Investing in crypto can be exciting, but many new investors fall into common traps when trading and investing in cryptocurrencies. From poor security practices to a lack of knowledge about crypto markets, new investors can quickly lose money.
But, if you are new to crypto trading, prioritize learning these mistakes beforehand so you don’t commit them while trading. This will also help you minimize the potential losses during trading. This article will guide you through the 18 common mistakes made by crypto traders and how to find a solution through strategies and security tips.
Key Takeaways
- There are many mistakes new and experienced cryptocurrency investors can make.
- Learn as much as you can about blockchains, wallets, transfers, fees, and popular scams to make sure you’re as safe as possible.
- A long-term investing strategy is best when considering investing in cryptocurrency.
- Always store your private keys offline and make backups.
- Using leverage might multiply gains, but it also multiplies losses.
18 Common And Biggest Crypto Trading Mistakes to Avoid In 2025
Here are the 18 most common and biggest mistakes new crypto investors make and how you can avoid them.
1. Lack of Basic Crypto Knowledge
New crypto investors may be attracted to all the hype surrounding Bitcoin and other cryptocurrencies, but investing in crypto requires understanding the asset class and how it works. Investing in an asset you don’t understand or trying to trade crypto without understanding how it works is a recipe for disaster. Educating yourself on different crypto projects and the goals of each crypto company will make you a better investor.
One of the biggest mistakes is skipping research. Trusting hearsay or random tips can lead to disastrous outcomes. Use reputable tools like CoinMarketCap and CryptoCompare to analyze potential investments thoroughly.
Tip: Rely on credible sources for crypto information, such as official websites, whitepapers, and reputable news outlets like CoinDesk or CryptoSlate.
Tools: Use analytics platforms like CoinMarketCap and Glassnode to study market trends and project fundamentals.
2. Always Be careful with Overtrading
Overtrading is another common mistake that traders make, leading to huge losses. Your excitement and desire to cover losses quickly might take you more towards losses. Overtrading can lead to serious losses because trading non-stop on projects can drain a lot of money and lead to poor decisions.
It is a clear symptom that you lack a transparent trading strategy. Consider the bigger picture by following a well-defined plan. Whenever you are trading, set clear entry and exit points. Check for the maximum number of trades you can handle in a week or a day. Do not push yourself beyond the mark that you have already set for yourself.
Tip: Be wary of projects promising guaranteed returns or rapid wealth. Cross-check their claims with reviews and independent sources.
Warning Signs:
- Unverified team members.
- Lack of transparency in the project’s purpose
3. Engaging in Emotional Trading
Do not make any impulsive decisions while trading in crypto. They can cause severe losses. One common example is “panic selling”. This means you are selling the currency at a lower price when you see a temporary dip during the market crash. And the trader might purchase the same crypto at a higher price when the market is recovering.
You are not just making a loss but also purchasing the same project at higher rates. If you are purchasing during higher market rates due to FOMO, you are already being late. So, implement a long-term perspective to avoid emotional trading.
Tip: Set predetermined entry and exit points for your trades. Stick to a strategy and resist emotional impulses.
Tool: Leverage trading bots for disciplined execution.
4. Neglecting Security Measures
Security should be every trader’s top priority while investing in cryptocurrencies. But most beginners underestimate the priority of security measures and simply trade. Scammers are always on the lookout for such people and exploit their assets, eventually leading to substantial losses.
Use 2FA while trading on cryptos and follow the highest security measures. Use an effective anti-virus and always update the wallet you are using. Also, if you are holding many cryptocurrencies for the long term, make sure to use hardware wallets.
Tip: Store your cryptocurrencies in hardware wallets (e.g., Ledger, Trezor) rather than on exchanges.
Best Practices:
- Use complex passwords for all accounts.
- Enable two-factor authentication (2FA).
- Avoid using public Wi-Fi when accessing crypto accounts.
5. Ignoring Risk Management
Risk management is essential for crypto trading because it helps limit losses while effectively seizing opportunities. For example, investing a small portion of your capital in crypto trading is a part of risk management. It reduces the overall volatility and risk of the crypto portfolio.
Diversifying your assets is also part of risk management. Thus, investing in crypto baskets and implementing automated strategies based on predefined parameters can help implement sound risk management and reduce potential losses.
6. Falling For Crypto Scams and Frauds
Cryptocurrencies’ unregulated and complex nature makes them open to scammers who are always looking to steal your assets. Every day, scammers are looking to seize your crypto funds. The only way you can protect yourself is to have proactive and knowledgeable measures for your portfolio.
