With increased public awareness of Bitcoin and altcoins, many new faces have recently entered the crypto scene for the first time. Of course, new traders will make many bad decisions, and for the most part, they will improve with time and experience. However, a number of these mistakes are common, and can easily be identified and avoided.
IGNORING MARKET CAP
Ignoring market capitalization is a pretty common issue that seems to persist almost universally among new traders. The mistake is that these traders look at the price of a coin, not its market cap, to decide whether or not to buy it. They look at coins like Ripple and Cardano as “cheap” and undervalued investments because they can buy so many units for so little. The mindset is that if Bitcoin could rise from such small amounts to where it is now, then surely these other coins could show returns of at least a fraction of those of Bitcoin.
Of course, this is an inherently illogical way to approach investing. While the price per coin is low, there are tens of billions of coins in circulation. These coins are not cheap or undervalued – they are already worth billions of dollars! The alternative is simply to assess coins by their market cap, not price, to determine what offers a strong buy. Look for coins with lower market caps than its competitors.
THE BEST TRADERS ARE FULL-TIME?
There is a misconception among both new traders and some more experienced ones that the best traders are interacting with crypto markets all day, every day. Beyond this, they think that to compete for optimal returns, they, too, must trade full-time. This is simply not the case. While some traders (mostly day traders) do spend dozens of hours per week, and some are wildly profitable, this is not the norm or even the best approach.
In reality, the most profitable traders are often the ones who research small projects and find ones with huge potential, buy in, and wait. With practice, it only takes a couple of hours to find a truly stellar project. Spending a handful of hours each week researching coins will equip you with enough knowledge to create a portfolio of potentially massive winners. From there, it’s a matter of doing less, not more. Have patience, and exponential profits can be enjoyed.
X COIN IS BETTER THAN BITCOIN
In this day and age, most projects are technologically superior to Bitcoin. Asserting that a particular coin will inevitably moon because its specs are better than Bitcoin’s is simply naive. Of the more than 1,300 cryptocurrencies listed on CoinMarketCap, hundreds can do more than Bitcoin, and can do what Bitcoin does better, faster, and cheaper. The fact of the matter is that people do not buy Bitcoin for its tech. If they did, then Litecoin, Vertcoin, even Dogecoin would be worth much more than BTC.
To accurately determine if a coin’s technology is undervalued, compare the value of the coin to its competitors or similar coins. From there, compare the respective hardware. Does a coin have a lower market cap than its competition, despite having stronger tech behind it? Then it is undervalued. If this isn’t the case, then perhaps it’s not.
While these are a few examples of common mistakes often made by inexperienced traders, they only represent a segment of the many misconceptions out there. To improve oneself as a trader, the best strategy is to remember advice as it is given, and simply learn from one’s experiences. No trade is a bad trade when there is a takeaway from the outcome. Learn from mistakes, and a method to all this madness can be found.
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