Troubleshooting Common Issues with Crypto Trading

New crypto investors often fall into common traps, such as poor security practices and lack of knowledge about crypto markets, which can lead to quick loss of money. To avoid these mistakes, it is essential to follow these 10 common mistakes.

Lack of Basic Crypto Knowledge

New crypto investors should understand the asset class and its workings to avoid investing in unknowable assets or trading without understanding crypto. Educating oneself on different crypto projects and the goals of each company can make a better investor, as investing in cryptocurrencies requires a thorough understanding of the asset class.

Ignoring Fees

New investors may not understand the process of buying crypto, including blockchain fees, exchange fees, and other fees. Credit card purchases may incur surcharge fees, 1% transaction fee from the exchange, and require blockchain fees for transaction processing. Depending on average fees at the time of purchase, these fees could result in hundreds of dollars in fees to various entities. Troubleshooting Common Issues with Crypto Trading

Understanding potential fees and finding cheaper exchange and time periods before making purchases can significantly save money in the long run.

Short-Term Thinking

The market’s promise of quick wealth has led many new investors to focus on short-term gains, but there’s also a risk of losing all funds due to poor investment decisions.

Investing in crypto requires a long-term mindset, focusing on high-quality projects with long track records. Focusing on a multiyear process rather than attempting to gain wealth in 90 days can lead to a more thoughtful crypto portfolio.

The process of keeping cryptocurrency in online wallets

Cryptocurrency, a digital currency, necessitates a digital wallet for storage. Online wallets offer convenience but are more risky due to vulnerability to hacks. Offline hardware wallets, like USB sticks with advanced encryption, are the most secure way to store crypto, as they protect private keys from hackers.

Forgetting Crypto Passwords or Seed Phrases

Cryptocurrency is stored in digital wallets that require passwords for access. If you forget your password, your cryptocurrency may not be recoverable. Even if you don’t forget your password, you must remember your cryptocurrency private keys, which are long alphanumeric sequences that are hard to remember. Losing or forgetting these keys results in the loss of your cryptocurrency.

Most wallets have a backup seed phrase for accessing funds, but if lost or forgotten, there may be no alternative for recovering funds.

Wrong Wallet Address

New investors often make a mistake when transferring crypto between digital wallets, as they mistakenly transfer funds from an exchange to a wallet, leading to a mistyped wallet address.

Crypto sent to an erroneous wallet address can be unrecoverable, and recovery service providers claim to help, but their services can only go so far, and the recipient must cooperate.

Getting Scammed

The cryptocurrency market is plagued by scammers, with scammers collecting $10 billion in 2021. Although the figure dropped in 2022 and 2023, a significant amount of money remains being stolen.

Criminals use sophisticated techniques like romance scams, Ponzi schemes, phishing, extortion, rug pulls, giveaway scams, and charity scams to gain access to your crypto wallet or convince you to transfer it.

Crypto scams often occur via email or messaging apps, where scammers pretend to act in the best interest of the victim. They can compromise wallets by connecting the online wallet to an application, allowing it to access funds and drain the wallet.

Avoid scams by connecting your online wallet to a trusted application, keeping most crypto funds in offline hardware wallets, and never share your wallet password, seed phrase, or private keys.

Use of Leverage

New crypto investors may be drawn to the stories of rags to riches through crypto trading, but it’s important to note that leveraged trading requires upfront collateral, and if a trade goes poorly, funds may be lost. Therefore, it’s better for new investors to avoid trading with leverage and use it only after gaining sufficient trading experience.

Overcomplicated Trading Strategy

New crypto investors may quickly lose money by attempting complicated trading strategies based on YouTube influencer recommendations, as learning technical analysis, conditional orders, and crypto market operations takes time.

Investing in crypto is straightforward, without the need for a complex trading strategy. The dollar-cost averaging strategy can be used like traditional investing, eliminating the need to actively trade and constantly monitor crypto charts.

Order Errors

Crypto exchanges like Coinbase offer simple purchasing options, but their complicated order forms and platforms can confuse new users. Simple errors can lead to thousands of losses, as seen in a $300,000 scam where a premium NFT was sold for 0.75 Ether instead of 75 Ether.

To avoid costly mistakes, double-check orders or transfers before submitting them, as crypto transfers are irreversible unless the recipient is willing to return them, so it’s crucial to ensure this before submitting a transaction.

List of cryptocurrency scams and their potential risks

There are numerous cryptocurrencies available, but they should have a clear purpose, be part of a blockchain project solving a problem, and be actively maintained and updated, avoiding those without clear purpose.

Significant event in the cryptocurrency industry

Cryptocurrency failures are a topic of subjective discussion. Some believe that the thousands of projects not adopted are the major failures, while others point to events like Terra USD’s peg loss. Others argue that cryptocurrency has failed to fulfill its purpose of replacing traditional monetary systems and removing intermediaries, becoming more similar to gambling than a decentralized payment system.

Discusses the three main issues of crypto

Cryptocurrency is a product of blockchain technology, which faces three challenges: decentralization, scalability, and security. Developers must balance these properties to fully realize their potential, known as the blockchain trilemma. Increasing security may compromise decentralization and scalability, preventing blockchain from reaching its full potential for decentralized finance.

The Bottom Line

Investing in crypto can be overwhelming, but understanding blockchain and cryptocurrency investing and how they are targeted by thieves can reduce the risk of losing thousands of dollars or becoming a victim.