated are. People don’t like to read what they don’t want to be true. The whole financial crash was caused by this very neglectful ignorance in 2007-08.
That is it for today, I am working on a big in-depth article on Polygon (MATIC), so I thought I would keep this short and sweet.
We hope this helps and has been useful. If you have any questions just get in touch and we will be more than happy to help. Please remember to sign up using the referral links to help support our platform.
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We also have a live Early Retirement Index on there. A list of coins we believe will perform excellently over the next few years.
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