- Lacking a Long-Term Investment Strategy
One critical oversight many newcomers to cryptocurrency make is not having a long-term investment strategy with clear financial goals and timelines. I’ve covered this topic in detail in a separate post, which I highly recommend reading. This mistake is the root of many others that follow. Without a solid long-term plan, achieving any substantial earnings in crypto, as well as in other investment areas, becomes nearly impossible.
- Over-Diversification
A frequent error observed among beginners—and not just newcomers—is over-diversification. It’s common to find portfolios with 50 to 100 different coins, under the misconception that this reduces risk through diversification. However, diversification strategies often fail in the volatile crypto market, a fact supported by data shared in my previous posts. This misconception is largely propagated by pseudo-experts on YouTube, whose main goal is to have you sign up on exchanges using their referral links. Warren Buffett’s quote is pertinent here: “Diversification is protection against ignorance for those who know what they are doing.” A portfolio of 50 coins doesn’t reduce risk; it significantly increases it, turning investment into gambling. Evaluate your portfolio critically, focusing on assets chosen based on thorough research versus those picked from YouTube recommendations.
- Speculative Approach
Many beginners in the cryptocurrency space plan for only 3-6 months ahead, which is dangerously short-sighted. A personal anecdote involves a friend who, in late 2018, asked whether it was a good time to buy Bitcoin. Despite Bitcoin’s price drop from $6,000 to $3,900 three months after his purchase, leading to a loss upon selling, the initial purchase decision remains irrelevant in the long-term view. Emotional decisions based on short-term planning can lead to significant losses. Building wealth with cryptocurrency requires a shift from speculative, short-term thinking to a more strategic, long-term approach.
- Ignoring DeFi for Asset Holding
Over 50% of investors, according to my latest survey, do not use DeFi (Decentralized Finance) tools to increase their earnings, missing out on significant opportunities. While holding assets long-term is a sound strategy, ignoring the potential of DeFi tools like staking, lending markets, and liquidity pools without impermanent loss (e.g., BTC.B/WBTC) limits portfolio growth. Simple participation in DeFi can substantially increase portfolio returns, especially in a bullish market.