Even experienced traders often bear large losses in the field of digital money. But the main mistakes can be avoided.
There are lots of opportunities for making money in the cryptocurrency field, but it is much easier to lose capital. You can lose your savings without even starting trading — because of fraudsters or hackers. We are looking into the main ways to fail in the digital money market.
#1 Take part in free bitcoin distribution
YouTube and Twitter often advertise “free bitcoins from the stars”. Criminals offer to send them crypto on behalf of the heads of companies to get twice as much in return. In fact, this is a deception.You can’t believe such ads, no one gives out crypto for free in this way, and even less will not ask to send a few coins first. Because of the popularity of this type of fraud, some representatives of the blockchain industry even changed their nicknames in social networks. For example, the creator of Ethereum Vitalik Butterin for a long time had a Twitter account “Not giving away ETH”.
The apogee of the cheaters was the July hacking of Twitter. The accounts of Elon Mask, Bill Gates, Barack Obama, Apple and others were compromised. Posts about the free distribution of digital money were published on pages of billionaires, politicians, representatives of the crypto industry and celebrities. Thanks to this, the criminals were able to attract about $100k in bitcoin in two hours.
#2 Keep cryptocurrency on the exchange
Even the largest crypto-exchanges are not protected from hacking or bankruptcy. Funds may be stolen from the site by hackers, or the company may suffer losses due to a decline in traders’ activity. When this becomes known, it will no longer be possible to return digital coins. Therefore, it is always necessary to transfer exactly the amount needed for trading to the exchange.
It is also possible to lose money by sending it to the exchange launched by fraudsters. If you transfer the cryptocurrency to such a market, you will not be able to withdraw it. Technical support may answer that there are problems with the platform or give any other argument to prevent the withdrawal of coins. You should work with popular platforms, which are not working for the first year, and start working with an unknown platform is better with a small symbolic amount to check if it is possible to withdraw.
#3 Become a member of the financial pyramid
For two years in a row, the main amount of money lost by users of cryptocurrency was lost due to the financial pyramids activity. In 2020, the Wotoken scheme is leading, which attracted more than $1 billion from more than 715 thousand investors. In the general list of cryptopyramids OneCoin takes the first line, according to various estimates, the fraudsters have stolen from $4 billion to $15 billion.
All such schemes are similar. The user is offered to earn on the attraction of other investors and promises a high profit if he or her will contribute funds. All profits made by early investors are generated through late investments. As a rule, the organizers take most of the money, while the rest of the participants are left with nothing.
#4 Buy when growing and sell when falling
Inexperienced traders often sell assets during price falls and buy during price rises. This strategy leads to negative results.
In order to avoid such mistakes, experienced traders and investors develop their trading strategy. First, they divide the capital into parts, which allows them to make several transactions in parallel. Secondly, they calculate in advance what they will do in different situations.
The most dangerous thing in trading is the FOMO effect (fear of missing out). It makes not only beginners, but also experienced traders buy an asset that has gone up in price because they regret not buying it earlier. In most cases, it leads to losses.
#5 Trade with leverage
Trading on margin allows you to borrow money from the exchange, in return it takes the user’s funds as collateral. If you lose, exchange keeps the deposit. Leverages are very popular because they allow you to increase working capital by times, sometimes — hundreds of times. But with this option there is a high risk of losing all funds.
The market for cryptocurrency moves unpredictably, and even experienced traders often have large losses. For example, on March 12–13, when the bitcoin rate fell from $8100 to $3800, traders lost $5.8 billion in margin trading. It is important to work with this instrument very carefully and not to use it without sufficient knowledge and training.
There are lots of opportunities for making money in the cryptocurrency field, but it is much easier to lose capital. You can lose your savings without even starting trading — because of fraudsters or hackers. We are looking into the main ways to fail in the digital money market.
#1 Take part in free bitcoin distribution
YouTube and Twitter often advertise “free bitcoins from the stars”. Criminals offer to send them crypto on behalf of the heads of companies to get twice as much in return. In fact, this is a deception.You can’t believe such ads, no one gives out crypto for free in this way, and even less will not ask to send a few coins first. Because of the popularity of this type of fraud, some representatives of the blockchain industry even changed their nicknames in social networks. For example, the creator of Ethereum Vitalik Butterin for a long time had a Twitter account “Not giving away ETH”.
The apogee of the cheaters was the July hacking of Twitter. The accounts of Elon Mask, Bill Gates, Barack Obama, Apple and others were compromised. Posts about the free distribution of digital money were published on pages of billionaires, politicians, representatives of the crypto industry and celebrities. Thanks to this, the criminals were able to attract about $100k in bitcoin in two hours.
#2 Keep cryptocurrency on the exchange
Even the largest crypto-exchanges are not protected from hacking or bankruptcy. Funds may be stolen from the site by hackers, or the company may suffer losses due to a decline in traders’ activity. When this becomes known, it will no longer be possible to return digital coins. Therefore, it is always necessary to transfer exactly the amount needed for trading to the exchange.
It is also possible to lose money by sending it to the exchange launched by fraudsters. If you transfer the cryptocurrency to such a market, you will not be able to withdraw it. Technical support may answer that there are problems with the platform or give any other argument to prevent the withdrawal of coins. You should work with popular platforms, which are not working for the first year, and start working with an unknown platform is better with a small symbolic amount to check if it is possible to withdraw.
#3 Become a member of the financial pyramid
For two years in a row, the main amount of money lost by users of cryptocurrency was lost due to the financial pyramids activity. In 2020, the Wotoken scheme is leading, which attracted more than $1 billion from more than 715 thousand investors. In the general list of cryptopyramids OneCoin takes the first line, according to various estimates, the fraudsters have stolen from $4 billion to $15 billion.
All such schemes are similar. The user is offered to earn on the attraction of other investors and promises a high profit if he or her will contribute funds. All profits made by early investors are generated through late investments. As a rule, the organizers take most of the money, while the rest of the participants are left with nothing.
#4 Buy when growing and sell when falling
Inexperienced traders often sell assets during price falls and buy during price rises. This strategy leads to negative results.
In order to avoid such mistakes, experienced traders and investors develop their trading strategy. First, they divide the capital into parts, which allows them to make several transactions in parallel. Secondly, they calculate in advance what they will do in different situations.
The most dangerous thing in trading is the FOMO effect (fear of missing out). It makes not only beginners, but also experienced traders buy an asset that has gone up in price because they regret not buying it earlier. In most cases, it leads to losses.
#5 Trade with leverage
Trading on margin allows you to borrow money from the exchange, in return it takes the user’s funds as collateral. If you lose, exchange keeps the deposit. Leverages are very popular because they allow you to increase working capital by times, sometimes — hundreds of times. But with this option there is a high risk of losing all funds.
The market for cryptocurrency moves unpredictably, and even experienced traders often have large losses. For example, on March 12–13, when the bitcoin rate fell from $8100 to $3800, traders lost $5.8 billion in margin trading. It is important to work with this instrument very carefully and not to use it without sufficient knowledge and training.