A study by Oxford Risk has revealed low crypto knowledge among crypto investors. The report found that 21% of investors rate their crypto knowledge as “poor or non-existence”. The study involved more than 1038 respondents with 36% of them saying they barely knew how the digital assets operate when they first bought the assets. It means the numbers have improved with time.
While the number of respondents might seem to reflect the bigger crypto UK crypto population, which currently stands at 2.3million people. If the figures are accurate, then around 460,000 crypto investors have “poor or non-existent” crypto knowledge.
The encouraging side of the report however shows that UK investors are prudent when it comes to crypto investments. 81% of them started to invest in small amounts to understand what happened. Also, 76% of the investors have less than 5% of their savings on cryptos while 41% put less than 1% of their crypto investments. It means most won’t be devastated in case of risks.
Most of the investors are also unsure of the crypto future. 45% of them don’t know whether the market will keep on appreciating, 32% believe it will depreciate while 24% vouch for the market’s assured appreciation.
The only concern from the study is that crypto understanding among investors has dropped. Still, 53% of those surveyed had a positive experience since they began investing.
Reasons people invest in crypto without knowledge
It is unimaginable that anyone could invest in cryptos without the knowledge. However, after establishing that it happens, you might wonder why. Well, there are several reasons. These include;
Fear of Missing Out (FOMO)
Fear of Missing Out (FOMO) is the leading driver of crypto investing. The study by Oxford established that 35% of the investors had read about the skyrocketing prices. Another 15% were encouraged by close associates like family and friends.
One thing with the FOMO is that you are never interested in understanding what the market entails. Instead, you only invest to get the most out of the existing market movements. Most new investors buy the assets when prices go up and sell immediately the market starts to depreciate. They only know of the up and down price movements. At no time do they ever consider sideway movements.
The other reason some people invest in cryptos without knowledge is when they get the information from advertisements. Most of the ads are meant to lure prospective investors. Given most marketers understand people want money with no risks, they never reveal the risks.
Instead, they paint crypto investments as an easy way to wealth. Then some people put money in without doing any due diligence. Some marketers use influencers easily trusted by prospective investors.
To reduce the possible risks, the UK Ad watchdog is clamping down on crypto marketing. It has come up with ways to identify and remove irresponsible and misleading ads. The watchdog also wants crypto-related ads to include disclaimers. That will likely encourage more people to research more about cryptos before investing.
Risks of investing without crypto knowledge
Crypto knowledge is crucial for anyone looking to invest. Failing to learn and understand the various aspects comes with different risks. Such risks include;
The main reason why most people invest in crypto assets is for the returns. That is why they follow the FOMO. Such that they make the most of the money invested without losing. However, without crypto knowledge, you cannot make the most out of the market movements.
For example, not all dips in the market mean a downward trend. At times it can be a resistant level. The token will mostly struggle at this point before picking up another big run. However, you won’t take advantage of the markets when you have already sold off your assets at the first decline.
Some whale investors have mastered the uninformed investors market actions. They can create an imaginary rise in prices then sell-off. You will remain with valueless assets if you had bought without any analysis.
Possibility of scam
One of the major crypto concerns is the possibility of scams. Several investors have lost money due to these scams. What makes it hard to discern a scam is a likeliness with actual projects.
Some common crypto scams include; theft by hacking, fake crypto investments, giveaway scams, ICO fraud and fake crypto wallets.
Without crypto knowledge, you can never know how to spot scams or protect yourself against them.
Longer time to trade
Starting to trade crypto takes time. You have to choose among the various crypto exchanges, digital assets, payment methods and storage facilities. Without the knowledge, you cannot know what works best depending on your needs. You will take unnecessarily long to set up and start trading. By the time you start trading, you might have missed some favourable market movements.
How to learn about crypto before investing
Everyone who invests in crypto never wants to experience the above risks. They are quite devastating and in some cases, some investors have plunged into depression or committed suicide.
While there is a lot to know about crypto before investing, here are some of the top ways to gain crypto knowledge.
Know why you are investing in crypto
The first aspect to learn about cryptos is what draws you to them. With over 6,000 cryptos available in the market, it will take you time to learn about them all. You might even end up overwhelmed to invest. However, by understanding your motivation you can learn and master the few relevant cryptos.
Are you looking for long term assets? Are you looking for stablecoins that are not volatile? Or is there any other reason you are joining the crypto world? Different investors have various reasons for exploring the crypto market. Once you know what you need you are on your way to making the most of crypto knowledge.
Have a feel for the industry
Once you have selected the preferred cryptocurrencies, the next step is to have a feel of what they entail. Get to know how the cryptocurrency market works. With the multiple crypto assets available, there’s no reason to get tied to only the known names like Bitcoin, Ethereum and Bitcoin Cash.
Get to understand how blockchain technology operates. This is also the time to know how to get started; the trading platforms, storage and the various crypto use. You also have to understand the various market analysis with the price movement impacts.
Once you have an idea of how the market operates, you can settle on the asset of choice.
Read the crypto whitepaper
The whitepaper remains one of the most crucial documents for every crypto project. It details all the information about the project. The whitepaper should have the project uses, the algorithm protocol, security, voting, and information on the team members.
The quality of the whitepaper should mean the same for the project. Also, ensure you can understand everything from the whitepaper before making a decision. If the whitepaper cannot convince you to invest in the project then nothing can.
Join an online community of crypto enthusiasts
For proper crypto knowledge, you have to keep updated with industry trends, news and other developments. Nowhere else is accessible and easy to follow than an online community of crypto enthusiasts.
Find these communities in social media where you can get to follow the conversations, ask questions and even contribute once you become well conversant. Twitter and Reddit are some of the best sites when looking for crypto enthusiasts. Still, feel free to look for other online communities as long as you feel comfortable.
1-in-5 UK Crypto Investors Poor Knowledge FAQs
What are some things to know when investing in crypto?
One way of making the best of crypto knowledge is to understand the basics of the industry. Some of the basics to know when investing in crypto is the volatility of the crypto industry, only invest what you can afford to lose and use common sense.
These basics when investing in crypto works for all the crypto assets you invest in. It will help you find the right project, know when to invest and also avoid FOMO.
What are the chances of gains when you invest without crypto knowledge?
Even after understanding the need for crypto knowledge some people might still want to risk it. In such a case, while losses are not assured you lower your chances of gains. If you can’t understand the market movements and the other market factors, you are more of gambling than trading. Therefore, your chances of gains are like winning a lottery.
Can I start trading then learn later?
Given some people are after making quick money in crypto they might consider investing first and learning later. However, that is not the best way to go about it. Crypto is a make money quick scheme. Instead, it is a trading exercise that requires informed decisions. There’s no way you can make informed decisions without crypto knowledge. You also set up yourself for more risks when you start trading before learning.