Published on November 19th, 2020
Bitcoin is usually the first cryptocurrency people hear about and how they’re introduced to the concept. And normally, it sparks a lot of enthusiasm in new investors.
However, as you may already know, Bitcoin doesn’t behave like any asset, and it’s important to understand what Bitcoin is and isn’t before you invest.
You also have to beware of the common pitfalls that others have fallen into so that you can avoid them. Let’s take a look at some of the most common mistakes people make when they start investing in Bitcoin.
1. Being Religious
A lot of people fall in love with the idea of Bitcoin versus what it really is. For many, it’s the ultimate tool to take down the global banking elite and the response to all of the world’s problems. But the reality is much more complex than that.
The truth is that Bitcoin has flaws, and being a religious investor will make you overlook those and be over-optimistic.
It’s better to see Bitcoin’s flaws for what they are (slow transaction speeds, high fees) so you can understand if any changes are coming to fix these issues.
2. Keeping All Your Eggs In The Same Basket
This is somewhat related to number 1. Being a religious ‘Hodler’ as they’re called, makes you miss all the other cool crypto projects. There’s a whole world of cryptocurrencies out there, and some don’t even operate in the same universe as Bitcoin.
You have projects like Golem, for instance, that allow you to ‘borrow’ the computing power of the computers in its network in exchange for coins.
Or, the Basic Attention Token (BAC) that filters ads and rewards you for the ones you opt to view. There are literally thousands of tokens out there, so do your research and diversify your assets, just like you would with any other type of investment.
3. Thinking That They’ll Get Rich Overnight
This is probably one of the saddest mistakes. People hear stories like that of the kid who invested the $1000 his grandmother gave him into Bitcoin and cashed in $1.5 million later, or the Winklevoss Twins’ early investment into Bitcoin that turned into more than a billion dollars.
They then assume that they can’t lose and often spend more than they can afford. These are the people who end up panicking once the price drops below a certain point and call it a scam only for it to rise right back up again.
You have to be into it for the long run and analyze price movements before you jump in. It would also help if you learned some basics about how to read a candlestick chart, for instance.
4. Trusting Exchanges
This one is another very sad one. You can’t trust exchange at face value, and if you’re Canadian and familiar with the Quadriga scandal, you may already know about this.
The worst thing you can do is let the exchange be your wallet too. If it suddenly goes down, this means that your coins will be gone also.
We suggest you learn how to buy bitcoin Canada safely and make sure that you only go with exchanges that have a solid reputation and track record.
These are just some of the mistakes people make when investing in Bitcoin. They are easy to avoid, however, and we suggest that you learn as much as you can, not only about Bitcoin, but about the technology behind it and other cryptocurrencies in the space.