Why beginners slip up
Crypto is open, fast, and unforgiving: transactions are hard to reverse and good security habits matter. Regulators repeatedly warn that retail crypto investing is high risk and you could lose all your money; treat every platform or token with skepticism until proven otherwise.
Mistake 1: Parking everything on an exchange
Exchanges are convenient but introduce counterparty risk. “Proof of reserves” web pages or attestation reports are not audits and can be inconsistent across providers. Use exchanges as on-ramps—then withdraw what you plan to hold.
What to do instead
- Move long-term holdings to a reputable hardware or software wallet you control.
- Enable withdrawal allowlists and spend limits.
- Keep only active trading funds on exchanges.
Mistake 2: Weak account security (SMS 2FA, SIM swaps)
SMS codes can be intercepted via SIM-swap or port-out fraud. Prefer phishing-resistant MFA (security keys or passkeys) on exchanges, email, and cloud accounts tied to your wallets.
Better setup
- Use an authenticator app or hardware security key/passkey for 2-step verification (many exchanges support this).
- Consider Google Advanced Protection for accounts that guard your seed backups, exchange logins, or tax docs.
Mistake 3: Falling for scams and fake apps
Common red flags include guaranteed returns, romance “advisers,” urgent QR codes, fake support, and counterfeit trading apps. The FTC and FBI highlight these patterns; Google even sued alleged actors behind fake crypto apps.
How to avoid
- Never send crypto due to pressure, “multipliers,” or celebrity pitches. Report scams to your national authority (e.g., FTC/IC3 in the U.S.).
- Download wallets and exchanges only from official links and app stores.
Mistake 4: Copy-pasting addresses and blind signing
Address-poisoning scams plant look-alike addresses in your history, hoping you copy the wrong one. Also, broad token approvals let malicious apps move your assets later.
Safer habits
- Use your own saved address book, ENS names you control, or scan verified QR codes with care.
- Review what you sign; avoid blind signing when possible and verify contract details. Revoke old approvals periodically.
Mistake 5: Sending on the wrong network
Beginners often pick the wrong chain in a withdrawal menu (for example, sending ERC-20 tokens via a BSC network). Recovery is difficult and sometimes impossible; always match network to token/chain.
Before you click send
- Confirm the token’s chain and the recipient’s supported networks.
- Do a small test transfer first.
Mistake 6: Ignoring supply, unlocks, and FDV
A token can look “cheap” while having a huge fully diluted valuation (FDV) and large future unlocks that pressure price. Learn how float, unlock schedules, and FDV relate.
Quick checks
- Compare market cap vs FDV, read the emission schedule, and look for upcoming unlocks.
- Be extra cautious with low-float, high-FDV launches.
Mistake 7: Overtrading and leverage
Crypto is volatile; leverage amplifies losses. U.S. and UK regulators caution that retail crypto is high risk and derivatives are complex. If you must trade, keep position sizes small and define maximum loss.
Mistake 8: Forgetting taxes and records
In many countries, selling, swapping, or using crypto can be taxable. In the U.S., brokers begin reporting certain sales on Form 1099-DA starting with 2025 transactions; the IRS also requires you to answer the digital-asset question and report income. The UK updated guidance in 2025 and expects detailed records.
Keep straight
- Log every trade, swap, income, and fee. Export CSVs from exchanges and wallets regularly.
Mistake 9: Skipping test sends and confirmations
Crypto transfers are not easily reversible; wait for sufficient confirmations before assuming funds are final, especially for large amounts or when moving between chains/exchanges. Many platforms require a set number of confirmations.
Mistake 10: No backup or recovery plan
Your seed phrase is the master key. If you lose it—or someone else gets it—you lose control of your funds. Keep it offline, private, and durable; consider metal backups.
Do this now
- Write down the seed phrase offline, store it securely, and never share it with anyone.
- Practice recovery on a spare device before you need it.
Quick beginner checklist
- Enable security keys or passkeys everywhere that matters (exchange, email, cloud).
- Verify downloads/URLs from official sites only.
- Test with a small transfer, then send the full amount.
- Match token and network; confirm the address independently.
- Revoke old approvals monthly and avoid blind signing.
- Diversify custody: keep long-term holdings in self-custody.
- Track FDV and unlocks; avoid low-float hype without research.
- Keep tax records; export reports quarterly.
- Learn scam patterns and never act under pressure.
FAQs
Are “proof of reserves” pages enough to trust an exchange?
No. U.S. auditors warn these reports are not audits, vary in quality, and offer limited assurance. Treat them as one data point—not a green light.
What’s the safest 2FA for crypto accounts?
Use phishing-resistant MFA like security keys or passkeys. Avoid SMS when possible due to SIM-swap risk.
How do I spot address poisoning?
Don’t copy addresses from recent activity; maintain your own address book and verify the first/last characters carefully. If in doubt, send a tiny test first.
I sent coins on the wrong network. Can I get them back?
Sometimes, with compatible wallets and careful steps—but recovery isn’t guaranteed. Always double-check the network before sending.
Do I owe taxes if I just swap one crypto for another?
In many jurisdictions (including the U.S. and UK) swaps can be taxable events—keep records and file correctly.
