The 10 WORST Crypto Mistakes

Here are the top 10 worst crypto mistakes you can make in 2024 and how to avoid them!

From not fully understanding the digital assets you’re investing in to not diversifying or falling victim to scams online, there are many mistakes out there that you can avoid!

We’ll help guide you through the worst crypto mistakes and how to mitigate them.

1. Lack of fundamental cryptocurrency knowledge

The most common mistake in crypto is not fully knowing or understanding what you’re investing in. From stocks to crypto or real estate, any investor should spend resources, from time to money, on fully understanding the assets, their implications, risks, potential, and other factors.

Before investing, you should evaluate all these factors and have at least an intermediate level of knowledge of the assets you’re investing in. Fortunately, investors can enjoy a wide range of resources to learn about cryptocurrencies.

2. Focusing on short-term gains

Investing in crypto can be a rollercoaster, and its return potential is one of the main reasons people come to the sector.

You may be tempted by the allure of leverage or the new buzzing meme coin to have an abnormal return on your investment.

However, as any experienced investor will tell you, consistent investing in fundamentals rather than the shiny new object will yield the results you’re expecting in the long term.

One of the worst mistakes you can make is to focus on short-term gains instead of defining a strategy that produces consistent results in the long term.

3. Selecting an unsuitable crypto exchange

Many new players quickly rise in crypto, attracting thousands and millions of users, but they might not be the most trustworthy project or best option in the market for you.

Crypto exchanges are one of those cases of rapid growth, but some can lack the fundamentals for long-term success, leading investors to lose funds (e.g., FTX, Mt.GOX).

Selecting the right crypto exchange for your strategy (hopefully for long-term gains) is an essential step in your crypto journey.

Don’t forget to align that with security, as some crypto exchanges may offer the features you’re looking for but may not have the security you need to protect your investments.

4. Failing to diversify investments

Diversification is a key tool to optimize portfolio returns while minimizing risks. It has been shown that a traditional stock and bonds portfolio could generate a higher return by just diversifying with a small allocation (of even 1%) of cryptocurrencies.

However, within a crypto environment, diversification is also key. There are many ways you can diversify from leading digital assets like Bitcoin or Ethereum.

Segments like DeFi, real-world assets (RWA), meme coins, a specific blockchain (e.g., Solana, Avalahance), gaming tokens, sports tokens, and many others offer different price patterns, potential, and risks.

5. Trading due to fear of missing out (FOMO)

Too much trading is one of the most common mistakes for beginner or experienced investors.

Due to crypto’s volatility, it can open many daily and intra-daily opportunities, leading investors to jump in under-analyzed trades. However, as Bitcoin has shown, it offers a better return to invest in assets in the long term instead of over-trading them. It’s easier to “have time in the market than to time the market.”

We know that FOMO is big in crypto, but do not deviate from your strategy. Being disciplined will be one of the characteristics that will help you become successful.

6. Ignoring fees and tax obligations

Following on the over-trading issue due to FOMO we have the amount of fees you’ll pay for those transactions, reducing your potential return. Moreover, if you engage in more complex positions (e.g., leverage), there are other debt-related costs to account for.

Long-term holding is a preferred strategy to avoid transaction costs while maximizing upside potential for fixed supply assets like Bitcoin.

Another key mistake, that over-trading contributes to, is not tracking your transactions and portfolio, leading you to have a lot of difficulties when tax season comes, or worse, not filling your crypto taxes, leading to fines and penalties.

CoinTracking can help with this by enabling automatic tracking of your crypto gains and income while enabling you to generate tax reports.

7. Storing cryptocurrency in online wallets

Security is still a key issue in crypto, with billions lost to several types of attacks from hackers every year.

The best way to prevent losing your funds is to not store your cryptocurrency holdings in online wallets but rather in more secure hardware wallets.

You should only leave the amount of crypto you need for your trading activities in exchanges but everything else (for long-term holding) in safer alternatives.

8. Falling victim to scams

Robberies, scams, and hacks are still common in the crypto industry despite a decrease in this trend in recent years.

Falling victim to scams online is one of the main ways people lose their funds in crypto, regardless of the medium used (e.g., Twitter, YouTube, email, phone). Generally, if it sounds too good to be true, it probably is.

To avoid falling victim to a scam, do not share any information across social media or by phone/email with anyone. Do your background research before sharing information.

9. Forgetting passwords or seed phrases

Believe it or not, forgetting passwords or seed phrases is still a key issue in the crypto industry. For example, it is estimated that around 20 percent of all Bitcoin is lost forever due to this issue, translating into over USD 270bn in current prices.

You should keep your passwords or seed phrases in a secure location (online or physical) that only you and a trusted person have access to (due to inheritance purposes).
If you want to access your funds, please avoid this mistake.

10. Using overly complex trading strategies

With the maturity of the industry, investors have wider access to tools and strategies, usually only seen in traditional finance, in the crypto sector.

However, having more complex strategies or tools available doesn’t mean they are the most appropriate resources for you as an individual investor.

Each person has different goals, knowledge levels, technical proficiency, and risk levels, with complex trading strategies only being suited to professionals and not to the average investor.

Conclusion on the 10 Worst Crypto Mistakes

There are many mistakes you can make in cryptocurrency, but the biggest one would be to not be involved in this booming industry.

When you decide to jump into the digital world, be aware of the risks and most common mistakes outlined in the guide to enjoy the best experience in crypto possible.

CoinTracking can also help you mitigate some of the risks by making it easier to comply with regulations and filing your crypto taxes across the world.

Disclaimer

All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.