To new encryption investors: These 5 serious mistakes must be avoided.

Author: Abhaya Anil Translated by: Baihua Blockchain

Currently, the cryptocurrency boom is unprecedented, and opportunities are everywhere. But behind the potentially life-changing wealth opportunities, if you are not careful, you could lose everything overnight. I'm not saying this from a textbook, but rather from the mistakes I've made in my own experience.

As a large number of newcomers flood into the cryptocurrency market—many of whom have never even been exposed to investing—these lessons become particularly important. Today, we will discuss the five most serious mistakes beginners commonly make ( and how to avoid them ). If you read to the end, I will also share why these lessons are especially important given the current situation with Federal Reserve Chairman Jerome Powell (Jerome Powell) controlling the market.

Error 1: Invest funds that you cannot afford to lose.

This statement sounds like a cliché, but it is the most common mistake and the trap that gets most people into trouble. You often hear: "Only invest what you can afford to lose." But for many beginners, this is just empty talk.

The cryptocurrency market changes rapidly, and it won't wait for you to adjust. Sometimes, you wake up and your account might have been halved. So, ask yourself: how much are you willing to lose?

Practical exercise:

• Take out the amount you plan to invest.
• Halve this amount.
• If this number makes you uneasy, you have invested too much.
• If the money you invest is money you cannot afford to lose, you are not investing; you are gambling. In the cryptocurrency market, this can be fatal.

Before entering cryptocurrency investments, make sure your basic safety net is in place. This means saving at least three months' worth of living expenses in a secure account that is not related to the crypto market. This is boring and not flashy, but it is the only way to ensure your financial safety during market downturns.

I have seen many people lose their life savings on platforms like FTX that have collapsed, and many of them may never get that money back.

Bottom line: Before dealing with cryptocurrency, make sure your emergency funds are secure.

Error 2: Blindly following internet celebrities

Cryptocurrency influencers are everywhere. Whether on Twitter, YouTube, or TikTok, you will always see someone claiming they have discovered the next big hit, such as "the three altcoins that can make you rich" or "the hidden gem that will skyrocket next week!" But what most people don't realize is that these influencers are often paid to promote these projects.

Do you really think they are bullish on these coins? Think again. Many people were paid between $10,000 and $100,000 to create these videos, and in reality, they haven't invested in these projects at all. The sad reality is that many of the projects they are promoting don't even have actual products. Essentially, you are footing the bill for someone else's marketing.

Solution: Follow my "3T Principle" before investing:

• 技术 (Technology): What problem does this project solve? Is there a real demand? Is it solving a practical problem, or is it just another imitator?
• Tokenomics (: How many Tokens are there in total? Who controls them? What is the distribution method? If the distribution is too centralized, the project may be at risk.
• Team )Team(: Who is behind the project? What have they done before? Are they transparent and trustworthy?

Think about Logan Paul's CryptoZoo. No product, no actual value, and the tokenomics are quite questionable, destined to fail.

Before investing in any project, do thorough research and do your own homework. Never trust others' hype.

) Error 3: Buying high and selling low ### FOMO emotions (

This is one of the most painful mistakes for beginners. It is theoretically easy to understand, but when emotions take over, it's easy to fall into the trap.

Look at the Dogecoin ) craze in 2021. People rushed in at 70 cents out of FOMO(, fearing they would miss out ), thinking Dogecoin would rise to 1 dollar. As a result, it crashed.

Solution: When you want to buy because you fear missing out, this is your red warning signal, pause for a moment.

The reasons are as follows: If a coin has already risen by 500%, you are no longer an early investor, but rather late. You are chasing a coin that has been hyped up, hoping for a stroke of luck. But more often than not, you are just caught up in the hype, and when the frenzy subsides, your investment will crash as well.

Practical advice: If you feel like you are chasing a big bullish candle, take a step back and wait for the market to calm down. The market is cyclical, and there will always be new opportunities. But if you are chasing speculation, you are likely to lose money.

( Error 4: Investing in a brand new cryptocurrency with no product.

The appeal of new coins is very strong. They are fresh and exciting, and everyone loves to fantasize, "What if this is the next big hit?" But I want to tell you: most new coins are not.

New coins are like startups, 90% of them fail. You don't put your life savings into a startup with no product, no revenue, no track record, and the same goes for cryptocurrency.

A reliable project should at least have a minimum viable product )MVP###, which is something that can be used today, not just an idea or a white paper.

Why it matters: Without a product, you are merely investing in a dream. And dreams do not yield returns.

Practical advice: Unless a project already has a real product, do not chase after the "next big hit." Prices may be enticing, but the product and execution are key. Stick to investing in currencies that have real products or can truly solve problems.

( Error 5: Using leverage ) disastrous formula ###

Leverage sounds great: "Double your position, maximize your profits!" But what they don't tell you is that leverage can also double - or even triple - your losses.

In 2022, Bitcoin fell by more than 50%. If you used 2:1 leverage, you didn't just lose 50%, but rather you were completely wiped out. Leverage amplifies losses, and there's nothing more dangerous than that.

When you use leverage, a slight drop in price can lead to your account being wiped out. This not only hurts your wallet but also affects your mental health. Watching your account balance fall like a free fall is a feeling that no one wants to experience.

Practical advice: Unless you are a professional investor who clearly understands leverage and its risks, completely avoid using leverage. Protect your principal. As long as you can stay in the market, there will always be more opportunities. The market will come back, but your principal may not.