Cryptocurrencies are an emerging industry that has seen rapid growth in recent times. Due to the youth of the industry and the uncertainty surrounding the future of online currencies, the cryptocurrency market can sometimes be volatile.
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Many people have jumped on the cryptocurrency bandwagon and chosen to invest because it is trendy and flashy, and this leads to some uninformed investors losing money on their investments.
According to Forbes magazine, only 13% of surveyed cryptocurrency investors have said they have broken even. Furthermore, only 28% of investors claim to have made a profit on their investments.
Only a small number of investors profit from their cryptocurrency stocks. This begs the question: What mistakes are preventing cryptocurrency investors from getting rich?
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1. Invest emotionally
One problem facing cryptocurrencies as a new and often sensational investment opportunity is their overvaluation.
“One of the main challenges is the psychological factor by which the investor has an affinity towards investments,” said Daniel Krupka, research director at Coin Bureau, a website that specializes in cryptocurrency trends and investment advice.
Novice cryptocurrency investors can invest when prices are rising and certain coins are trending.
“This is because when trading, emotions such as fear, greed and overconfidence take over and this causes investors to not act rationally,” Krupka said.
Factors such as celebrity endorsements or news coverage can lead investors to invest emotionally. They may lose money if they make decisions based on their current emotions, rather than changing their long-term perspective.
2. Ignoring market trends
The decision to deliberately ignore cryptocurrency market trends is what leads many investors to ruin. Often, cryptocurrency investors become obsessed with their own expectations and goals.
“The market does not take personal goals into account and works according to its own logic,” Krupka said. “Recognizing these signals is important for successful investing, but technical analysis is necessary to understand them well.”
When one focuses too much on personal goals, it is difficult to see the bigger picture and utilize external factors, such as real-time market updates and trends, that can help guide investors to make smart decisions.
By staying up to date on market trends, cryptocurrency investors are decreasing their chances of making costly mistakes.
3. There is not enough research
With our current ability to communicate through social media sites like Reddit and YouTube, it is easy for misinformation to spread and outdated investment strategies to circulate.
Some cryptocurrency investors take the words of influencers or celebrities who endorse them as absolute truth without doing their own research.
“Cryptocurrency investing is about learning and planning to achieve the best results,” Krupka said. “In order to understand and predict market trends, investors must understand the different strategies of market analysis.”
As with cryptocurrencies, many people want to ride the wave without personally researching which investments can be profitable in the long run. By doing their due diligence, cryptocurrency investors can make informed investment decisions and potentially become rich.
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This article originally appeared on GOBankingRates.com: I’m a Cryptocurrency Expert: 3 Biggest Mistakes Preventing Cryptocurrency Investors from Getting Rich
