Crypto Investing Mistakes: What You Need to Know in 2024

Crypto investing can be exciting, but mistakes happen. These mistakes can cost you big time, from scams to trading errors. We’ve spent over a decade watching people lose money in crypto. Not just a few dollars – we’re talking life-changing amounts. In 2021 alone, scammers took $7.7 billion from investors. That’s more than the GDP of some small countries.

The truth? Most cryptocurrency mistakes don’t come from market crashes. They come from basic mistakes that anyone can make. Let me break this down for you.

Key Takeaways

• Crypto scams have led to billions in losses, including $7.7 billion in 2021 alone.
• Forgotten passwords and lost access to wallets have cost millions.
• Mistakes like listing errors in NFT sales have resulted in major financial losses.
• Failed cryptocurrencies account for over 2,000 coins, with 90-95% of joke coins failing within a year.
• Major exchange security breaches have resulted in over $50 million lost from investors.

Real Examples of Crypto Mistakes

Look, mistakes in crypto investing aren’t just numbers on a screen – they’re real people losing real money. We’ve collected some of the most painful examples from recent years. Not to scare you, but to show you what can happen when things go wrong.

Lost Passwords: The $300 Million Mistake

The story of Stefan Thomas haunts me. As the former CTO of Ripple, he lost access to 7,002 Bitcoins – worth over $300 million today – because he forgot his password. Think about that. One forgotten password, hundreds of millions gone.

But here’s what’s scarier: about 20% of all Bitcoin is sitting in wallets that people can’t access. That’s not just money – that’s dreams, retirements, and futures locked away forever.

Exchange Disasters: When Trust Costs Everything

Remember Mt. Gox? I do. I had friends who lost everything when it went down. Since then, we’ve seen:

• NiceHash
• Coincheck
• Zaif
• BitMart
• Cream Finance

Each lost over $50 million of investor money. The pattern? People trusted these exchanges like banks. They weren’t banks.

The NFT Nightmare: $297,000 Gone in One Click

Let me tell you about the Bored Ape seller who lost $297,000 in a single mistake. They listed their NFT for 0.75 ETH instead of 75 ETH. One decimal point. Gone. Sold for $3,000 instead of $300,000.

The Ponzi Problem: Billions Lost to False Promises

OneCoin took $4 billion from people. BitConnect promised 1% daily returns before dropping to zero. These weren’t subtle scams – they were obvious to industry veterans. But to new investors? They looked legitimate.

Dead Coins: The 90% Failure Rate

Here’s a stat that keeps me up at night: 90-95% of joke coins die in their first year. Over 2,000 cryptocurrencies have failed since 2009. That’s not counting the ones still “alive” but worth nothing.

Complete List of Crypto Investment Mistakes to Avoid

We’re all bound to make mistakes. But here’s the thing – we don’t all need to learn these lessons the hard way. After watching millions get lost in the crypto space since 2013, we’ve seen patterns emerge. These aren’t just random errors – they’re common pitfalls we all face. Let’s look at the crypto investing mistakes we need to avoid if we want to protect our investments.

1. Falling for Scams

Scams are a huge issue in crypto. In 2021, scammers stole $7.7 billion—an 81% increase from the previous year. In 2022, it dropped to $6.5 billion but still remains significant. Ponzi schemes like OneCoin ($4 billion) and BitConnect promised impossible returns and fooled millions.

To stay safe:

• Avoid promises of guaranteed returns. No investment is risk-free.
• Do your research. Check if the project has a credible team and real utility.

For more on scams, check our guide to common crypto scams.

2. Lost Access to Wallets

Imagine losing access to $300 million. That’s what happened to Stefan Thomas, who forgot the password to his wallet containing 7,002 Bitcoins. Approximately 20% of all mined Bitcoins are in abandoned wallets.

Here’s how you can avoid this:

• Back up your wallet information. Store passwords in a secure location.
• Consider a hardware wallet. It’s safer than leaving coins on exchanges.

3. Making Trading Errors

Crypto prices are volatile. One Bored Ape NFT seller lost $297,000 by accidentally listing it for 0.75 ETH instead of 75 ETH. It sold for $3,000 instead of $300,000.

Avoid costly mistakes:

• Double-check listings before posting.
• Use tools that help automate trade processes.

4. Investing in Failed Cryptocurrencies

Not every cryptocurrency is Bitcoin. Over 2,000 cryptocurrencies have failed since Bitcoin’s creation. Joke coins have an even higher failure rate, with 90-95% failing in their first year.

If you’re thinking about investing in a new coin:

• Check the project’s fundamentals. Does it solve a real problem?
• Research the team and their track record. Are they experienced and credible?

Rather than blindly picking coins, follow our detailed analyses of promising coins, check out our coin profiles.

5. Falling Victim to Exchange Security Breaches

Major exchanges like Mt. Gox and Coincheck have been hacked, resulting in millions lost. NiceHash and Cream Finance have also fallen prey to hackers, with each losing over $50 million in investor funds.

To protect your assets:

• Don’t keep large amounts on exchanges. Use hardware wallets.
• Ensure exchanges are secure. Look for two-factor authentication (2FA) and cold storage.

6. Not Understanding Tax Implications

Crypto isn’t tax-free. Depending on your country, trading, mining, or earning crypto can lead to significant tax obligations. Many investors don’t account for this, leading to legal and financial headaches later.

Make sure to:

• Keep records of all transactions. Know what you owe.
• Consult a tax professional. Crypto tax laws differ by region.

7. Failing to Diversify

Putting all your money into one coin is risky. Even the best projects can fail or face massive price drops. For instance, many investors lost huge amounts when Luna collapsed in 2022.

To minimize risk:

• Diversify your portfolio. Don’t rely on one asset.
• Look for coins with strong fundamentals.

8. Ignoring Risk Management

Crypto is volatile, and the value of your assets can swing wildly in a single day. If you don’t have a plan, you might lose more than you’re willing to.

Best practices include:

• Setting stop-loss orders to minimize losses.
• Taking profits when a coin hits a target price.

Want to learn more? Read our guide on risk management in crypto trading.

9. Buying the Hype

FOMO (Fear of Missing Out) can be a dangerous feeling in crypto. Prices often pump quickly, making it tempting to buy in before it’s “too late.” But buying based on hype often leads to losses when the market corrects.

Here’s how to avoid FOMO:

• Do your research before buying. Don’t rely on hype.
• Set a budget and stick to it.

10. Trusting “Experts” Blindly

Influencers and so-called “experts” often recommend coins without revealing their vested interests. Following their advice blindly can lead to bad investments.

Instead:

• Do your own research. Verify claims before investing.
• Be skeptical of anyone promising huge returns.

11. Ignoring Long-Term Potential

Crypto is about more than just short-term gains. Many investors focus on day-to-day price movements and ignore the long-term potential of projects that could revolutionize industries.

To invest wisely:

• Look at the long-term roadmap of a project.
• Focus on real-world utility. Does the coin solve an actual problem?

12. Not Knowing When to Sell

Timing your exit is just as important as choosing when to buy. Many investors hold onto assets for too long, hoping for a recovery that may never come.

To avoid this:

• Set a selling strategy. Know when to take profits.
• Don’t let emotions guide your decisions.

FAQ

For more detailed advice on crypto investing, check our full list of crypto trading guides.