Crypto Investing Mistakes

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What Not to Do When Trading Cryptocurrency 
 
Crypto trading is gaining 
more popularity with each 
passing day. Despite 
cryptocurrency prices still 
being volatile, people are 
interested in investing.  
 
Thus, we see new people 
joining in every day. 
 
Cryptocurrency markets are 
exciting, but they are also 
hard to navigate.  
 
Most people try to avoid problematic situations but fail to do so. That 
is because of a lack of proper guidance.  
 
So, to guide you through the markets and cryptocurrency trading, 
here are a few tips on what not to do when trading crypto. 
 
Trying to be a Jack of All Trades 
 
When you sign up for an exchange, one of the first things you will 
notice is that it has a lot of different options to choose from. It is 
natural to want to buy and sell different coins, but some pitfalls come 
with doing this. 
 
Cryptocurrency markets are highly volatile—price changes can 
happen quickly. While this volatility can be advantageous for savvy 
traders, it can also work against those who lack the knowledge 
necessary to trade effectively and profitably. 
 
It is thus crucial that you focus on trading in the coins with which you 
have experience and feel comfortable. Do not try to spread yourself 
too thin by trading in all types of coins. It will only lead to greater risk 
and potential loss. 
 
Investing Too Much Money 
 
● The first thing that you need to do is learn what cryptocurrencies 
are and how they work. 
● You should get a basic understanding of the technologies 
involved and know how these currencies work. 
● It's vital to keep your money in a bank account since there are 
many risks associated with cryptocurrencies. 
● Cryptocurrencies are volatile, so do not invest more than you 
can afford to lose. 
● Make sure to do your research before investing in anything! 
 
Not Knowing the Tax Laws 
 
One of the most important things you need to know about trading 
cryptocurrencies is your tax obligations. It's incredibly easy to get 
caught off guard by this, but there are a few crucial strategies and 
considerations you should keep in mind when it comes to taxes on 
trading profits. 
 
First, your trading profits should be reported on your tax return as 
capital gains. Any money earned (or exchanged) from cryptocurrency 
trades is taxable regardless of whether it's cash or crypto assets. 
Your capital gains tax rate will depend on how long it's been since the 
trade took place and what type of currency was used in the trade.  
 
Crypto assets like bitcoin are taxed at a maximum rate while fiat 
currency such as dollars tend to face a lower rate of capital gains tax 
than cryptocurrency transactions because they've been around longer 
and can be verified to have original value. 
 
Additionally, any crypto asset that you sell will also be subject to 
capital gains tax if you haven't held onto them for more than one 
year. This can prove problematic. If you don't pay close attention to 
how many months over one year have passed or where you've kept 
your coins after selling them. With each passing month, it becomes 
easier for governments around the world to collect taxes from people 
who have forgotten about their crypto assets for the past 12 months. 
 
Thinking that Cryptocurrency is Free Money 
 
● Don’t think of cryptocurrency as “free money.” 
● Cryptocurrency is an asset, and the value of that asset can 
fluctuate wildly from day to day (or even moment to moment). 
● It is vital to remember that any government or bank does not 
guarantee cryptocurrency. 
 
Making Emotional Decisions in Trading 
 
As a rule of thumb, you should never make an investment decision 
based solely on emotion. You might be worried about a family 
member or friend and think you need extra money. You may feel 
motivated by greed to trade to earn more money than you need. 
Whatever the situation is, it is vital to focus on your trading strategy 
and avoid emotional decisions. 
 
When you're feeling calm, assess your long-term goals and consider 
strategies that will help you get there without risking too much in the 
short term. If a bad trade is unavoidable, do not let it ruin your plan 
or affect your next move; think objectively and make informed 
choices instead of emotionally-charged ones that are harder to 
backtrack from later. 
 
Assuming Cryptocurrency is Anonymous 
 
When you sit down to trade cryptocurrency, it's important not to 
assume that your activities are anonymous and untraceable. 
While cryptocurrencies like Bitcoin and Ethereum have a reputation 
for being decentralized and anonymous, it's not entirely true. 
Blockchains are public records, meaning anyone can have access to 
them. Courts in the U.S. can subpoena blockchain data if they believe 
there is evidence of illegal activity on it.  
Furthermore, IP addresses can help identify people who conduct 
crypto transactions online through exchanges or peer-to-peer 
networks. If you use an exchange that requires you to use your real 
name when registering your account, then any activity on the 
exchange could be traced back to you directly instead of just your 
public address.* 
 
Failing to Safeguard Your Devices 
One of the most important steps you can take is to ensure that all of 
your devices are secure. Cryptocurrency is extremely vulnerable to 
hacking and can be stolen in a matter of seconds if your security 
measures are lacking. 
 
A secure wallet lives offline and isn't connected to the internet at any 
time. This prevents hackers from attempting to access it through your 
network connection. 
 
A secure internet connection has antivirus software, protection 
against malware, and a firewall—as well as an up-to-date operating 
system, browser, and Internet security settings (such as downloading 
files only from trusted sites).  
 
Additionally, always use a trusted VPN service over public Wi-Fi so 
that no one can access any information sent through the open 
network. If you don’t have a VPN service provider yet, we recommend 
setting one up before engaging in cryptocurrency trading activities. 
 
A secure device is one that's locked down by two-factor 
authentication or biometric recognition (think: fingerprint or facial 
scanning) for anyone to gain access to it. It should also not be 
jailbroken or rooted—i.e., its operating system shouldn't have been 
modified outside of manufacturer specifications—since these 
processes can weaken its built-in security features. 
 
That is all for this post. Your crypto trading experience will be sublime 
if you can maintain these things while trading or buying 
cryptocurrency.