7 Common Bitcoin Investing Mistakes and How to Avoid Them

Cryptocurrencies have taken the world by storm these past couple of years, but one, in particular, seems to be the reigning champion of crypto investments – Bitcoin. This past year was a dream for those investing with bitcoin as the digital asset’s value ran all the way up to an all-time high price of $63,729.50.

That’s a pretty incredible price for an asset that you could have invested in for less than $10,000 just a year sooner in 2019.

If you are thinking about investing with bitcoin, keep reading this comprehensive guide to learn some of the common bitcoin investing mistakes people make and how you can avoid them. 

1. Buying Because You Heard It’s “Going to the Moon”

This one should seem obvious, but it’s never a good idea to invest in something just because someone told you “it’s going to the moon.” Buying on someone else recommendation is not an ideal bitcoin investment strategy and can end up costing you a lot of money. 

How to Avoid

When someone tells you bitcoin is going to take off, start doing your own research and due diligence. Try to figure out why people think it will run up in price and then create an actionable plan. 

2. Panic Buying

Panic buying is another common investment mistake when it comes to bitcoin and really any asset. When the fear of missing out or FOMO gets the best of you, that’s typically when you end up losing money. Panic buying can be a costly mistake when you fail to do your due diligence. 

How to Avoid

Instead of buying immediately when someone tells you to, it’s better to do your own research. Think about possible good entry points where the cryptocurrency seems to have support and avoid buying when it’s running up.

3. Investing in Only Bitcoin

Bitcoin may be the “king of cryptocurrencies.” However, it’s never a good idea to invest all your money in just one single asset. Doing so can bring on excess risk to the investor as one correction can make you lose a significant amount of money.

Things happen from time to time that can affect the asset’s price, such as news releases, government policy changes, and cryptocurrency influencers commenting on the subject.

How to Avoid

Instead of just investing in bitcoin, consider doing some more research and finding a few different assets to invest in. It can be other options for cryptocurrencies or even other financial instruments like stocks. Diversifying your portfolio can help protect your account and “cushion it” from severe corrections.

4. Throwing All of Your Money in at Once

This can go for any investment – throwing all of your money in at once can be costly. When an investment like bitcoin experiences a correction, investors that bought at the top can lose a significant amount of money, and it can take a while to recoup the losses. 

Investing is a process. It’s important to consider things like entry points and dollar-cost averaging. 

How to Avoid

In this scenario, you can avoid investing all of your money at once by practicing dollar-cost averaging. Dollar-cost averaging involves making small investments over time that add up to a large sum rather than investing it all at once. Practicing this investment strategy can help investors become more patient and wait for the price to go to a place they are more comfortable investing in. 

Dollar-cost averaging can produce a higher return on investment for investors with better entry prices than if you were to invest your money all at one time. 

5. Panic Selling

Panic selling can be just as costly as panic buying. When things are not going the way you expected (ex. the price is falling after you bought it), it’s best to reassess why you invested in the asset in the first place. Panic selling happens when you sell the investment because the value is falling, and you are worried the price will continue to drop.

For example, when Bitcoin fell more than 30 percent and crashed to a value of around $31,000 in May, it led many people to panic sell and lose their position. These people missed out on the opportunity when Bitcoin bounced back and began trading back above 40k. 

How to Avoid

When things don’t go the way you planned them to, and the price is going against you, it’s essential to keep things in perspective. This is when you revisit your notes on why you purchased the investment in the first place. If your primary reason for investing is still valid, you should have no problem holding through corrections.

6. Borrowing Money to Invest

Again, this can go for most investments – borrowing money to invest in an asset is rarely a good idea, especially assets that are as volatile as cryptocurrencies. Sure, you can boost your position with leverage and trade on margin, but if the trade goes against you, you can end up losing a lot more money.

How to Avoid

Instead of attempting to leverage your position, consider either a) saving up to invest more or b) try to win it using something like a bitcoin casino. The best bitcoin casino will provide opportunities for investors to win real Bitcoin. 

7. Checking the Price Every Few Minutes

There is no correlation between how many times you check the price of Bitcoin and the value of it. Checking the price of the investment every few minutes will not change the price and can cause you to panic sell.

How to Avoid

The best way to avoid this is by investing for the long term. If you are invested for the long term, you will be less inclined to panic when the price drops. If you are looking to invest more into the asset, you can set up price alerts to inform you when the price has reached your target, and you can then proceed to invest more if you wish.

Bitcoin Investing Mistakes: Getting the Most Of Your Investment

Investing in bitcoin has been a hot debate recently. On the one hand, investors are saying it will multiply many times over, and on the other side, individuals are claiming the digital asset will fall and basically become worthless. So far, bitcoin has managed to prove its doubters wrong. 

If you are looking to get invested in cryptocurrency, avoiding these few bitcoin investing mistakes can help you get started on the right path. To learn more about bitcoin and other interesting topics, check out the rest of our blog!

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