Some common crypto scams include:
Crypto Ponzi Scam
A Ponzi Scam is a fraudulent investment scheme where the returns are paid to earlier investors using funds from new investors. These schemes fail when recruitment slows down or investors withdraw funds.
Crypto Romance Scam
The crypto romance scam includes fake romantic connections with crypto frauds. Scammers build connections with victims online and persuade them to invest in fake schemes. This emotional manipulation leads to significant losses.
Crypto Recovery Scams
This scam focuses on victims of crypto fraud by promising them to recover their funds in exchange for a fee. The scammers use fake credentials to impersonate officers.
Pump and Dump scams
This scam inflates the crypto’s price through false hype, often through social media. When scammers sell their assets at the height of the market, prices plummet, leaving gullible investors with losses. Be careful and do your homework.
These are some of the scams that you must avoid. Maintain a healthy level of skepticism and perform due diligence before engaging with any crypto-related platform.
Avoid Phishing Attacks
Tip: Verify the authenticity of all emails and messages. Avoid clicking on unknown links or downloading suspicious attachments.
Protection: Bookmark official exchange URLs and use browser extensions like MetaMask with caution.
7. Focusing on Short-Term Gains
The most common mistake, or the first mistake, that beginners make is thinking of making huge gains over a short period. Focusing on short-term goals leads to a myopic view of trading. Here, traders start making comprehensive decisions based on price fluctuations rather than conducting comprehensive research on the asset.
Thus, the best advice for beginners is to not be greedy at the forefront. Rather, make decisions beforehand and make purchases to make gains in the long run rather than looking for short-term gains.
Tip: Be wary of projects promising guaranteed returns or rapid wealth. Cross-check their claims with reviews and independent sources.
Warning Signs:
- Unverified team members.
- Lack of transparency in the project’s purpose.
8. Not Understanding Leverage
Leverage is essentially a loan offered by the provider to open a position. Traders pay a deposit amount called margin and gain market exposure equal to the full value of that position. However, one must know that while leverage can increase gains, it can also amplify losses.
Trading with leverage looks very interesting. But, traders need to understand the implications of leverage trading before opening a position. So, before using leverage, make sure that you read a leverage guide and how to use it.
Tip: Start with low leverage (e.g., 2x or 3x) and only trade amounts you can afford to lose.
Platform Advice: Choose trusted exchanges like Binance or Kraken with robust risk management tools.
9. Overconfidence after Making a Profit
Winning streaks don’t last long in crypto trading. Having overconfidence after making a profit could lead you to make more investments. And you can incur losses rather than make any profits. Trading on cryptocurrencies without making proper analysis could wipe out your entire funds and drain your money.
But, if you have a trading plan, you can combat this issue. Making a profit by following this plan could suggest that it is working. It will also validate your previous analysis and predictions rather than act as an encouragement to abandon them.
10. Overlooking Fees and Costs
Every trade involves certain costs, including transaction fees, withdrawal fees, and, in some cases, deposit fees. When traders focus solely on their profits without considering these expenses, they might see that their net returns are much lower than they expected. Thus, before you trade on any trading platform, check for the fees and verify them. Selecting exchanges with low fees is always recommended. Also, do not overtrade because it always leads to poor decisions and loss of funds.
Tips: To prevent overlooking fees, research and understand all trading costs, including transaction, withdrawal, and network fees. Use low-fee exchanges, and fee-reduction strategies, and incorporate costs into your trading plans. To avoid overconfidence after profits, stick to your trading plan, diversify your portfolio, and prevent over-leveraging. Stay humble, take regular profits, and continuously educate yourself to ensure disciplined and sustainable trading.
11. Thinking All Crypto Is Bitcoin
All cryptocurrencies are not Bitcoin. In other words, Bitcoin is one of many tens of thousands of assets in the crypto market. The huge media coverage and its high value as the most expensive crypto asset have made Bitcoin the face of the crypto market, but it is not the only crypto.
There are other coins, “altcoins”, like Litecoins, that have their value and features. Stablecoins are another crypto asset with a value pegged to commodities like the US dollar in 1:1 to maintain stability. Examples of stablecoins are USDT and USDC. There are also meme coins like Dogecoin with real time value.
Therefore, you must have a clear-cut understanding of the crypto asset you are investing into to inform your decision about it.
