5 things to know before investing in crypto

However, behind the loud success stories are thousands of investors who lost large sums, succumbing to FOMO (fear of missing out) and investing in assets just before their prices collapsed.

Discipline vs. emotions

Beginners are often offered short-term trading since it allows for quick profits and can be started with even small amounts, which are supposedly not intimidating to lose.

However, trading is, in fact, much riskier than long-term investing and requires a high level of professionalism and discipline.

Beginners often incur losses precisely due to the large number of trades. Risks increase significantly if trading derivatives with leverage, such as futures or perpetual contracts — this can quickly lead to a total loss of balance.

It is also worth noting that trading is more dangerous due to the high psycho-emotional load. As a result, beginners can make emotional mistakes, succumbing to FOMO (fear of missing out) or FUD (fear, uncertainty, doubt), which often leads to losses.

Volatility

The high volatility of cryptocurrencies not only provides the opportunity for significant profits in a short period but also for losing most of one's capital. For example, after the large bull run and the decentralized finance (DeFi) boom in 2021, the value of many, even major altcoins, fell by 90% or more within just a few months.

This high volatility is caused by the relatively low liquidity of cryptocurrencies, which is hundreds of times lower compared to the stock market. This means that just a few large sell-offs are enough to crash the price of some altcoin by tens of percent.

It is essential to remember that the market is cyclical, and after any rapid rise, a fall will inevitably follow. To reduce the risk of losses, one can, for example, study the market cycles in the crypto space and understand how they work.

Regulation

Only a few experts raise the topic of taxes in crypto investing. However, as cryptocurrency regulation develops, it will become increasingly complex to avoid paying taxes since exchanges are required to provide information about clients who are taxpayers.

In cases of tax evasion, such users' accounts may be subject to restrictions. These restrictions may include asset freezes or the withdrawal of funds once tax evasion is detected.

Such cases are still rare, but as the regulatory framework becomes more robust, their number is expected to increase. At the same time, hiding profits from crypto investments will become much more difficult, as all transactions are easily traceable, and crypto exchanges conduct client identification checks.

Risks

Since cryptocurrency is a relatively new and untested technology, there are numerous risks of incurring losses — from exchange hacks to errors in entering the wallet address during digital asset transfers. These risks include:

1. Technical:

• Hacks of exchanges and DeFi protocols;
• Errors when entering the address or choosing the network during crypto asset withdrawals/transfers;
• Device infection with malware.

2. Fraudulent:

• Various scam projects and rug pulls;
• Phishing and spam emails;
• Fraud attacks on forums and messengers (social engineering).

A striking example of fraud is the case with the well-known exchange ByBit in February 2025, when hackers managed to withdraw about $1.4 billion in Ethereum and LST tokens from a cold wallet. The attackers used a combination of methods, including phishing, malware, and social engineering (SE).

Most altcoins will be "dead"

Altcoins are considered the most promising cryptocurrencies due to their lower market capitalization, which allows for multiple capital increases during rapid growth. However, more than 90% of crypto projects become "zombie coins" within a few years, with an average lifespan of around 1.2 years.

Additionally, according to CoinGecko's April report, more than half of the cryptocurrencies created since 2021 have already stopped trading on exchanges. The number of "dead" altcoins has also increased significantly: while there were approximately 2,500 in 2021, by 2025, the number had risen to 1.8 million.

However, it's essential to consider the growing competition in the cryptocurrency market, which is gradually pushing even the most capitalized crypto projects "to the bottom." For example, take Lisk and Waves — during the first major ICO boom, they were among the top 20 digital assets, but now they are barely mentioned. Even the top 10 cryptocurrencies have undergone significant changes over the past five years.

Other factors can also significantly influence the crypto market, such as the global economic situation. Experts note that the increased "mortality" among crypto projects is closely tied to the unstable global economy following the inauguration of the new U.S. President, Donald Trump.