Despite the ups and downs when it comes to the value of Bitcoin, it still remains one of the most sought-after cryptocurrency investments. The problem is most new investors don’t know how to buy Bitcoin. Instead of doing proper research before investing in something new, they just jump onto the bandwagon in the hopes of making a profit.
Here are several useful tips that new investors should follow before buying Bitcoin.
1. Learn How to Store Bitcoin
Before anybody can learn how to buy Bitcoin, they must first learn how to store it. Learning all of the basics before investing in anything is crucial for the success of the investment. Not all exchanges are created equal, so always do plenty of research beforehand.
Learning how to properly store Bitcoin is critical as it’s the only way to protect the investment. Proper storage is necessary to fully protect any digital assets, as scammers and cyber-attacks are a very real possibility.
Look for Bitcoin wallets with security as their main focus. One of the top security features in these wallets is generating private security keys to keep the wallet offline. Storing it offline prevents others from seeing it, so it’s less vulnerable to attacks.
2. Don’t Ignore the Market Cap
Many new investors only focus on the coin price, which is a grave mistake. Never base any investment decisions on the current coin price because that doesn’t provide the true value of the cryptocurrency.
The true value also takes into consideration the supply that is currently circulating. When investing in Bitcoin, don’t focus too much on current value. Instead, pay attention to the total market cap being purchased. The closer the Bitcoin is to the market cap, the more in demand it will be when selling at a later point.
3. What About Bitcoin Mining?
For investors considering Bitcoin mining, it’s not a wise path to follow, despite how fast the industry has grown. When Bitcoin first entered the scene, mining at home was easy. Home computers were able to crack the crypto puzzles, and people were able to earn new Bitcoin.
Now the only way to be successful at Bitcoin mining is through a specialized data centre, whose only purpose is to mine Bitcoin. As a decent home setup would cost millions, it's more profitable to invest in Bitcoin currently circulating rather than mine.
4. Create Clear Profit Targets
As a brand new Bitcoin investor, it can be difficult to determine when to buy or sell Bitcoin. Another issue is how volatile the Bitcoin market is. It is constantly changing and is unlike any other financial investment market.
To help navigate the fluctuating market conditions, it is necessary for investors to set clear profit and loss margins before they start trading. Many new investors make the mistake of not letting go of a bad investment so they just sit on it, hoping that it does better. Setting clear profit and loss margins enables investors to minimize their losses.
5. Don’t Fall Victim to FOMO
For those new investors out there, FOMO stands for “Fear of Missing Out.” This is a huge mistake that many new investors in Bitcoin make, as they often make rash decisions in fear of missing out on something.
A good example is when they see huge growth in their investment, they immediately invest more money, not thinking about what is going to happen in the future. These investors fail to realize that they have already missed the price move that day, so they are buying high rather than low. Investors really do better by following the buy-low-and-sell-high rule.
6. Understand That Bitcoin Is High-Risk
For all new investors, understand that this is considered a high-risk investment. The market is constantly going up and down, which makes even the most experienced investors a bit nervous. Before making any investments in Bitcoin, an investor needs to come to terms with the fact that it is a high-risk one, there are no guarantees on profits, and investors will experience losses.
The best chance to turn it into a profitable investment is to use a strict risk management strategy, but investors should also diversify their portfolios.