Way forward:
Avoid the misconception that all cryptocurrencies are the same by learning about the diversity in the crypto space, including altcoins, tokens, and their unique use cases. Research projects like Ethereum (smart contracts), Solana (scalability), Ton blockchain and Ripple (cross-border payments) to understand their roles. Explore educational resources like CoinMarketCap or Binance Academy to broaden your knowledge beyond Bitcoin.
12. Investing In One Coin
Tens of thousands of crypto assets are in the market, and investing in one coin may be unsafe. Similar to how the financial market works in terms of diversifying portfolio investment in stocks and bonds, you may need to invest in multiple crypto assets.
Popular cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, Litecoin, Binance Coin, USDT, Tron, etc, are some of the assets you can invest in. A diversified crypto portfolio gives you leverage when one of the assets has a bearish run, so you do not lose all your funds. This follows the cliché of “not putting all your eggs in one basket.”
Tip: Spread your investments across multiple cryptocurrencies to reduce risk. Avoid allocating more than 20% of your portfolio to a single asset.
Strategy: Invest in a mix of established coins like Bitcoin and Ethereum, alongside promising altcoins.
13. Disregarding Regulatory Compliance
The momentum that cryptocurrencies have been gathering has prompted governments to provide legislation about the activities of assets, especially for trading and Bitcoin mining.
For instance, some countries have banned crypto trading activities while other countries and regions are planning to roll out crypto regulations to guide users. Notable of this is the European Union Markets in Crypto-Assets Regulation (MiCA), which is expected to be effective from 2025.
Therefore, staying informed about the crypto regulatory landscape in your jurisdiction is imperative as you ensure your crypto trading complies with the law.
Notably, there is still a debate in the United States on whether cryptocurrency should be classified as “Securities” under the oversight of the Securities and Exchange Commission (SEC) or jurisdiction of the Commodities Futures Trade Commission (CFTC) as “Commodities.” There are also trading and mining regulations in some states in the United States as well as other countries.
Stay Informed About Regulatory Changes
Tip: Monitor updates from government agencies and international organizations regarding crypto regulations.
Sources: Follow regulatory news on platforms like CoinTelegraph or Twitter.
14. Ignoring Crypto Fees And Taxes
Investing in crypto is not free in countries like Australia, the United States, or Canada. This is because you must comply with a crypto tax in Australia and a Canadian crypto tax structure to avoid sanctions. This is also the same for the United States.
In terms of fees, every crypto exchange charges a set amount. The fees can include transaction fees, gas fees, and blockchain fees. However, the fees can vary depending on when you are using the network. Therefore, you must pay the research fees you should expect if you will invest in crypto.
Tips: Understand and account for all trading fees, including transaction, withdrawal, and network costs, by reviewing exchange fee structures. Use tax software like Koinly or CoinTracker to simplify tracking and reporting your crypto taxes.
15. Wrong Wallet Address
Transferring crypto between digital wallets is how you take custody of your crypto from an exchange or send funds from one party to another. But a common mistake new investors make is attempting to transfer crypto funds to a wallet, only to mistype the wallet address.
When this happens, the crypto is sent to an erroneous wallet address and may be unrecoverable. While expensive recovery service providers claim to be able to help, their services can only go so far—the recipient must choose to cooperate.
Tips for choosing the best wallet:
Always double-check wallet addresses before sending crypto to avoid irreversible mistakes. Use the copy-paste function and verify the first and last few characters of the address to ensure accuracy. For added safety, send a small test transaction before transferring larger amounts.
16. Forgetting Crypto Passwords or Seed Phrases
Because cryptocurrency is kept in a digital wallet, these wallets require passwords to access. If you forget your password, your cryptocurrency may not be recoverable. Even if you don’t forget your password, you’ll have to remember (or store and have access to) your cryptocurrency private keys. These are long alphanumeric sequences that are hard to memorize. If you lose or forget these keys, you lose your cryptocurrency because they cannot be recovered.
Most wallets have a backup seed phrase to gain access to the funds, but if that seed phrase is lost or forgotten, there may be no alternative option for recovering your funds.
Security Tips:
Store your crypto passwords and seed phrases securely in a physical location, such as a fireproof safe or a password manager. Avoid saving them digitally on devices connected to the internet to prevent hacking. Regularly back up this information and ensure trusted family members know its location for emergencies.
