How To Lose Money In Crypto (2024)

Crypto is risky and most people lose money, but why when the market has been going up steadily~ish since inception?

One of the reasons why many new investors lose money in cryptocurrencies is because they invest at the worse possible time and in the worse possible digital assets. Most people first hear about cryptocurrency or get interested in it during the hights of a bull run where it's the hot topic. Your Uber driver is talking about his latest meme coin and fomo (fear of missing out) incentivises us to invest.

This means that huge numbers of new market participants are buying into the asset class at the worse possible time. Often this is exasperated because they allocate capital to high risk, high volatility altcoins or illiquid NFTs.

Once the market reaches its peak and begins to correct, smart money exits first or hedges their position causing a sell off. Investors who bought in at the top are sat on a unrealised loss with the value of their crypto portfolio depreciating.

This is often fuelled by emotions such as fear, uncertainty, and doubt (FUD), leading to a rush to exit the market. This in turn causes the sharp drops and volatility so often seen in the price of cryptocurrencies, leading to more significant losses.

Eventually investors without strong conviction in the underlying technology capitulate to sell their holdings at a loss. This behaviour is often driven by the desire to avoid further losses, rather than sound investment principles or a long-term strategy.

Try to make it through one market cycle and learn to recognise how these things tend to play out, then you will be in a better position than 90%+ of other market participants.