If any of the following applies to you, you probably shouldn’t invest in Bitcoin.
You don’t really have the money
The golden rule of investing in Bitcoin and other cryptoassets is to not invest what you can’t afford to lose. Too many people invested their life savings into crypto during the 2017 boom and bust, thinking it was a ticket to riches, only to have it disappear in front of their eyes.
Since Bitcoin is still so volatile and unpredictable, it’s impossible to predict where it will go next.
Despite the allure of easy money, there’s always a possibility that it could all go to zero tomorrow.
If you have more money invested in Bitcoin than you can’t currently afford to lose, you’re taking a big risk with your financial position.
You want to get rich quick
Everybody has heard stories of someone becoming a millionaire practically overnight from their early Bitcoin investment, or because they bought some obscure crypto that 10x’d in two months.
Exponential increases in the span of weeks or months are completely unheard in any other field except crypto. It therefore draws in people looking for for a way to make money quickly.
But just like winning the lottery, the chances of that happening to you are incredibly slim.
Spending money you don’t have on a speculative asset is a recipe for disaster, not success.
Bitcoin investment is for hodlers who are prepared to play the long game and sit on their coins for years.
Instead of being a get-rich-quick scheme, investing in Bitcoin should be seen as a way to add to your long-term asset portfolio.
It’s something that could not work out at all how we want it to, but it could provide — given enough time — some level of financial freedom.
You don’t understand how it works
Bitcoin is a complex invention, comprising many new and confusing technologies.
You don’t need to be a computer scientist to buy and sell Bitcoin. But, it is useful to have a general understanding of where Bitcoin came from, how a transaction works and how to use a wallet.
Bitcoin transactions are irreversible, so not knowing how to use it properly could have serious consequences. If you send your funds to the wrong place accidentally, there’s no getting them back.
You don’t understand Bitcoin’s implications
As well as being technically complicated, the Bitcoin rabbit hole just gets deeper and deeper the further you go.
On its face, Bitcoin is a new digital peer-to-peer cash system.
Look a little deeper though and you’ll find that among other things, it’s the most accurate form of truthful record keeping humanity has ever produced.
And that has huge consequences for our entire monetary system, so understanding Bitcoin’s true potential is more important than ever.
Bitcoin is immutable, tamper-proof, censorship resistant and only ever likely to increase in value over time.
Our current system of government-issued money is centrally controlled and manipulated, used as a surveillance tool against its citizens, confiscatable and guaranteed to lose value over time.
In time, which of these two forms of money do you think is more likely to appeal to the population?
It will certainly take time, and Bitcoin will need to mature as a technology to allow more people to use it.
But over time, more and more people around the globe will begin to realise that it’s in their best interest to have their savings in bitcoins rather than dollars or euros.
And when this inevitable shift from fiat currency into Bitcoin occurs, what happens to our current monetary system is anybody’s guess.
But when it happens, it will be far better to already be on the winning team.
Thinking about Bitcoin as only a quick way to make money, and not for it’s true long-term potential could cause you to lose out big in the future.
Because a ‘blockchain expert’ told you to
During the 2017 bull run, we all had friends who tried to predict the price of Bitcoin, and which coins were ready to 10x and go to the moon.
We all saw the clickbaity articles and YouTube videos claiming to give you insider dev info on the hot new altcoins.
And it all turned out to be bullshit.
Without wanting to sound repetitive, nobody can predict the future, and nobody knows what any given crypto is going to do next.
And with (what looks like) the end of the most recent bear market and onset of another run, these bullshit artists are starting to come out from hiding, and are producing the same trashy content.
If you believe anything these supposed ‘experts’ say, Bitcoin just isn’t for you.
You’re getting FOMO
Probably the worst reason on this list to invest in Bitcoin. Investing because you think you’re missing out is almost guaranteed to cause you to make bad decisions.
Watching other people around you make money is a sure way to go crazy, but FOMO buying is never the answer.
I knew plenty of people who FOMO bought Bitcoin in December 2017 right around the all time high, only to watch their investments drop by up to 80%.
Two strategies that are useful in fighting the FOMO are:
Dollar cost averaging: This involves a bit of discipline, but it is the practice of putting the same amount of money in at specific intervals. This means that the average price you pay for Bitcoin averages out over all your investments.
Some might be a little cheaper, some might be a bit more expensive, but it stops you from trying to guess or time the market.
Playing the long game: If you understand Bitcoin’s potential future, you’ll realise that this technology is going to be around for a long time.
If we make a rough comparison with the adoption of the Internet, Bitcoin and crypto is around about 1995–1998 levels.
If you thought at that time that the Internet was at its peak and wasn’t going to get any better, you would have been way wrong.
And it’s the same with Bitcoin. We still have so far to go on this journey, and thinking you’re going to miss out on investing because Bitcoin gained a few percent in the last week is short-term thinking.
Even if you think Bitcoin might be getting expensive now, we might look back at today’s prices in a few years and be amazed at how comparatively cheap it was.
Of course, there are many more reasons to invest in crypto than not.
But it’s still useful to look at how easy it is to get things wrong, especially in the mania of a bull run when prices are going up left, right and centre.
If in doubt, always follow the two golden rules of crypto: don’t put in what you can’t afford to lose, and whatever you do have, you hodl.
If you’d like to learn more about Bitcoin and why it’s so important, check out “The Ultimate Beginner’s Guide to Bitcoin”: an in-depth look at Bitcoin, how it works, and why it’s important, written specifically for beginners.
If you’d like to get the first chapter of the guide for free, leave your email address here.
Originally published at www.cryptobeginners.info.
Disclaimer: This article in no way constitutes financial, legal or investment advice. It exists for educational and entertainment purposes only.