Currently, the cryptocurrency market is at an unprecedented level of heat, seemingly filled with opportunities for wealth. However, behind these seemingly fortune-changing opportunities lie hidden dangers, and with a small mistake, one could lose everything overnight. These are not just theoretical musings, but valuable experiences I have summarized from my own painful lessons.
As a large number of inexperienced newcomers flood into the cryptocurrency market, mastering these experiences has become crucial. Today, I will analyze the five most serious mistakes beginners make and share corresponding avoidance methods. If you read to the end, I will also reveal why these experiences are particularly important in the current market dominated by Federal Reserve Chairman Jerome Powell.
Mistake one: investing beyond your means
"Only invest money you can afford to lose" may sound like a cliché, but it’s a common pitfall for beginners and the root cause of many people's troubles. Many newcomers disregard this advice, but the cryptocurrency market is volatile and won't give you time to react and adjust. Waking up to find your account balance halved is not uncommon. Therefore, before investing, ask yourself: how much can you afford to lose?
Practical suggestions:
1. Determine the amount you plan to invest;
2. Halve the amount;
3. If the amount after halving still makes you anxious, it means you are planning to invest too much.
Investing money you cannot afford to lose is essentially not investing but gambling. In the cryptocurrency market, this behavior is akin to playing with fire. Before stepping into cryptocurrency investment, ensure you have a basic safety net, reserving at least three months' worth of living expenses in a secure account separate from the crypto market. While this may sound mundane, it is the only way to ensure financial security during market downturns. I have seen too many people lose their life savings due to the collapse of platforms like FTX, and that money may never be recovered.
Remember: before investing in cryptocurrency, ensure your emergency funds are secure.
Mistake two: blindly following influencer recommendations
Influencers in the cryptocurrency field are everywhere; whether on Twitter, YouTube, or TikTok, there are always claims of discovering 'three altcoins that can make you rich' or 'potential coins that are about to surge next week.' What is less known is that most of these influencers are paid to promote projects, and many of the coins they recommend they themselves do not invest in. Worse still, many of these promoted projects lack even a real product; investors are just paying for the influencers' marketing expenses.
Solution: Before investing, consider following my '3T principle':
• Technology: What real problem does the project solve? Is there genuine market demand for it, or is it just a product of following trends?
• Tokenomics: What is the total supply of tokens? Who controls it? Is the distribution mechanism reasonable? If the token distribution is overly concentrated, the project's risk is extremely high.
• Team: Who are the team members behind the project? What past successes do they have? Is the team transparent and trustworthy?
Take Logan Paul's CryptoZoo as an example; it has no actual product, lacks real value, and its tokenomics is riddled with flaws, making failure a foregone conclusion. Therefore, before investing in any project, be sure to conduct thorough research, think independently, and do not blindly trust others’ hype.
Mistake three: chasing after rising prices and selling in panic (driven by FOMO emotions)
This is one of the painful traps beginners easily fall into. Everyone understands the logic, but once emotions take over, it’s easy to lose rationality. Take the 2021 Dogecoin craze as an example: many people, fearing they would miss out (FOMO), jumped in when the price rose to 70 cents, fantasizing it would reach $1, only to face a crash instead.
Solution: When you impulsively want to buy coins out of fear of missing out, you must stop immediately; this is a dangerous signal. If a coin has already surged 500%, it means you've already missed the best investment opportunity; buying now is merely chasing high prices in an attempt to gamble. More often than not, this type of investment wrapped in hype will only turn your capital into bubbles after the excitement fades.
Practical advice: When you feel the urge to chase rising prices, take a moment to calm down and wait for the market to return to rationality. The cryptocurrency market has cycles, and opportunities will arise again. Blindly chasing hype will only make you a victim.
Mistake four: investing heavily in new coins without products
New coins are often full of temptation; fresh and exciting, they lead people to fantasize, 'Could this be the next big hit?' But reality is cruel: like startups, 90% of new coins ultimately fail. No one would invest their life savings in a startup without a product, revenue, or successful track record, and investing in cryptocurrencies is the same.
A reliable cryptocurrency project should at least have a minimum viable product (MVP), which is a tangible outcome that can be used right now, rather than just a concept or a white paper. Without a real product, investment is merely an unrealistic dream, and dreams cannot bring actual returns.
Practical advice: Do not blindly chase the so-called 'next big hit' unless the project has a tangible, usable product. Attractive prices are just the surface; product quality and project execution are the key factors determining investment value. Stick to choosing coins that can genuinely solve problems and are supported by real products.
Mistake five: using leverage (extremely risky operation)
Leverage sounds tempting, 'double your position, double your profits,' but people often overlook its other side: leverage can also magnify losses. In 2022, Bitcoin's price dropped over 50%; if using 2:1 leverage, investors would not only lose 50% but could even lose everything. Even slight price fluctuations can lead to forced liquidation of accounts, resulting in not only financial loss but also immense psychological pressure; no one wants to experience the despair of watching their account balance plummet.
Practical advice: Unless you are an experienced professional investor with a deep understanding of leverage and its risks, stay away from leveraged trading. Protecting your principal is the primary principle of investing; as long as your principal remains, there is always a chance for a comeback. The market will fluctuate, but lost principal is hard to recover.
