New to crypto investing? Avoid these common mistakes to protect yourself from scammers

Investing in crypto can be a thrilling but challenging experience, especially when you are venturing into the volatile market for the first time. While the potential for significant returns is undeniably appealing, there are several risks involved.

Unfortunately, many new investors fall into traps that could cost them their hard-earned money. The pitfalls are many, ranging from a lack of fundamental knowledge to using improper trading tactics influenced by social media users.

Here's a list of the top five most common mistakes that new-age crypto investors, and even some relatively experienced ones, should avoid.

Choosing a digital wallet to store your cryptocurrency is not only primary but also essential when investing in crypto. Mainly, there are two options for storing your cryptocurrencies: online or “hot” wallets, and offline or "cold" wallets. While online wallets are more easily accessible than their counterparts, they leave your crypto vulnerable to hacks and thefts.

The most secure way to store your cryptocurrencies is in a cold wallet, which is not accessible via the Internet. A cold wallet stores your private keys in a cold storage device, which can be accessed via Bluetooth or a USB connection.

Additionally, it is important to remember never to keep all your cryptocurrencies in one location, such as exchange wallets or hard wallets. As the saying goes – do not put all your eggs in one basket.

There is always some degree of misinformation circulating on social media websites. Many new crypto investors get carried away and start their trading spree after listening to an influencer who claims to have built a portfolio worth millions by investing in relatively unknown projects. There may be times when such projects can turn out to be Ponzi schemes, trapping even the most veteran investors.

While it is good to take opinions from those who have invested in cryptocurrencies, it is essential to conduct your own research as well. Reading a project’s whitepaper, scanning key staff members, and learning about funding rounds can give you better insight rather than relying solely on what social media users have to say.

Another common mistake that people make while trading crypto is chasing trends due to FOMO (fear of missing out). FOMO trading is extremely risky as it ignores the fundamental and technical aspects of a coin. For new investors, the same is not a sustainable tactic for long-term stable gains.

In the fast-paced crypto market, it is common for a token to rally by triple digits overnight. However, such price pumps can be temporary and those who buy too late into the rally could be left reeling with steep losses. Hence, it is better to analyze a project yourself before investing in it.

A lack of basic research on cryptocurrencies can topple any investment strategy. In fact, one should make it a habit to analyze a cryptocurrencies’ fundamentals even before setting up their crypto wallet.

New investors must take time to familiarise themselves with how different crypto projects operate and what utility they provide in the long run. For instance, a look at a coin’s supply concentration can provide greater insight into its sustainability. As a general rule of thumb, you should stay clear of coins whose supply is concentrated in the hands of a few as such coins could be vulnerable to pumps and dumps.

Keep in mind that it only takes one bad investment to paint your portfolio red. Hence, understanding fundamentals and keeping a long-term mindset is key to picking up good crypto projects and avoiding scams.

Investing in cryptocurrencies requires staying updated on price patterns, external developments, and general market trends. Conducting technical analysis, such as studying price charts, identifying support and resistance levels, and predicting potential market movements are important aspects to consider before making informed investment decisions.

For example, some coins are driven only by hype and do not follow any technical analysis laws. This is particularly true for some meme coins. The same does not imply that any coin in which technical analysis does not apply is a fraud. However, following this technique can save you if and when a coin does turn out to be a hoax.

Alas, one can still fall prey to phoney projects even when following these strategies. Therefore, it is always a good idea to create a trading tactic by considering your risk tolerance levels and how much you can afford to lose in the worst-case scenario. Many amateur investors often overleverage their positions, which can lead to steep losses.

This is the most common advice you can receive but it applies to every investment. One must remember that the market is extremely volatile, and investing in even legitimate projects carries some degree of risk.

Sieving through cryptocurrencies can be a daunting experience for new investors. Each investor’s financial goals can differ from one another, and not everyone can afford to purchase Bitcoin and Ethereum.

While gauging relatively lesser-known crypto projects, one can use the techniques mentioned in this list to steer clear of scam projects to the best of their abilities. Keeping these points in mind can help new investors become more confident instead of jumping blindly into a storm.