April 16, 2024

pitfalls During major bitcoin busts and booms, traders feel more noise than vital signals to buy or sell their holdings. However, savvy investors and traders can see past extreme price swings and short-term noise to take directional bets. Today, individuals continue to make money by trading Bitcoins. However, the crypto space no longer has easy money. The Bitcoin market is risky. Nevertheless, people who study and analyze the crypto market can build wealth over time.

Today, individuals buy this digital currency on platforms like the one featured in this article using fiat money. You can also sell this virtual currency on the platform to cash out your investment with profit or loss. Bitcoin trading is not always profitable. You can make profit or loss every time you trade this digital asset. Additionally, the crypto market has many pitfalls to watch out for if you want to maximize your earnings. Here are the main pitfalls to avoid when trading Bitcoins.

1. Stop Drive

Stop drive occurs when a cryptocurrency exchange realizes where a user is stopping. Knowing this, the platform can hit the Bitcoin price with a false move to wipe out all the profits. A cryptocurrency exchange can do this by selling the real coins, thinking that it will generate more revenue on the stop loss than it can lose by selling good coins, causing pitfalls the price to crash in a matter of seconds. Minutes and redeems them.

The stop that involves selling allows you to recover the coins due to the covering stop. A trader can also play this game. However, it is the crypto exchange that plays it most of the time because it has the right information at the right time.  

Crypto exchanges that play this game do not allow stop loss and leverage because it is in the interest of the trader. In addition, this technique allows platforms to show users that Bitcoin trading is not done in a benevolent environment.

Therefore, make your stops mental when trading Bitcoin to avoid this trap. Although you can use leverage, keep it low. If you must use high crypto leverage, follow all your positions.

2. Exit Scams

You may have come across small crypto exchanges that play this game before. The idea is to get the money during initial coin offerings or through a crypto exchange and run with the funds. Some bitcoin exchanges hold coins and allow users to trade with them. They can also sell the tokens elsewhere while allowing users to continue to think they are using them. Ideally, a cryptocurrency exchange can play with the accounting system to prevent traders from noticing this trap.

Unfortunately, these scammers are not easy to track down due to the unregulated, anonymous, and decentralized operations of digital currency systems. To avoid this bitcoin trading pitfall:

  • Do not keep a significant amount of tokens in your crypto exchange account.
  • Regularly withdraw your coins and store them in an off-exchange wallet.
  • If you notice that a crypto currency exchange is not paying quickly or communicating effectively, exit it immediately.

3. The Ponzi scheme

With this Bitcoin exchange trap, someone promises investors vast profits, after which they run away with the funds traders put into the systems. But Ponzi schemes require a lot of effort to persuade potential customers to invest. For example, a Bitcoin project can promise annual returns of almost 10% set up by the Ponzi scheme.

The Ponzi pays previous investors with the capital of current traders. It also requires investors to keep turning. Thus, the profits do not come from disorderly companies but from the wallets of people recently scammed.

The scheme crumbles when it loses money, but it crumbles as soon as the criminal behind the scheme begins to sense that the net is about to catch up with him and disappears. To avoid this trap, stay away from any Bitcoin project that requires you to find and recruit new investors into the system.

Success in Bitcoin trading requires extensive research to understand how it works. Also, do your due diligence and avoid anything that looks or sounds suspicious.