9 Crypto Investing Mistakes And How To Avoid Them

Bitcoin image with a trading screen behind

The prospect of high returns can lure many to test their fortunes in the cryptocurrency sphere.

Yet, imagine if your success wasn’t solely reliant on chance, but instead on your commitment to enhance your skills as a crypto investor.

This article highlights some typical blunders that investors often face during their ventures. While it doesn’t promise 100x returns, it will undeniably aid you in steering through the exceptionally turbulent market and evade errors committed by others in the past.

Purchasing a Stock Solely Based on its Current Popularity

Certain stocks gain value because they’re the latest trend in investments, while others transform into meme stocks, gaining more from social media hype than solid investment foundations.

Putting your money into a stock merely because it’s popular isn’t a wise tactic. There’s a high risk of monetary loss if the buzz around the stock dies down. It’s crucial to do thorough research when considering a stock and identify factors that truly validate it as a worthwhile investment.

Hiring a Robo Advisor

Robo-advisors are technologically driven platforms that utilise automated algorithms to facilitate investment to diminish or remove the need for human interaction. These platforms offer a convenient app through which users can invest. 

Upon setting up an account, users provide specific details such as age, income bracket, risk acceptance, and investment objectives. The robo-advisor then curates an investment portfolio tailored to these specifications, generally comprising a selection of economical exchange-traded funds. Some notable robo-advisors include:

  • Wealthfront
  • Wealthsimple
  • Acorns
  • Betterment

If you’re a beginner investor, a robo-advisor could be practical. However, if you’re an experienced investor, a robo-advisor may not be necessary for you.

Failing to Diversify Your Portfolio

To mitigate risk and optimise earnings, it’s advisable to diversify your investments amongst various cryptocurrencies and other investment types. This approach is more beneficial than putting all your money into a single crypto, as it’s unlikely that all cryptos will plummet simultaneously. You can devise a plan that aligns with your trading habits, risk appetite, and objectives.

Broadly speaking, it’s wise to have a mix of the biggest, most stable cryptos like Bitcoin along with a few mid-sized to small ones like Cardano, based on market capitalization. If you’re new to crypto investing, following an 80/20 ratio of large-cap to mid-to-small-cap is a sound guideline. This tactic also helps avert any liquidity problems with your portfolio. Adhering to this principle enables you to reap substantial profits from the Cardano price upswing while also ensuring a significant portion of your investments are in more secure coins.

Being Scammed 

The cryptocurrency market, being a relatively new form of asset, is unfortunately teeming with fraudsters. In fact, the Federal Trade Commission (FTC) has reported that crypto assets nearing a value of $700 million were robbed in 2021 alone. These malefactors use advanced phishing strategies to infiltrate your cryptocurrency wallet and persuade you to transfer your funds to their wallets.

Crypto scams can occur through various platforms like emails or messaging applications, with the fraudsters deceitfully pretending to work for your benefit. Your wallets could be put at risk simply by connecting them to an application and authorising it to access funds. Even though this is a standard procedure for many crypto apps, it’s also a method scammers exploit to empty your crypto wallet.

To steer clear of these scams, avoid connecting your online wallet to any unverified application, and store the majority of your crypto assets in offline hardware wallets. Never disclose your wallet password, seed phrase, or private keys.

Investing Funds You Cannot Lose

The principle, “Only risk what you can tolerate losing,” is commonly referred to as the cornerstone of investment strategy. This axiom resonates profoundly in the volatile world of cryptocurrency. 

Numerous initial payment cryptocurrencies have faded into the background. In the thrilling realm of decentralised finance, while some cryptos may multiply a thousand times in value, others might end up totally disregarded. Along with the enormous potential for profit comes an equally intense risk of loss.

The investment journey should always begin with the end in mind. Consider your financial objectives first (e.g., owning a home in five years, making a substantial contribution in ten years, or having a large and diverse portfolio by retirement), then determine the type of asset allocation that will provide the best odds of fulfilling these goals.

Accepting All You Read as Truth

In cryptocurrency, it’s crucial to recognise that not all counsel is of equal value. Novice traders often fall into the trap of heeding tips and advice from unknown individuals encountered on social media platforms.

The internet is awash with advice on crypto trading, much of which is misleading hype or, in certain instances, outright deception.

Prominent news outlets are also known for disseminating alarmingly negative news. However, one should be aware that many of these articles and sensationalised headlines are designed solely to provoke clicks, controversy, and propagate FUD (fear, uncertainty, and doubt).

If you plan on taking advice from someone, ensure they possess relevant expertise and have a substantial following or a solid reputation to substantiate their claims.

Having Difficulty Understanding Your Asset Distribution

Generally, creating a financial portfolio and then ignoring it is not advisable. Market dynamics or approaching retirement age may necessitate adjustments to your investment composition.

If you find this task daunting, think about consulting a financial advisor. They can provide guidance on how to tailor your assets to suit specific requirements.

Over-diversifying Your Investments

Without proper caution, diversification can inadvertently turn into over-diversification. Over-diversification is a frequent error made by inexperienced investors and involves the allocation of investments across several asset classes or funds within the same sector or category. An example of this would be possessing two large-cap mutual funds or exchange-traded funds with a similar makeup in your portfolio, which qualifies as over-diversification. 

Panic Selling 

Stock investments seldom promise a steady upward trajectory. Even a robust company can face a disappointing earnings report or be impacted by an overall downturn in the U.S. economy. Seeing your investments depreciate can be unnerving, tempting you to exit at the earliest.

However, selling out of fear only solidifies your losses and eliminates any potential for profit if the stock bounces back and begins to climb again. It’s crucial to remain calm when considering selling shares. Make sure your decisions to sell are justified and not driven by panic.


Undoubtedly, investing is one of the most effective methods for wealth accumulation. You don’t require expert knowledge or vast sums of money to begin your investment journey. Every investor, whether a seasoned professional or a beginner, is prone to making errors. However, repeatedly committing the same investment blunders can inevitably erode your returns.

About author

Poppy loves personal finance almost as much as she loves her two cats, Tif and Taz.
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