Four things to avoid when investing in crypto in 2023
Cryptocurrency has been one of the highest-profile forms of investment to emerge over the last few years, and many people around the world are getting involved with it, buying and selling hundreds of different currencies, from the well-known to the obscure.
If you are looking for the best crypto South Africa or Nigeria can offer, it is important to be aware of the risks involved. Cryptocurrencies are notoriously volatile and hard to predict, and many investors have lost money due to the unpredictable nature of the crypto world.
If you are considering investing in cryptocurrencies in 2023, it is vital to do your research about every aspect of your investment and try to avoid the pitfalls. Here are four of the most common crypto investing mistakes to avoid in 2023:
Failure to plan
Any form of investment should involve planning and research, and for a volatile and potentially risky investment such as cryptocurrency, that requirement is essential.
Before you buy any currency, you should be asking yourself what your strategy is. Are you planning to hold the currency for the long term? Is this a short-term trade?
If you’re investing for the long term, then you need to be prepared to ride out sudden falls in the value of the currency, as these are almost inevitable with such a volatile investment. If you are hoping to trade in the short term, you need to have your exit points from the market outlined, and have a contingency plan if things go wrong.
Above all, you need to learn all that you can about the currency you are investing in, the creators of that currency, their goals, and what security they can offer in terms of cash reserves to protect the currency if it suddenly loses value.
Emotion has no place in making an investment, and in the case of cryptocurrency, it can be positively harmful. For one thing, there are many people out there hoping to persuade you to invest in one currency or another, and some of them are good at what they do. They know how to push the right buttons and exploit other people’s weak points, particularly the fear of missing out.
Some of these people will even have successful YouTube channels. Ignore them.
If a currency has already started to skyrocket, it is too late to get involved. Don’t chase popular currencies or listen to stories of how people became instantly wealthy—you will likely end up buying currency at the top of the market, only to watch it devalue. Make sure that all of your crypto investments are made on the basis of cool calculations.
Look out for scams
Although the Nigerian SEC has set up a licensing system for cryptocurrency operators, and there are other efforts under way to regulate cryptocurrency, most notably in South Africa and the US, the global crypto industry remains largely unregulated. This means that as an investor, you are not protected from scams, fakes, or operators who can simply take your cash and run.
Before you part with a single naira or rand, make sure that you know everything there is to know about the platform you are buying through, and where available, seek advice from the body that regulates crypto in your territory.
It can also be a good idea to check out what other crypto investors are saying about a platform or currency, and do a wide search for news articles related to the operators.
Reckless money management
Whether you are buying stocks, playing the lottery, or betting on a sporting event, any activity that involves risking money in the hope of a return carries the same risk: you may lose all of your money and have nothing to show for it.
Most people don’t go into crypto investing planning to lose money, and that’s why so many crypto investors end up suffering huge losses. Crypto investors are more prone to bad investments than those who deal in stocks, because crypto is often sold as a futuristic technology to young people who lack experience in investing.
In particular, many people fall foul of the number one rule of investment: never use money that you cannot afford to lose. Allowing your household income to become tangled with your investments is a sure sign of trouble ahead. You should only ever invest using spare money that you could, in theory, afford to give away.
If you don’t have enough spare capital, then wait until you do, rather than being reckless with your essential income. That way, you will be investing from a firm foundation.