More people than ever are getting in on the Bitcoin bandwagon. Is this good news or bad for the average investor? Well, it all depends on how knowledgeable that investor is? So, for this reason, we’ve put together these five top tips for investors to ensure success. Don’t be one of those who become caught out.
The one big mistake we can make with any investment is to dive in without knowing what we are doing. It can, and often do, end up with disastrous consequences. The prudent thing to do is to invest a small amount, see how it goes, and learn when to cash in and when to hold on to your coins. There is no real shortcut to getting this right, and it’s very much a trial-and-error process at first. If you are cautious, it might even make sense to make ‘dummy’ investments, basically pretend you bought some Bitcoin on date x, and then monitor the market and see when you would cash out. This strategy allows you to learn the market while risking no money.
Choose Your Exchange Wisely
As with any financial product, there are good examples and bad examples of providers, and for Bitcoin, this means exchanges where you buy and sell coins. But not all exchanges are created equal, some are better for trading Bitcoin, and some are not. Poor examples can range from high fees to some that are downright fraudulent. The big issue is that being an unregulated industry, there is no-where to turn for adjudication as there would be if a bank or insurance company ripping you off.
Keep tabs on trends; if you see an upwards curve, be aware of when it starts to slow down. You may need to consider getting out before a slow down of growth turns into a decline.
Although Bitcoin and other cryptocurrencies can be great investments, we should be wary of putting all of our wealth into this one type of investment. It does not seem likely that there will be a total cryptocurrency collapse; we can never discount it. For this reason, we should look at a mixture of investments as this way; we can spread the risk. It can be fruitful to have a mixture of new and traditional types.
Don’t Chase Losses
You should treat investing in Bitcoin as if it were any other investment or even a business start-up. It is important to assess risk and have a pre-identified bail out point. Sometimes it is easy to forget this when you are trading, but if things are going wrong, be sure to get out before it gets any worse. Trading with increasing losses based on how much time and expense you’ve already put in is known as the sunken cost fallacy, and this should be actively avoided.
This article has been contributed on behalf of Paxful. However, the information provided herein is not intended to be investment, financial, or other advice.