Top tips for beginner bitcoin investors

Bitcoin investing is now one of the hottest topics in the investment world. It has established itself as an extremely valuable asset for over 10 years now. Its technology has stood the test of time, and is only getting more popular. 

Cryptocurrency prices have gone up relentlessly over the last decade, making bitcoin the best-performing financial asset in the world. The return on investment has never really been seen in any asset class before. 

Because of these reasons, many people want to start investing in this cryptocurrency, but it can be daunting at first. It’s a completely unique investment asset, and there are many risks peculiar to cryptocurrencies. Here are the main factors you should consider as a beginner bitcoin investor who is buying crypto for the first time. 

Start investing gradually

One of the biggest mistakes beginners make with bitcoin is jumping in too fast. They are excited and quickly find out just how easy it is to buy bitcoin once they have an exchange. The price may even jump up 10% in one day. 

Then, they discover all the other cryptocurrencies they can invest in. From there, they quickly put in everything they have (and more!) into digital coins. 

However, this is naive investing behavior, because cryptocurrency is an unpredictable market. If you check how the bitcoin price moved over the last few years, you’ll see it fluctuates wildly and irregularly. If you buy too much at the wrong time, you could lose a lot of money very quickly. 

The best approach is to start slow. Invest only $50 or less at first. Get a feel of how the cryptocurrency market works – then, when you’re more comfortable, you can start to build your crypto portfolio bit by bit, one purchase at a time. This is the only smart way to buy bitcoin. 

Assess the risks objectively

Making an investment in bitcoin comes with a lot of risks, many of which you won’t find in the traditional banking and investment sectors. 

The first is price risk. This implies that the price will drop suddenly. If it does, you’ll lose money on your investment. 

This risk is higher with bitcoin than with most other assets. That is because it is prone to price bubbles. This is where the price becomes inflated well above what it’s actually worth in the real world. 

This problem with price bubbles has happened many times in bitcoin’s past. For example, in 2017, it shot up to around $20,000. Many investors saw the soaring price and jumped in to make some quick money. Unfortunately, because it was a bubble, the price soon crashed to below $6,000. Those that bought in at the top of the bubble lost a lot in the short term. 

Bitcoin also has other risks associated with it. The main ones include actually losing your BTC coins. You see, cryptocurrency is a unique digital technology that works a lot like cash. However, if you lose it, it’s gone forever. There is no bank or government that can help you out in recovering it. This makes it a prime target for hackers, and the crypto world is full of hackers looking to get their hands on your assets. 

Another risk is just simply losing your private key (basically, your crypto ‘password’), thus losing access to your coins forever. 

These risks are very real in the crypto world, and people fall prey to them all the time. Therefore, before you invest, you need to assess all pros and cons objectively and make your own decision on how many risks you are willing to take on in your investment strategy. 

Choosing a cryptocurrency for investment

Cryptocurrency investors are spoilt for choice when it comes to currencies. There are hundreds of different cryptocurrencies currently trading on the open market, and many more are added every year. Each one has its own unique value proposition and potential for future return on investment. 

It can be tempting to want to buy many different currencies right away. Or to start buying the ones that are currently surging in price. However, for beginners, it’s usually best to start with the most well-known cryptocurrencies like bitcoin. 

Bitcoin is currently the safest bet in the industry, and where most people start. After you have gained some experience of investing in BTC, you can diversify your portfolio with all of the other exotic varieties of digital coins out there. 

Don’t succumb to FOMO

Cryptocurrency trading is one of the biggest wealth transfers in history. Unsurprisingly, probably the biggest killer in the crypto investment market is FOMO – the “fear of missing out”. Because there are so many people who have become rich from buying BTC and other cryptocurrencies with basically zero effort, people can easily fear that they will miss out on this once-in-a-lifetime opportunity and make irrational decisions. 

The main way this FOMO manifests is in price bubbles. A cryptocurrency price – for example BTC – will start to rally upwards. As it goes up, it catches some people’s attention and tempts them to buy in the hopes of profit. This causes even more people to buy, which pushes the price up even higher. 

Once the media catches on to this trend, the whole world sees the price skyrocketing. Investors fear they will miss out on getting rich, so they hurry to buy, and end up buying at the wrong time. 

Don’t get caught up in FOMO. You will miss most opportunities in bitcoin trading. That’s just how it is. Stay calm and stick to your long-term investment strategy. Smart investors don’t let fear cloud their judgement. 

Conclusion

Bitcoin investing can be extremely fun and financially rewarding, but it does come with many risks for new investors. Before buying, you need to consider the risks carefully. 

Start investing simply and gradually at first. Look at the risks objectively and don’t let fear and reaction drive your investment choices. Follow these simple principles, and you’ll have a good chance at making it as a successful bitcoin investor. 

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