As a rule, bitcoin transactions usually go well once people master the complexities. That can take time, considerable research, studying, patience, and proceeding through the processes with caution.
Unfortunately, in some instances, investors in the cryptocurrency don’t follow the guidelines when attempting to go into bitcoin purchases since they go in with minimal knowledge, full-throttle taking no precautions. That’s when mistakes often occur to the detriment of finances – or perhaps devastation. Look here for examples of errors that occur with bitcoin trading.
These mistakes usually occur with a gregarious newcomer to the bitcoin world who wants to get in on the incredible profits that run the gamut of the internet. It’s unwise to presume that because millionaires were produced when bitcoin was introduced, it will be as prevalent now that it’s progressed along so far.
When users keep expectations realistic, they also pay better attention to what they’re doing and are less likely to jump into an irresponsible or risky transaction. There are more reasonable goals than merely making a fortune.
Instead, there is a greater focus on building a strategy that will eventually bring profits to keep the future comfortable. Let’s look at a few of the more common mistakes some of the less experienced (excited) newcomers tend to make.
Bitcoin Buyer’s Mistakes
Anyone new to a product or service will be anxious to dive in headfirst with generally not a lot of time and thought in the beginning. That is why most newbies tend to make the most mistakes, and bitcoin purchasing is no exception.
It’s especially true when you read how people have made millions transforming their entire lifestyle. While that might have been true in the initial stages with bitcoin buying (see bitcoinguiden.no for guidance on crypto purchases), it’s not necessarily the case in the present day. It probably depends on how you play your hand; if you’re methodical and purposeful holding the currency instead of impulse selling – or buying, or not.
Check out some of the standard mistakes made when buying bitcoin for the first time.
- Emotion-based trading
The recommendation when buying or trading is to do so without having an emotional attachment. Before you even “step into the ring,” there should be an established strategy that you intend to follow and not stray from regardless of the circumstances.
If this is the case, logic and method should be deciding factors when implementing the strategy instead of passion or excitement, let alone greed or being unsure.
Those seasoned in the industry have established an incredible degree of patience. These individuals make no final decisions until a thorough analysis with profit targets set for purchasing and selling with the strategic plan put in motion once everything falls into place.
Again, there is a purpose to the thought process. Decisions are not impulsive, nor do these pros merely dive in without a plan. A common mistake is to panic purchase or panic sell. With either scenario, you will lose incredible amounts of money.
- Failing to follow your own research
Virtually anyone can establish a new digital currency account with so many available to the public. It’s vital to perform an adequate amount of research on each option, including bitcoin, if that’s your virtual currency of choice before you put up any money. Some questions suggested when studying the various options:
- What sort of community participates with bitcoin
- Are the developer active – how active
Check out the white paper and seek out as much educational literature as you can find to become informed. Go on forums to participate in conversations and ask questions.
You’ll find the cryptocurrency world is full of scams, but these scammers only grow successful because they attract the attention of those who did not educate themselves.
- Investing more than your budget can afford
When choosing bitcoin as an option for purchase, the idea is only to buy the quantity that you know you can reasonably afford to lose in the end. That basically means if you have a budget that affords you $1000 for investment purposes, that’s all you need to put into the currency.
It would be best if you never stepped outside your comfort zone by cashing in retirement plans, borrowing off of close friends or family, taking out loans, or maxing credit cards. Purchasing or trading bitcoin should not be viewed in the context of “gambling.”
There isn’t a guarantee that you’ll get the sort of return you’re hoping for to pay back all the debt you create.
If you invest the money you budget for bitcoin and lose that money, there are no financial repercussions. There’s no debt and no bills with which you need to contend. It’s a safe, wise purchase with virtual currency that you sort of hold onto until there’s an opportunity to either build on it or let go.
- Lack of diversification
If you’re new to crypto, most people lean towards adding bitcoin to their portfolio. It is the favored option, an extraordinary asset that many people consider their starting point in the crypto world. Still, numerous other opportunities could fit your specific financial circumstances just as well.
It’s beneficial to sample a few without going over your budget to diversify your assets somewhat and create some added stability with your holdings. It’s not like you’re being disloyal to bitcoin.
It can be your primary crypto but scatter a few others in there to shake things up a bit and give your portfolio a more solid foundation.
- Unsecure assets could create significant problems
It doesn’t matter whether you have a minimal amount of money in your portfolio or a substantial sum of money; the assets should always be secure. Any password incorporated into your bitcoin project needs to safely be stored in a safe or locked area where no one has access except for you.
The information needs to be written plainly and clearly or printed on a slip of paper so you never forget what it is because there will be no way to recover or receive a new password. That means you will be out of any bitcoin secured by that password.
Two-factor authentication uses a “third-party app” or text to create a code that completes the sign-in process. The recommendation is to implement a “hardware wallet” for long-term storage of the bitcoin or other types of crypto.
Hackers and scammers are drawn to the potential for large sums of money with bitcoin and know that some users are lapse with security measures.
- Early leverage trading
Margin or leverage trading is an exceptionally high level of investment strategy that involves incredible risk but on the other end of that coin is a tremendous reward.
The investor borrows money against their assets in a sort of collateral concept in order to make more significant trades to expand their gains. Pros in the leverage game can cash in massive sums of money in brief periods.
Still, the strategy is hugely risky for those who are inexperienced. As quickly as a pro can make a fortune, a newbie can lose that same fortune. As mentioned before, you should never invest what you can’t afford, and that means not borrowing against assets that you don’t want to lose.
The recommendation is to avoid this sort of strategy until you have more of an understanding of the fluctuations in the market and standard spot trading. Many users won’t touch leverage trading no matter how experienced they are due to the amount of risk.
Other similar risky but rewarding strategies include “futures and options,” again, something that should be avoided until you know better than to do it.
These are merely a few mistakes newbies tend to make before taking the time to learn the ins and outs of the bitcoin market. As someone just starting with cryptocurrencies, emotions tend to be high considering the potential for profits.
The goal is to wait to dive in until you’re able to take that high level of emotion out of the equation and proceed with a degree of logic and purpose.
The industry can be a thrilling and unique experience with so many opportunities to make money on any given day. Still, it’s more readily available for those who take the time to study, research, and ask questions until they thoroughly understand the practice – plus develop a strategy.
When you take adequate steps, you can then be sure that you do not have losses because of these preventable mistakes.