Let’s talk stats. From just 66 digital coins in 2013 to currently over 7,557, cryptocurrency has surely come a long way. The rise of cryptocurrencies have given an upthrust to the wealth of several people. Released in 2009, Bitcoin - a decentralized digital currency, has a market value of over $1.03 trillion. Considering all these numbers, it is right to say that cryptocurrency has surely become a household name. Almost 79 percent of cryptocurrency owners in UK have invested in Bitcoin. And studies suggest, with over 10.07 crore, India has the highest number of crypto owners in the world. All these numbers exude the importance of cryptocurrency and goes on to prove that it is here to stay for long. All said and done, we also need to take note that understanding cryptocurrency is like learning a new language. What seems to be utterly difficult in the beginning, with experience it becomes a piece of cake. As a greater number of investors are setting foot in this water, they should make sure that they don’t commit the following mistakes. If they sail past these mistakes, they will surely deep dive into an ocean of wealth.
1. Investing/ Trading without knowledge
Research, research, and some more research. This is one of the rookie mistakes budding investors commit – diving into the world of cryptocurrency without any knowledge. Cryptocurrency, might we say, is probably vast than an ocean. Understanding the nitty-gritty and the foundation on which this industry is built takes time, and ample experience. While many have made a fortune dealing in crypto, in early 2021, when the prices of Ether and Bitcoin dropped, this market lost around 17 per cent, which is around $150 billion. Hence, it is safe to safe that the nature of cryptocurrencies is highly volatile. Conducting thorough research, seeking pundits’ advice, and following your investor’s guts plays a great role. There is a plethora of material available online. Spend enough time to gather all the crypto trading skills.
People often trade with little or no knowledge of this industry. And this costs them dearly. Cryptocurrencies are surely booming courtesy of Initial Coin Offering (ICO). And due to the hype, it is often seen that fresh investors enter into this treading water with an intent to make the most of the ICO. Unknowingly, the investor gets caught in the trap of fraudulent ICOs. Have a clear plan before setting your foot in ICOs. In the end, mistakes are inevitable but learning nothing from the mistakes is a crime. Cryptocurrency runs on the ‘high risk - high reward mechanism'. All we can say is commit your mistakes with the intent of learning.
2. Not thinking straight
Usually, novice investors are of the notion that trading will make them an overnight millionaire. Well, to burst their bubble, that’s not how it works. Investing is not a 100m race, it’s a marathon. Invest in the right coin, be patient, learn from your mistake, and that’s how trading can change your life.
3. Falling for crypto scams
Investing in wrong coins, trading on imposter websites, phishing scams, falling for scam emails, and following the wrong social media accounts are some of the deceptions that investors can fall for. According to a study by Chainalysis, over $ 7.7 bn worth of cryptocurrencies has been stolen from the investors worldwide. Their report further states, rug pull that is mostly associated with Decentralized Finance (DeFi) projects, have emerged to be a go-to scam. This scam amounted to 37 per cent (around $ 2.8 billion) in 2021, as opposed to just 1 per cent in 2020.
In another scam, Finico, a Russian Ponzi scheme, looted millions, while touting itself as an ‘automated profit-generation scheme’. Money could be invested in Finico using Bitcoin or by purchasing Tether (in-house currency) in three options. It was said, that Finico was led by a popular Instagramer Kirill Doronin. This Ponzi scheme lasted from December 2019 to July 2021. This brings us to the point that one shouldn’t invest before doing proper research.
4. Putting all eggs in one basket
Diversification is an established tenet of conservative investment. The world of crypto goes through several ups and downs, and one of the things that save the investor during such unprecedented time is diversification. Studies suggest that a 50 per cent drop in the price of Bitcoin is normal. And when the market plunges down, proper research followed by plan should be made before selling the coins. Diversification to an extent helps in risk management. Putting your money in just one coin is not a great move. Spreading your hard-earned money in different cryptocurrencies increases the chance of good returns.
5. Failing to pay taxes
Whether you earn the money through your salary or by mining cryptocurrency, it counts as a taxable income. People often surpass this process and avoid paying the required tax. Around August 2021, the founder of Crypto ICO, Bruce Bise, and Samuel Mendez plead guilty to tax evasion after raising $24 million from investors, the press release said. Such tax frauds have become quite common and should be avoided. If a person holds cryptocurrency for less than three years, as per the income tax slab, they ought to pay short term capital gain. Likewise, the profit after selling the crypto post three years is chargeable too. It is advisable to take a note and declare this money in the income tax returns.
Read more: https://www.justice.gov/usao-ndtx/pr/founders-crypto-ico-plead-guilty-tax-evasion-after-raising-24-million-investors
6. Buying high, selling low
Another common mistake perpetrated by new time investors is that they buy the crypto while it is gaining momentum. But as the rate starts coming down, they panic and commit the mistake of selling it. This industry is highly unpredictable, and investors should learn to take a hit as well. Overcoming the ‘FOMO’ (Fear of Missing Out) will lead them far in this game.
To sum up, it is always a smart move to invest in the right crypto at the right time. Also, spreading out your savings by investing in the different coins can surely help you multiply your wealth. As we mentioned, the cryptocurrency industry is quite unstable and fickle. The only thing that will lay the right path is gathering as much technical know-how as possible. Research till the time you are ready to invest. Always remember high risks rewards with high returns, be patient, your time will come too. With that, to have a secure future wealth after earning profits, don’t forget to pay taxes on the same. If you still have any further queries or looking to start investing in NFTs/cryptocurrencies, our App Scoop team is here to answer your questions. Contact: https://www.app-scoop.com/contact-us.html