Common mistakes to avoid when investing in crypto
With Bitcoin dropped briefly to $6,500 last month and moving in a narrow range, we haven’t seen a substantial recovery in bitcoin at the moment. Known for its extreme volatility, crypto prices can vigorously fluctuate within a short period of time.
Hate to tiptoe around the volatile market? Here are some of the risks you definitely don’t want to take when investing in crypto.
1. Not all crypto are born equal
There might be thousands of crypto tokens on the market (to be precise — more than 1,600 and still growing), apart from the “popular” ones like Bitcoin, Ethereum, or Litecoin (probably these are the only ones people are familiar with as well), the risk of exit does exist for altcoins.
The entrance to the crypto market might be wide and you can easily get hold of a new technology, but this has also contributed to an easy entrance point for casual traders that are not familiar with the volatility of the crypto market. In the unfortunate event that the market is going down, this lowered barrier to entry makes it hard for them to exit, not to mention that most traders are unwilling to take a downward-going altcoin.
Tip: Do not invest just because of the hype. Protect yourself with the necessary knowledge to make informed decisions.
2. Betting all your money on random ICOs
Dozens of new crypto and ICOs launch every month — looks like excellent opportunities to get rich…or not.
With the technology developing at full speed, we see new (or fraudulent) ICOs all the time in the market, even experienced investors may find it hard to keep up with the terminology behind those coins, plus there’s really no guarantee that they will be legitimate or successful.
For investors looking to make the most out of ICOs, thorough research is the top priority before you actually bet money on it. If you can’t find any information about a particular developer or founder online, chances are they’re not real persons; or you could read the whitepaper to see if it invests resources to build the project. Companies that don’t offer whitepaper should be avoided at all costs, as legitimate companies would make the system itself and the progress of the token sale easy for potential investors to view.
Tip: If a company makes it difficult for anyone to chart the progress of its ICO — a major red flag!
3. Beware of market manipulations
One of the biggest dangers for new crypto traders is market manipulation. Despite an industry-wide effort in striding towards legitimacy and integrity, the crypto market still remains vulnerable and unregulated for some marketplaces where risk management and anti-manipulation work are insufficient, creating a favorable environment for scammers to manipulate it through pump and dump.
A pump and dump is when a group of investors colludes to endorse an asset through a series of high-volume purchases. They trigger a dramatic increase in price and claim that it promises huge returns to attract casual investors that are unaware of the manipulation. Scammers tend to work on projects with a smaller market cap as it is easier to control, or at exchanges with poor security measures. So next time when you see supply and demand shifting unnaturally, beware of FOMO and do your own research before jumping in.
Tip: Always opt for a reliable, top-tier exchange with a sophisticated risk management system. Keep in mind that if something is too good to be true, it probably is. It’s unlikely that you can make a quick investment return without doing any research.
4. When you FOMO or panic sell
Emotional trading, or FOMO, is another common landmine you want to avoid. Usually, FOMO-driven positions result in the market moving in the exact opposite direction. Don’t bet all your money on an asset just because you heard some investors said that it has the potential to go on a big run. It’s true that crypto is still in its infancy stage with great potential for exponential growth, yet not all crypto are born equal. While FOMO does drive prices up, it is also likely to lead to a significant pullback once the FOMO passes.
What about panic sell? Crypto go through cycles in the volatile market and they don’t work the same way, they take different timeframe to bounce back from the bottom. So don’t sell in a rush, control your emotions and talk to expert traders for advice instead.
Tip: Base your decisions on logic, not emotions or deceiving headlines. Remember: Ignore the noise, always analyze facts.
Managing market risks — an easy way
In a market full of uncertainty, managing risks is obviously crucial for any traders. To take advantage of the market movements, you can strategically hedge the risks through different instruments like derivatives.
Options are one of the most important and widely-used speculation tools in the traditional markets, and it is equally effective for us crypto traders in hedging risks, especially for those who have large portfolios. They can protect your assets against a downside move, or allow you to profit on changes in the underlying asset value instead of the cost of your position.
OKEx Options to launch on Dec 27, 2019
As the demand for options trading grows in the crypto market, we have developed an advanced trading system from the ground up — the OKEx Options. It represents a complete upgrade to the platform’s trading architecture, backed by a faster, more stable and robust infrastructure.
Options trading will be available on OKEx starting from December 27, 2019, andsimulation has already begun on December 12, 2019. Join now to get a share of 150,000 USDT!
Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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