With Bitcoin and Ethereum reaching new all-time highs, Elon Musk and Tesla tweeting about Bitcoin and Dogecoin, and innumerable tales of individuals making (and sometimes losing) insane sums of money owing to cryptocurrency, it’s no surprise that more and more people are interested in investing. Although prices have lately fallen and the market has become more volatile, cryptocurrency remains a prevalent issue. Having said that, the world of cryptocurrency may be challenging to navigate, especially for newbies.
Bitcoin has made so many people a lot of money. If you had invested $100 in Bitcoin when it first debuted in 2009, your investment could be worth millions of dollars now. But don’t forget that many individuals have lost millions of dollars in Bitcoin. This high-risk investment may cost you money, whether it’s through purchasing high and selling cheap, being hacked, falling prey to scammers, or losing your keys. Here are four significant blunders to avoid when first learning how to buy and sell Bitcoin.
Failure to prioritize security:
There are several reasons why solid security is essential while you buy and sell Bitcoin. Essentially, if you lose your Bitcoin, it is doubtful that you will recover it. Using blockchain technology, Bitcoin eliminates the intermediary in financial transactions. The specifics are extensive, but in essence, that technology allows you to purchase something without going through a bank or other financial institution. You get access to your Bitcoin using public and private keys, and losing those keys is one way to lose money. You can’t just phone someone and have them change your password since there isn’t a bank. If someone obtains your keys, they have control of your Bitcoin.
Only planning to buy and sell Bitcoin:
A well-diversified portfolio is an excellent method
to hedge against volatility. Not only should you invest in non-crypto assets, but you should also diversify your crypto investments. That way, if Bitcoin crashes, you won’t be putting all of your eggs in one basket. A beneficial rule of thumb is to not invest more than 5% to 10% of your wealth in cryptocurrency. For the remaining 90% to 95%, consider well-established – and perhaps safer – assets such as equities, shares, mutual funds, and real estate.
If you would like to diversify your crypto portfolio, there are several currencies to pick from. But, like with Bitcoin, do your homework before you buy. Look for coins that have a long history and respected names behind them. Each coin comes with a white paper that you can read to learn more about what the coin will do and who is involved.
Planning to invest more than you can afford:
There’s a lot of promising upsides when intending to buy and sell Bitcoin
. There is also a whole lot of ambiguity. It is a new asset class with limited regulation or protection. Monetary regulators frequently warn people to be prepared to lose all of their assets. That is why it is prudent only to invest money you can afford to lose. Make an emergency fund your top priority if you don’t already have one to protect you in the event of a job loss or an unexpected sickness. Borrowing money to invest in cryptocurrency is not a good idea. Also, if you have credit card debt, attempt to pay it off before purchasing Bitcoin.
It’s natural to want to participate when the value of Bitcoin rises. However, Bitcoin has had significant ups and downs during the last decade. Consider losing your job the same week your Bitcoin investments plummet; you’ll be pleased you saved for an emergency fund and paid off loans before investing.
Giving in to FOMO (Fear of missing out):
Let’s face it: we’ve all been there. You observe a project’s price increasing and want a cut of the action. Even more so, if you’ve previously traded away comparable possibilities, you would not want to miss out on anything else, so you leap in. The issue is that what goes up must come down. While you invest when a project is booming, you have a far higher chance of losing money since initial investors will start collecting their profits, and you may have to wait a long time even to break even, much alone earn any profit. Furthermore, it may be challenging to buy in when a project is pounding hard, mainly if you’re dealing on a decentralized exchange (dex) like Uniswap. You might lose a lot of money in gas costs (on the Ethereum network), money owing to greater slippage or transactions that become stuck and fail.
Are you interested in learning how to buy and sell Bitcoins? First, learn to avoid the blunders mentioned above. Bitcoin is digital money that many people use to buy things and for various other reasons. However, this high-risk investment may cost you a fortune, whether you buy high and sell low, are hacked, fall victim to fraudsters, or lose your keys. So, learn thoroughly, receive adequate training, and only enter the market.