17. Keeping Crypto in Online Wallets
Cryptocurrency is a digital currency that requires a digital wallet to store it. While utilizing an online wallet is more convenient, it is also far riskier than storing your crypto offline. Online wallets are more vulnerable, and hackers can drain your wallet through crypto scams or hacks. The most secure way to store your crypto is in an offline hardware wallet, which is essentially a USB stick with advanced hardware and software encryption to protect your crypto’s private keys.
Tip: Spread your investments across multiple cryptocurrencies to reduce risk. Avoid allocating more than 20% of your portfolio to a single asset.
Strategy: Invest in a mix of established coins like Bitcoin and Ethereum, alongside promising altcoins.
18. Not Knowing When To Exit And Take Profits
Crypto assets such as Bitcoin and Ethereum are volatile, which can cause them to have a bullish run, increasing the value of the assets you are holding. This may be the best time to sell your asset to make a profit because what will happen next cannot be predicted.
If you are holding your coin for a short term, it is always essential to have an exit strategy, but long-term holders may not need it. You must have clearly defined goals for how much you want to make and at what point you would like to cut your losses and exit when investing in crypto.
Tip: Avoid day trading unless you have expertise. Adopt a long-term perspective to benefit from steady growth.
Safe Crypto Investment Strategy
A well-planned strategy is your best defense against mistakes.
Steps to Build a Solid Strategy:
Set Realistic Goals: Decide whether you’re investing for short-term gains or long-term wealth.
Limit Your Investment: Never invest more than you can afford to lose.
Stay Educated and updated: Keep learning about the market and adjusting your strategy accordingly.
Tools and Resources for New Crypto Investors
Make use of resources that simplify crypto investing:
Wallets: Use trusted hardware wallets like Ledger or Trezor for security.
Educational Platforms: Websites like Coinmarketcap, CryptoCompare, DefiLlama, Coinbase, CoinGecko offer valuable insights
Tracking Apps: Use apps like CoinDesk and CoinMarketCap Blockfolio or Delta to monitor your portfolio.
Leveraging these tools ensures an informed and secure approach.
Real-Life Stories of Crypto Mistakes
The Phishing Scam: A user lost $50,000 by clicking a malicious link in a fake exchange email. Lesson learned: Always verify email sources.
The Forgotten Key: An investor misplaced their wallet recovery phrase and lost access to $200,000. Lesson learned: Securely back up your keys.
Learning from others’ mistakes can help you avoid similar pitfalls.
What is the weakness of crypto?
Security risks can be a weakness of crypto and cryptocurrency trading. So, traders need to know the security features and do proper research before selecting an exchange for crypto trading.
What is the safest way to trade crypto?
The safest way to trade crypto is to select a reputed exchange. Binance is one of the best exchanges for crypto trading. Also, if you have a large amount of crypto in your wallet, store them in a web3 wallet.
What is the Cryptocurrency to Avoid?
There are thousands of cryptocurrencies to choose from. Cryptocurrencies should have a purpose, be part of a blockchain project that is solving a problem, and be actively maintained and regularly updated. It’s best to avoid those that don’t have a clear purpose for existing.
What Was the Major Crypto Failure?
What the significant crypto failures have been is a subjective discussion. Some feel that the thousands of projects that have not been adopted or accepted are big failures, while others point to events like Terra USD, a stablecoin that lost its peg and caused millions of dollars to be lost. Still others believe that cryptocurrency, in general, has failed to fulfill the purpose it was designed for, as a replacement for traditional monetary systems and removing intermediaries. Instead, they argue, cryptocurrency has failed as it is now more similar to gambling than to a decentralized payment system.
What Are the 3 Problems of Crypto?
Cryptocurrency is a byproduct of the underlying technology, blockchain. Blockchain has three issues that prevent it from reaching its full potential of decentralizing finance. The three issues are decentralization, scalability, and security. If developers increase one of these properties, one or two of the others decrease. For instance, if steps are taken to increase a blockchain’s security, decentralization and scalability must be sacrificed to accommodate it. This is known as the blockchain trilemma.
Wrap Up
Every trader is bound to make mistakes. But facing them does not mean that you will end your crypto trading journey. But, if you are tackling these crypto trading mistakes, consider them as opportunities and move ahead to learn from them and correct them in the future. The main thing is that every trader, be it a beginner or an experienced trader, must make a trading plan based on their analysis. Always stick to it to prevent emotions from clouding your decision-making.
Declaimer
The comments, opinions, and analyses expressed on Techafricana are for informational purposes only. As of the date this article was written, the author does not own cryptocurrency.
