5 Mistakes to Avoid When Buying Bitcoin

5 Mistakes to Avoid When Buying Bitcoin

It’s said that Bitcoin has become one of the most popular cryptocurrencies on the market because of the benefits they possess, especially those of security and low cost. However, investing in Bitcoin isn’t as easy as you might think.

As a prudent investor, your return on investment is important. Bitcoin’s volatile nature makes it a risky investment choice. That shouldn’t deter you from buying it. But, as an investor, it’s always good to invest in assets wherein you understand the risks involved.

Man use smart phone pay with bitcoin

It’s believed that investing in something you don’t understand exposes you to the risk of making costly mistakes. So, to avoid making these mistakes, you need to gain knowledge of how things work. Also, market forces of demand and supply affect cryptocurrencies like every other investment. Hence, having a basic understanding of market analysis can help you when dealing with things like Bitcoin. In the end, the objective is to get a good return on your investment.

That said, here’s a list of mistakes you ought to avoid when buying bitcoin.

  • Not Prioritizing Security

If you lose a Bitcoin, you may never get it back. That’s why you need to prioritize security.

With Bitcoin, you need a public or private key to access your coin. If you lose this key, you may lose access to your Bitcoin for good. Since Bitcoin effectively cuts off the middlemen (financial institutions), there’s no one to call if you want to reset or recover your password. Many accounts today are said to end up being irretrievable for people have forgotten their access keys. Plus, for lack of vigilance or knowledge, some people have fallen prey to scams that have resulted in lost Bitcoins.

Below are some tips on how to make your Bitcoin more secure:

  • Use a reputable exchange

While the Bitcoin network itself is secure, the same can’t be said for exchanges where you buy it. Due to the increase in cybercrime, scammers are on the rise. Therefore, there’s the genuine risk that you, or anyone, can get hacked or scammed.

Some scammers can create fake exchanges. But if you’re a novice, you could be a victim. These fake exchanges are fraught with fake coins and malicious wallet software that a novice may mistake as the real deal. To avoid being scammed, partner with reputable exchanges like Netcoins to ensure that your investment is safe.

  • Use Two Factor Authentication (2FA)

To heighten security, make sure that all the devices you use are secure. Whether it’s your phone, laptop, or desktop. You need to use two-factor authentication and encryption to keep yourself safe online.

  • Not Diversifying Your Portfolio

As an investor, you need to have a diversified portfolio to protect yourself against uncertainty and volatility. Casting all of your metaphorical investment eggs in one basket isn’t a wise investment because it makes you vulnerable to volatilities. Henceforth, it’s not a good idea to only invest in Bitcoin, especially since its volatility is common knowledge.

Ideally, you should diversify your investment portfolio with other safer items such as stocks, precious metals, mutual funds, and real estate. But, if you want to stick to cryptocurrencies like Bitcoin, you can diversify with other alternative currencies as well.

  • Buying High

For fear of missing out, some people may jump on the bandwagon to buy cryptocurrency as investment because of the high price. But, the fatal mistake with this logic is because of the volatile nature of Bitcoin, the price won’t stay high forever. It’ll eventually come down. So, once you buy into the craze, you may end up having to sell your Bitcoin for a lower price later.

Consequently, rushing to buy a Bitcoin just because it’s on the ascension or because everyone else is buying isn’t always a wise investment decision. You need to make decisions based on what is economically viable, not what’s trendy.

  • Having No Investment Plan Or Strategy Ready

How much will you invest in and how much do you want out of Bitcoin? When do you plan on cashing out? Are you investing in the short or long term? These are examples of some questions you should be clear on before investing in Bitcoin.

A plan or strategy provides direction, especially when making decisions. Going ahead without a strategy is a risky business. For instance, if you don’t know where to cut your losses or bank your gains, you may end up losing more than you bargained for. Ideally, you should have a strategy of how you’re going to cut your losses or bank your gains. Without it, your prospects of maximizing return on your investment are bleak.

  • Investing More Than You Can Afford

Bitcoin has its upside as an investment. Yet you can’t deny the fact that it’s still a very volatile asset. Investing in it can be expensive, depending on your financial status. Additionally, the amount of money you’re willing to risk largely depends on your risk tolerance and quest for possibilities.

If you’re biting off more than you can chew, you need to reconsider whether the benefits truly outweigh the costs. If your investment is taking a toll on your savings account, it may not be wise to buy too much of it since there’s no certainty that you’ll get a good return on your investment.

So, if you’re going to invest in Bitcoin, invest only the amount of money that you can afford to lose. You certainly don’t want to invest in more than you can bear to lose because it’s unwise investing.

Conclusion

While investing in Bitcoin can be a worthwhile investment in the longer run, its volatility makes it risky. That’s why it’s wise to diversify your portfolio if you wish to hold Bitcoins. In addition, make sure you partner with reputable exchanges and keep your investment as secure as possible.

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