Cryptocurrency investment has been on the rise, especially after the price of Bitcoin witnessed a momentous hike in 2017. Although the price of Bitcoin has fallen since then, investors have shown a continued interest in it and in other cryptocurrencies. Investment in cryptocurrencies has its own benefits as much as they have their pitfalls. While investing in cryptocurrencies or bitcoin gambling, there are certain mistakes that the investor might possibly make.
Some of these mistakes are specific only to cryptocurrency owners while few others are applicable for investors and traders too. Sometimes, the most insignificant mistakes can make investors pay a heavy price and therefore we should examine the kind of mistakes to avoid.
Investors often make a common mistake of not backing up their wallets as access to the wallet can get disrupted if access to the private key is lost due to some reason. Sometimes, the device that holds the wallet can also get stolen or become inaccessible due to any physical damage or technical glitch. In such cases, backup is the only way to retrieve the funds of the wallet and a lack of it can lead to substantial loss and inconvenience for the investor.
Investors can make use of certain guidelines that are available on various websites with an explainer
“on how to restore a Bitcoin mobile phone wallet onto a fresh device using a mnemonic seed phrase, a guide on how to restore a hardware wallet using a seed phrase, and a list that contains ways in which one can store the wallet recovery phrase.”
It talks about errors that can occur when different forks are mixed and the ways these can be prevented. For instance, when BCH has been forked from BTC, few users had claimed that they had lost their BCH when they sent their coins to BTC addresses.
Mostly, the coins are kept in hot wallets that have been prone to security breaches. Crypto exchanges are another place where these coins are kept, but they are also vulnerable to attack by hackers as many exchanges are not sufficiently protected from such attacks. In case, if such an exchange faces an attack, coin holders would not be able to get back their entire fund.
The creditors at the crypto-exchange Mt.Gox have not yet got their money back despite repeated attempts. A recent hack has also occurred in Binance, in May last year, which caused a loss of 7000 BTC. BITPoint lost cryptocurrency close to $32 million in July, Coincheck also lost XEM worth approximately $523 million and several other exchanges have faced such hacking attacks like Bithumb.
A few other mistakes closely associated with an investment in cryptocurrency are market timing and a greater investment than one can afford to lose. When the price of cryptocurrencies is on the rise, investors become highly prone to these mistakes, while on the other hand, when the prices go down, some traders tend to sell off in order to reduce their losses.
Kyle Cox, a senior investment analyst at Invictus Capital, has said in this context,
“Of course, we often hear the success stories in the media; however, the many losses that have been incurred by participants seeking to time the market have been swept under the carpet.”
Therefore, investors can refer to the guide available in order to make careful investments which would bring them wise returns.