Safeguarding your portfolio is important. While crypto is a fast moving space, and there is a lot of money that can be made, do not start investing in crypto without knowing the basics. Spend your time in understanding as much as possible, before putting your first money. And once that is done, understand the ways you may lose your portfolio.
Listen, crypto is here to stay. So you need not make all your money in one day or a month or in one or two projects. I have seen many people getting rekt doing the same. Crypto is not a GET QUICK RICH scheme. There is a lot of opportunities out there and there will always be. Understand it first.
We should probably try to BUILD WEALTH WITH CRYPTO. Hence, it is important to minimise our potential mistakes and risks, so that long run, we can make a lot of money. Crypto is not a race, but a marathon.
Enough gyan! Let's get to the point.
Here, I have made a list of mistakes to avoid if you trading cryptocurrencies.
Diversifying into a pile of altcoins
Many a times, we FOMO. We see posts over Facebook, reddit and telegram groups and we see the price going up, and we find it very tempting to buy the coin. I am not blaming you. I know how difficult it is to see a good coin and not buy. With so many coins launching every day, within a span of 30 days, our portfolio could have more than 30 coins, before we even come to know about it. Always have a pack of not more than 7-8 coins. They will be easier to track and manage. Since crypto market mostly moves alike, it would not matter much whether you hold XRP or XML. When in bull run, both of them are expected to jump. We will follow up with an article on how to design your crypto portfolio in the coming weeks. Stay tuned.
Not taking profit
The coins we buy, we believe the price will be going up, and many a times they do. But we do not set any goal. We do not know when to sell. And we keep HOLDING them. The price keeps moving up for 7-10 days in a stretch and then comes a correction and the entire portfolio goes REKT. Back to zero in no time. And once it starts going down, we do not know what to do. We keep holding bags. Hence, even if we are diversifying into multiple coins, it is important to book profit and move to BTC. Remember, our end goal should be to have more BTC, ETH and USDT in our portfolio. Using our investments in other coins, our main motive is to grow the core coins - BTC, ETH and USDT.
Not having BTC in your portfolio
I can’t stretch this enough. Excluding, stable coins, you got to have more than 50 percent of your portfolio in BTC. We think since BTC is already trading around 58000 USD, looking at the price, we feel the coin won’t go up or move much. Hence we try to look for alt coins that may give better returns. Major portion of my portfolio is in ETH + BTC. Bitcoin has always surprised us and have been proving wrong. Just image Bitcoin alone hold around 50 percent of the market dominance. Rest all coins combined, it is 50 percent. Even institutional investors invest 80-90 percent of their portfolio in Bitcoin, and miniscule in other alts. Let's learn from them, shall we?
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Investing Blindly into SHIT COINS
Don’t gamble. Investing in cryptocurrencies is not gamble. You can make a lot of money, if you research properly. Have you seen the recent ‘’THE BIG BULL’’ movie? Abhishek’s brother gambled all his money by taking random advice and not doing his own research. Abhishek got a tip too, but he did his own research and then risked his money and earned profits. This is exactly how you should play the game. Even the advices we give on our Youtube channel or our website, I would still tell you to DYOR before investing. People put a lot of money in coins that some random person suggested on a channel, and then it tanks. You end up losing but can’t blame anyone, but yourself. Now, you may ask what are the things you need to know before investing in a coin. Refer to this video we did some times back.
Investing at Peak: FOMO and GREED
Timing is everything. Timing is important. Emotions and FOMO can REKT your portfolio. Suppose there is a hype in a coin. You wanted to buy into presale, or IDO, but you did not get an opportunity. You FOMOed on a listing date, and bought at 10-12X. What happens then? The FOMO dies, people move to other projects dumping their bags, and your portfolio is down by 50 percent in less than a day. You do not know what to do, now. If you had invested a little amount, then it would not matter much. If it is really a good coin, you can now DCA and add some more. Careful here. Do not DCA in a coin that is pure HYPE and no fundamentals.
DCA and importance of USDT
It is important to have stable coins in your portfolio. Stable coins can help you DCA your current portfolio. DCA is Dollar Cost Average. Let's have a look why it is important to have stable coins with an example. Suppose you hold BTC, ETH and BNB. And there is a correction and let’s say the market falls by 30 percent. You can now use your USDT funds and DCA. These three coins will be the last coins to die. Hence, you can DCA here. But let’s say you hold a coin that you bought because of the hype. Example: BTT or WINK. Dollar Cost averaging these coins does not make any sense to me. These coins can go down by 90 percent even in bull run. If you do not have USDT, then you will not be able to take benefits of these corrections. Apart from what you have invested, have 0.3 times your portfolio into USDT.
FUD: Fear Uncertainly and Doubt
FUD is not something uncommon in crypto. We have seen people selling their coins because of FEAR or Uncertainty, or DOUBTS and later finding that the project is real and the FUD was unnecessary. Media plays the perfect role of a villain here. For example, we have seen Indian media running stories of Bitcoin getting banned in India and investors may be jailed for holding or dealing in crypto. And Indians panicked and started selling. USDT rates fell as low as 62 INR per USD from 78 INR per USDT in less than 2 days. Later when there were no such laws or drafts from GOI, people started buying again, and USDT reached 83 INR. Most of the coins fell in Indian exchanges by 10-20 percent just because of baseless FUD. Stay away from FUD. Overcome your Fear and you will find crypto to be rewarding. Try to have as much knowledge about the project, the team, what they aim to achieve, how good they are with technology, marketing etc, before putting your money. And if you know that you have invested in a good company, it will be easier to deal with FUD. Don’t be the person selling USDT at 62 INR. Be among the ones who would buy it.
Yield Farming: Following the Trend
While Yield farming is good, but now knowing what impermanent loss is could hurt you badly. Just because, you heard someone saying that the APR is good, and you can make good amount of money from yield farming, you put a major portion of your portfolio in Yield farming, ignoring the risk of impermanent loss. There could be other risks like smart contracts failing, technical glitch, a hack, rugpull etc. Let me share my personal experience, Even though I did all my research and started farming Sushi in early September, I had to pay heavily and lost a good amount of money because of impermanent losses. Sushi is a great project right? But the lead developer could not resist his GREED and started dumping all his SUSHI. Price fell from 10 USD to below 1 USD. Later, FTX founder, revived SUSHI but the damage for me was already done. I also tried many other projects in the beginning, some got me returns, some not. What I am trying to say here is: Understand about impermanent loss, before investing. Analyses all the risks. Go slow. Put a little amount. Don’t let greed take over. Your portfolio will be gone before even you understand what happened. If you are yield farming, do not look for APR. Instead look for farming with stable coins, and pairs that have low Impermanent loss.
Not your keys, not your coins. Do not keep your crypto in any random exchange for a long time. Exchange may shut down, get hacked, and you will lose your portfolio. However, buying and holding in reputed exchange is better, though not full proof. Binance, FTX are some well known exchanges. If you would like to know the crypto exchanges we trust, read this article. Always do everything to secure your funds in an exchange. Have 2FA enabled and keep the backup key safe. If you are keeping your coins in blockchain wallet, or metamask, do not enter your private key or passphrase in a fishy site. We see a lot of FAKE AIRDROP posts, and they take you to a SCAM site, and when you enter your details, entire portfolio is withdrawn to scammer’s wallet before you even realising it. In the last 4 years, I have seen this happening with many of the community members.
Video: Mistakes to Avoid While Trading in Cryptocurrencies
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