What To Watch Out For In Crypto Trading

The crypto market has experienced substantial growth in recent years and it doesn’t look like it is going to come to a halt anytime soon. In a recent market analysis, Fortune Business Insights projects that the industry will grow from $910.3 million as of 2021 to a staggering $1,902.5 million market by 2028.

In part because of the perception that this growth is on the horizon, many new investors are still taking an interest in crypto –– and ultimately trying their luck.

This can be a worthwhile endeavor, and the crypto market does present potentially lucrative opportunities. However, there are still things that new crypto investors need to watch out for as well.

1. Trends and memes

Many people have bought into specific cryptos on the grounds that they were becoming trendy, or even sparking online memes. Such memes are actually quite common, and at various points in recent years have been driven to “trending” status by famous people who –– by all appearances –– are deliberately attempting to influence the market.

For example, last December, Elon Musk tweeted that Tesla would begin accepting the cryptocurrency Dogecoin as payment for merchandise –– and the price of the crypto immediately jumped by more than 20% (alongside a virtual monsoon of “doge” images and memes on Twitter). Now, there are of course plenty of Dogecoin holders who caught that wave and made money off of the gains. But it is also clear that some crypto investors have developed a tendency to invest on the basis of trends and memes, rather than on actual market analysis.

Be aware that meme-driven crypto movements tend to be brief and fleeting, and that sound analysis and projection is best.

2. Crypto scams

The golden bitcoin in mail hands Free Photo

It is common to assume that trading in crypto is safe, simply due to the fact that the underlying blockchains are decentralized platforms and activity is private and anonymous. However, you should also remember as you’re getting started that these same factors have made crypto markets attractive to scammers and criminals –– and scams do occur.

In fact, a recent article at the economic advice site AskMoney pointed out that crypto-related crimes reached an all-time high of $14 billion in damages in 2021 (as opposed to $7.8 billion in the prior year). This means the risk has only gotten greater, and may continue to do so. Helpfully, the same article also did a round-up of some of the common scams to be on the lookout for:

  • Pump and Dump –– scammers trick you into buying a coin via false information

  • Account Hijacking –– scammers take over popular social accounts and use them to push narratives or scams for profit

  • Phishing –– scammers pretend to represent a trusted organization to acquire your personal information

These are only a few types of scams, but they give you a sense of how crypto crime can still occur, and what you should be on the lookout for.

3. Greed

You may have heard some of the stories about people earning vast fortunes in crypto –– like Sam Bankman-Fried (CEO of FTX), or Brian Armstrong (CEO of Coinbase). Even the Winklevoss twins of Facebook fame were estimated to be Bitcoin billionaires as of 2018, per a post at the financial news outlet CNBC. And it’s only natural, when you read about fortunes like these, to wonder if something as simple as buying up some affordable cryptos now could land you in a similar situation in the future.

With that said, it’s important not to trade with your eyes focused solely on a $1 billion prize. This will likely lead you to make reckless decisions, become easily frustrated, and ultimately waste money. Try not to succumb to greed, and instead focus on what’s most important: learning how to trade strategically and effectively over time.

4, Don’t forget your password

“Don’t forget your password” sounds like common sense –– but it’s actually important advice in a trading space in which your entire stash of assets is kept on an encrypted digital wallet. And unfortunately, there are some related horror stories! Last year, The New York Times reported on an investor from San Francisco who lost the password to the hard drive on which he stored his “private keys” (the codes that provide access to digital wallets). And unless he finds said password, he’ll never be able to recover his 7,002 Bitcoins –– which as of this writing would be worth nearly $280 million.

Now, obviously that’s a fairly extreme example. But it still speaks to the importance of maintaining your passwords. One simple act of forgetfulness can make your whole investment journey moot.

Trading crypto can be thrilling, and there’s always the potential for gains –– possibly even significant ones. However, it is also a highly volatile market that comes with significant obstacles and risks. If you’re a newcomer to the market, be sure to take the advice above to heart before getting started. And for more content on finance, technology, and a range of other topics, please visit us here at ITSupplyChain again!

 

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