Being the first and largest cryptocurrency ever, Bitcoin continues to dominate the global crypto market with a market share of over 40%. In just 12 months after March 2020, Bitcoin prices skyrocketed from $6,000 to $60,000 during the pandemic. Thousands of e-commerce merchants and websites now accept Bitcoin as payment. Even Tesla will let you buy a car with Bitcoin now.
We had El Salvador accepting Bitcoin as a legal tender and the US SEC passing the first Proshares Bitcoin ETF application back in October-November 2021. Bitcoin reached its ATH of $69,000 while taking along the crypto market to a $3 trillion market capitalization.
There are Bitcoin ATMs spread across the world, and institutions and banks are heavily investing in Bitcoin. While Bitcoin has seen a fair share of troughs and crests and spikes and plunges in its life cycle, Bitcoin never loses its sheen as a viable investment option.
As a new crypto trader, many commit a few mistakes while investing in cryptocurrencies, Bitcoin in particular. This article discusses Bitcoin investing mistakes that beginners should avoid to ace their investing strategies.
Beginner Bitcoin Investing Mistakes
#1 Trading Bitcoin
Confused about how trading Bitcoin can be a mistake, are you? Well, as a beginner, it is advisable to avoid speculating, gambling, or trading in Bitcoin. Instead, save in Bitcoin.
Though Bitcoin can easily be traded or invested across thousands of crypto exchanges, there is always an advantage if you invest in Bitcoin as an experienced investor. Trading Bitcoin can be risky for beginners and may result in liability. As a beginner, one must avoid trading Bitcoin due to the following reasons:
- Trading involves timing the market, researching information, deriving strategy by studying technical charts, etc. It becomes nearly impossible to find the market flow if you are just kickstarting your crypto trading journey.
- Saving is a passive activity, but trading requires your active market observation. While trading may be fun, it takes time away from productive and enjoyable activities.
- Trading coins requires substantial knowledge and a lot of time in the markets to understand how the market operates internally and reacts to external developments. You could probably try hodling the Bitcoin to make a difference rather than trading it.
- Trading overtime might increase your risk appetite, and when you start playing with leverage, there are high chances that your savings might blow up. Bitcoin is an expensive cryptocurrency and more of digital gold that will enhance in value over the years. Try using it to increase and diversify your savings instead.
- Trading also results in taxes at the end of the year, which you probably didn’t consider as a beginner.
Novice traders or beginners can regularly opt for Dollar Cost averaging to invest a fixed amount in Bitcoin. In that way, the trader would be investing at an average price each time.
#2 Investing for a Short-term Horizon
Bitcoin prices keep on fluctuating. In fact, the prices keep on moving up and down all the time. This makes predicting Bitcoin values extremely challenging, and you must be prepared to deal with price fluctuations.
Hence, it is advisable to set a long-term goal for your investment game, study the price trends and invest accordingly.
#3 Panic selling
Many of the beginners out there invest in Bitcoin on a particular day, and when they find that the market has crashed the next day, they are back in the market selling it. This is one of the biggest mistakes that beginners make when entering the crypto market. As investors, you need to have a clear intention of what you are looking to achieve from your Bitcoin investments rather than selling your investments on intuition or FOMO (Fear of Missing Out).
As far as Bitcoin is concerned, it has a volatile price history. A small market crash doesn’t mean that you need to dump your entire bag of coins in one go. Persist and persevere. Hodling is a necessary investment tactic that traders should opt for while putting their money in Bitcoin and other blue-chip cryptocurrencies.
If you study bitcoin well enough as a new investor, you’ll learn that Bitcoin is an excellent investment, and a slight decline in the price should not be considered a threat. The Bitcoin rate has always recovered as quickly as it has dipped.
#4 Not Diversifying Your Crypto Portfolio
There are tons of coins available in the market. While some are better than others, you should continuously diversify your investments. As a beginner, you may want to start with the coins that look to be more robust and stable. Once you get its hang, you can start adding new coins. For the safe side, buying bitcoin makes you the most secure investor at the beginning of your journey due to the following reasons:
- Firstly, Bitcoin is the king of all cryptocurrencies. All cryptos are strongly correlated with bitcoin. So when you’re thinking of investing in cryptocurrency, Bitcoin is simply the answer. If bitcoin crashes, all the other coins take a dip too. Maybe with a slight delay, but all the other coins will follow the same sequence as the bitcoin.
- Secondly, the top 100 cryptocurrencies are constantly fluctuating. The price of the currency goes up or down. They follow a pump and dump scheme to attract the greedy. A beginner should be ready for the market’s volatility and be aware of such scams. On the other hand, only bitcoin remains on the top. Bitcoin is the most secure coin in the history of cryptocurrencies.
Hence, as a beginner in cryptos, starting with bitcoin and understanding the market first is recommended.
#5 Keeping Your Coins in Your Exchange Wallet
As traders, we prefer keeping our coins in our exchange wallets instead of moving them to a non-custodial wallet or a hardware wallet to save the costs of moving the coins from one wallet to another. However, this isn’t a very good idea. As a beginner, when your investments are in an exchange, there is a high chance that they will get wiped out with just one button click.
Bitcoin can be bought via exchanges such as WazirX or P2P lending platforms (WazirX also offers P2P trading). The disadvantage of storing your coins in an exchange wallet is that you don’t entirely control your holdings. Your funds are held by the exchanges themselves, which are often vulnerable to hacks and scams. As a beginner, you would probably not know how to deal with such a mishap. It is advisable not to keep coins on exchanges, not at least when you’re beginning your crypto journey. Use hardware or offline wallet to store your bitcoin holdings.
Crypto investing is steadily becoming popular, and most people are still getting used to it. So, being aware of the market and its dynamics is essential for any trader. Avoid these mistakes while buying bitcoins to get the best out of your investments.
If you are a new trader looking for a reliable crypto exchange to start your crypto trading/investing journey, your search ends with WazirX. WazirX provides an intuitive and comprehensive, user-friendly platform for all newbies. Hop over to WazirX to start your trading journey in a few simple steps. Happy Trading!
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.