Did you know that about 80% of bitcoin traders quit in the first or second year of business? This high rate is due to the significant losses that about 95% of people in the cryptocurrency market make.
While investing in bitcoin is a lucrative venture, learning how the market functions beforehand is vital. Failure to do this increases the chances of losing money and underperforming. It may also lead to unrealistic expectations, which may affect your financial health and other assets.
Here, we provide a guide on bitcoin investing by discussing how to avoid common mistakes. We’ll also explore some strategies you can use to increase your chances of success and get a better ROI.
1. Research Before Investing
One mistake common among bitcoin investors is not conducting enough research. Unfortunately, skipping the research process may result in trading on scam sites. It can also lead to the loss of essential access keys and wallet log-in information.
The best way to prevent mistakes with bitcoin investing is by learning more about cryptocurrency. This way, you can avoid falling for illegitimate offers that may cause you to lose your investment. Moreover, you identify how to protect your access information from hackers and suspicious malware.
Another benefit of researching is that you will comprehend bitcoin volatility. With this information, you can create an effective investment strategy and avoid losses. Understanding volatility also allows you to prepare for price swings caused by market changes.
2. Invest at the Right Time
Buying bitcoins at the wrong time lowers the chances of making significant profits. It can also lead to losses depending on the time you decide to sell.
Investing at the right time is a crucial component to maximizing your earnings. While predicting the actual bitcoin trading value may be challenging due to volatility, experts still advise monitoring the market.
This way, you can invest when the price is relatively low and wait until it increases to sell. Studying the market also reduces the risk of loss by lowering the amount spent in acquiring the portfolio.
3. Remember Your Password
Forgetting the password to a digital wallet is a mistake that may cost you an entire investment. Reports show that about 20% of mined bitcoins lie in abandoned wallets that owners may never retrieve.
When making cryptocurrency investments, it’s essential to set a password you can remember. Besides, consider getting an encrypted USB to store the access information. You can also get a secure password management program that will simplify access without compromising security.
While selecting an easy password may appear as an ideal solution, it increases the risk of hacking. Pick complex passwords that include letters and numbers to protect your investment. You can also incorporate symbols for enhanced digital wallet security.
4. Buy What You Can Afford
Some people view bitcoin investing as a get-rich-quick scheme and end up investing all their money. Others also borrow loans and sell their assets to mine higher amounts of crypto. Although such a move may yield remarkable profits, it’s not advisable to invest all your money.
Alternatively, evaluate your monetary capability and determine how much money you are willing to trade. By doing this, you protect yourself against a loss that may affect your financial status.
Depending on the performance of your initial investment, you may then increase it gradually as you develop better trading tactics.
5. Determine Your Investor Profile
Another common mistake made in the cryptocurrency business is failing to identify an investment profile. This issue then makes it challenging to plan on maximizing profits. It also increases the risk of failure by lowering the effectiveness of investment strategies.
Before involving yourself in bitcoin trading, you should first pick an investor profile. The three main options in the market are trader, moderate and conservative, or hodler.
Traders mainly focus on short-term operations by observing crypto market fluctuations. These buy when rates are low and sell within a short time after the bitcoin value increases.
On the other hand, hodlers focus on the long-term value of their investment. After buying, they hold the asset until its value appreciates significantly compared to the initial price. The last category, moderate, consists of investors focusing on both trading and hodling.
Since each of these profiles has pros and cons, it’s advisable to determine your goal before picking one. This way, you can plan accordingly and identify the most appropriate time to invest. Choosing your profile also allows you to develop effective strategies that can generate a better ROI.
6. Select a Convenient Transaction Method
Before trading bitcoins, you should pick a convenient exchange method. Selecting the wrong one can lead to high blockchain network transaction fees. It also complicates the entire process and makes it challenging to ensure timely purchases.
If you want to buy bitcoins in cash, consider using safe and reliable bitcoin exchanges. However, beware of scammers and follow the rules set by the platform you use.
Alternatively, opt for bitcoin ATMs to transact with cash or credit and debit cards. While you may feel skeptical about this choice due to low transaction limits, selecting an option like bytefederal.com will allow you to trade higher amounts of up to $21000.
7. Consider Taxes
Most beginner traders fail to factor in taxes when investing in bitcoins. Ignoring this aspect then influences them to make mistakes that may lower their profits. For example, some buy crypto in many installments, increasing the amount of taxes charged on transactions.
Avoid lowering your potential profits by understanding all the laws and policies related to blockchain technology. Further, determine the amount charged to specific transaction categories and use the information to plan your investment.
By taking these steps, you can develop a strategy to maximize investment and reduce taxes owed. You will avoid problems related to filing taxes, such as financial audits and penalties or fines.
Avoid Costly Mistakes With Bitcoin Investing
Learning more about the most common bitcoin investing mistakes will help you protect your portfolio. Besides, you can determine how to get a higher ROI by picking the right profile and time to buy or sell.
If you would like to read more cryptocurrency-related articles, browse the rest of this page today.