Crypto investments are inherently risky. At some point in the course of your journey, you will undoubtedly lose (part) of your investment. You could be contemplating investing, or you might actually be deep into the game. Whichever the case, losing your investment can be traumatic to the extent that you might want to avoid crypto altogether.
You could lose your investment out of a lack of understanding the trade, or someone just fleeced you. After all, crypto is not for everyone. But wait! Even seasoned investors once in a while incur losses. The question is, are there warning signs you can watch out for and jump out before it’s too late or wait until the time is ripe?
This article looks at signs that tell you to avoid that crypto investment or abandon it if you had already taken the journey.
#1 You’re not really enthusiastic about crypto
Many a time, people rush into crypto because they hear it is lucrative. There is no doubt that investors have made big cash out of crypto investments. But, if you are only interested in multiplying your money, you might find yourself making very unwise decisions. Additionally, if you are not enthusiastic about crypto, chances are you will struggle to understand market dynamics and how to take advantage of the seasons.
#2 You don’t understand the technology
Almost anyone can buy and sell cryptocurrency. In essence, you do not need to be a geek to invest in cryptocurrency. But there is one little rule in investment: you should invest in a sector you understand – this is controversial, but think of it this way: Would you rather bid your money on a project you have no idea of or one in which you’re a professional?
A cryptocurrency is a form of technology, and if you are not good at tech, don’t be surprised if you find yourself struggling to catch up with technological changes that directly affect your investment. You should consider this your cue to take a break from crypto investment until you are familiar with the technology.
#3 You are not updated with news and events
Events in the cryptocurrency space unravel so fast that, as an investor, you cannot afford to be outdated. Due to the speculative nature of these markets, news and events have a major influence on prices. Thus, if you hardly follow the news, you are likely to miss out on your cues to exit a market. Of course, you also need to be able to interpret the news – they sure won’t announce that it is time to exit.
#4 You are not patient
This is not just for crypto. For any sort of investment, you need to be patient, especially to give you time to think twice. Hype, FOMO, and peer pressure can rush you into investing even when you have not thoroughly analyzed an investment.
There is no substitute for due diligence. As such, if you are not patient enough to double-check that enticing crypto investment proposal, you are already a potential victim of loss. Regardless of the kind of crypto investment in question – an ICO, DAICO, trading, staking…you name it – time and patience are absolutely necessary inputs for the avoidance of unnecessary losses. And if you lack these elements, it is a sign that you are unlikely to succeed in crypto investment.
#5 You easily buy into the buzz
Arguably, the hype is the biggest commodity traded in the money markets. It’s even bigger in crypto trading, which has been branded as revolutionary, more advanced, and cut out for the discerning investor.
The hype has misled many into thinking that certain investments are paying off handsomely, only to realize later that it’s not all true. A good investment must be well thought out – the timelines, the bid, the risks, and all. Some people just can’t resist the hype. Should you be one of them, your crypto investments are at a greater risk of going down.
#6 You are a panic seller
Crypto is, by nature, highly volatile. Sometimes, a cryptocurrency can gain/lose 20% but then correct the trend within hours. Such temporary spikes are a norm in the markets. If you have a tendency to panic-sell, the chances are that you will sell your assets when the prices have temporarily crashed, and you will have lost the difference. It is best to differentiate normal fluctuations from sustained trends.
#7 You’re only investing in high-risk portfolios
In the money markets, high risks are associated with high returns, and the converse is true. There are people who appear to specialize in taking high-risk investments only. You could say one’s investment strategy is their choice, but to be honest, these are the kind of investments that, when they go down, fall hard.
If you find yourself choosing high-risk portfolios all the time, it is best to re-evaluate your strategy. With due respect to diverse investment styles, a good portfolio should balance both high and low-risk investments.
#8 You don’t like the idea of losing money
Not that anyone does, but investing in crypto is a two-way traffic – you can gain, you can lose. When investing in crypto, you should come to terms with the possibility of losing money. It is generally important to be open-minded to avoid panic-selling or making some other rash decision. If you find yourself struggling to accept the loss of your investment, check again that you are not vulnerable to making hasty decisions to ‘avoid further loss’ as this could be counterproductive and lead to even further losses.
#9 You have no idea what is going on
This sounds related to being updated and understanding tech, but it goes even further. Crypto investment is diverse. You will hear of ICOs, staking, crypto loans, and other jargon not found in regular conversations. You can imagine what it would be like investing in an ICO and receiving a bunch of useless tokens just because there was an offer for ‘early-bird investors.’ The thing is, you should familiarize yourself with what is what, so you know exactly what you are engaging in.
Investing in crypto is a risky journey. Despite the fact that you can reap big profits from the venture, the possibility of loss always exists. As some of these losses are avoidable, you should watch out for the signs above to help you know when and if to take the risk. Anyway, there is no right or wrong investment approach – take this only as a guideline to avoid unnecessary losses to your crypto investments.