There are numerous ways investors could lose a lot of money in the crypto market.
With 2023 off to a strong start, cryptocurrency investments will once again be popular with many investors. The difficult year 2022, in which prices almost only fell, is over. It also means that new investors could enter the market.
The crypto market is considered wild and volatile. Many investors have made extremely high profits, while others have lost a lot of money. Prices keep experiencing strong gains or losses in a short time. In addition to volatility, it is paramount to address the fact that cryptocurrencies are barely regulated.
A total loss of invested money has happened to quite a few investors in recent years. On top of that, cryptocurrencies have always been stolen in various ways, or investors have lost the coins. Therefore, investors could lose a lot of money in the crypto market in many ways.
Below are four serious mistakes that a crypto investor can make.
Buying from Dubious Sellers
To buy cryptocurrency, investors must either buy it peer-to-peer, or through a central provider. Peer-to-peer has its own risks and is often more complicated. Most investors buy through central providers, the crypto exchanges.
It would be a big mistake to buy from dubious suppliers, as investors may be victims of fraud, or, in another case scenario, the provider may have security gaps. The trusted providers in the market are Coinbase, Binance or Bitfinex.
When choosing which trading platform to trade with, it will be important for investors to do their own research before trusting their money with an unknown company.
Neglecting Storage Security
While there are certain reputable cryptocurrency exchanges, the FTX bankruptcy highlighted the weaknesses of central cryptocurrency storage on cryptocurrency exchanges. There have been hacks and bankruptcies in the past, in which investors have lost large sums of money. Therefore, it is necessary to take care of the secure storage of cryptocurrencies. In this sense, hardware wallets are the most secure storage method.
Giving the Keys to Someone Else
“Not your keys, not your coins!” is a well-known saying when it comes to storing one’s cryptocurrencies. Therefore, the investors themselves must keep the cryptocurrencies in a wallet. However, one of the biggest mistakes is giving one’s keys to a stranger or, even worse, to the internet. Wallet providers will neither ask for keys, nor for recovery phrases.
Losing the Keys
The last and probably the worst mistake is probably losing the keys. This can happen if the password is forgotten, or a hardware wallet is lost. If the recovery phrase is then lost, the cryptocurrencies are gone forever. So it is essential to take good care of the keys.
To conclude. when planning to enter the world of cryptocurrencies, there are doubts or distrust about whether or not it is worth investing in them. This happens especially to beginners, as they may not have the necessary knowledge about this relatively new market that, obviously is not risk-free.
By Audy Castaneda
