5 Tips For New Bitcoin Investors

Tyler Durden's picture

Authored by Darryn Pollock via CoinTelegraph.com,

Taking the plunge and entering the crypto space can be daunting. There is no centralized authority to hold your hand, and the rumors and stories circulating around digital currencies can be fear-inducing.

image courtesy of CoinTelegraph

However, with a few straightforward tips, negotiating that first Bitcoin transaction or trade can be a lot less stressful.

1. Do your homework

There is plenty of hype, rumor, success stories and tales of horror when it comes to Bitcoin and other digital currencies. Make sure you understand exactly what you’re getting into, and don’t risk more money than you could afford to lose.

Bitcoin is an exciting world to be in, but it is one that is complex and confusing if you only enter it on hype. Many people buy expensive cars, not knowing how the engine works, and that is fine because if it breaks there are mechanics and garages. In the cryptocurrency world, it is you against the world, it is decentralized and there is no one to hold your hand.

Pawel Kuskowski, CEO & co-founder of Coinfirm, gave this advice:

"The more you understand, the better off will be."

Don’t simply speculate about the big money there is to be made, actually go out there and learn how Bitcoin and Blockchain work. Lucas Geiger, founder and CEO of Wireline, says:

"This may seem obvious, but I think the first thing is take time to understand the Blockchain. I say this strongly because few people will do this. If you don't have a high-level understanding of how a Blockchain stores secure data (such as coins), then you are investing in the equivalent of tulip bulbs.”

A good place to start is the beginning - with Satoshi Nakamoto's white paper. Crypto fund manager Jacob Eliosoff wrote:

"If you have any technical bent whatsoever, take 10 minutes to leaf through the original 2008 Satoshi white paper. It's only eight pages, legible and an inspiring work of genius!"

The great thing about the cryptocurrency ecosystem though is that there is a lot of material and information out there. Loads of websites and resources are aiming at trying to make the technology easier to understand.

Even more than that, the investment world is also trying to simplify things by making Bitcoin more available to traditional investors. The introduction of things like futures will help people understand how Bitcoin works.

2. Be cautious

In any investment there will be risk, but that risk is somewhat magnified by Bitcoin’s newness and extreme volatility. Eliosoff emphasized:

"This is still an extremely high-risk space. Don't invest money you can't afford to lose!"

It is tempting to be bold and brazen, throwing money at Bitcoin after hearing the success stories, but especially as a first timer, caution is the better part of valor. There is no reason to look to become a millionaire overnight with Bitcoin, and by sinking huge amounts of capital in it from the start, you will be met with more problems than solutions.

Marshall Swatt, a serial entrepreneur, suggested:

"Start small and invest a small portion of your capital."

Additionally, from Tim Enneking, managing director of Crypto Asset Management, advises:

"Don’t chase Bitcoin prices. Decide on a entry point and stick with it. With Bitcoin, you’re almost always right in terms of foreseeable price action – it’s your timing that might be off. So, be patient, and let the Bitcoin price come to you."

There are a number of investing strategies that work really well with Bitcoin, and those that offer the most success are often the most cautious.

Things like ‘Dollar Cost Averaging’ - putting in the same amount of money into an investment at the same time each week or month - is great for Bitcoin as it helps you ride out the lows, as well as the highs.

3. Diversify effectively

Most new digital currency enthusiasts hear first about Bitcoin, but there are thousands of other cryptocurrencies out there, and some have grown much faster than even Bitcoin. Diversification is wise, particularly since many of these “altcoins” perform well when Bitcoin drops. Tech entrepreneur Oliver Isaacs writes:

"Hedge against volatility and don’t put all of your eggs in one basket. Much like investing in the stock market or FX, you should diversify your funds as a risk management technique." 

Famed stock picker Ronnie Moas is a strong believer in diversification. It is easy to become infatuated with one cryptocurrency, especially Bitcoin, but it is important to hedge your bets.

“Do not put all your Crypto money into Bitcoin,” Moas warns. “You must diversify across at least a dozen of the more than 1,000 names. Focus on names in the top 50.”

4. Keep coins off the exchanges

There is still a lot of hacking and thievery that goes on in the crypto space, and it is important to take precautions. It isn’t too hard to make hackers’ lives difficult. Use the exchanges for just that: exchanging. Once you have bought a currency, move the money off the exchange and into a wallet that only you control, such as a hardware wallet.

A lot of people have been burned on exchange hacks - none more so than the major Mt. Gox one - but even recently, things like BTC-e and the charges against their CEO would have caused many people to lose out on huge amounts of money.

Matthew Unger, founder and CEO of iComply Investor Services Inc. suggested:

"Just like you keep some cash in your wallet, some in your bank account and perhaps the really valuable stuff in a safe, you need to manage digital currencies in the same way."

5. Get ready for a wild ride

Bitcoin is notorious for its volatility, so much so that many traditional investors are terrified of it. A massive drop in Bitcoin’s price does not spell permanent disaster, but it is hard to stay committed when you start heading into the red.

Diversification is a great strategy to help with that, but it takes some thought and effort. Of course, the most famous (and so far, successful) Bitcoin strategy of all is to ‘hodl’ - or hold onto -  your investment no matter the market volatility.

You can also buy and forget, as not keeping an eye on the market can help keep you from worrying about the dips and miss the volatility.

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MGTOW_MONERO_XMR's picture

You want advice? HODL!

Fiat Pirate's picture

Gold.  Bitcoin is computer fiat.

malek's picture

This.

And the "21 mio. coin limit" is a sad joke.

Raffie's picture

Your trolling ignorance of cryptos and blockchian is the SAD JOKE that is you.

 

Raffie's picture

Not a pumper u loser.

I'm a HODL'er..... 

Bitcoin CORE (orginal bitcoin) the math only allows 21mil coins total. Not to be fully mines till 2140.

Gobble On Turkey Boy. You r a fail and u know it. 

malek's picture

You weren't able to follow my detailed argument that I linked to?

It's not math, it's an arbitrary rule. Now the question is who enforces the rule.

wulf's picture

Bitcoiners didn't even read the bitcoin white paper writen by "Satoshi":

"[Miners] vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them.  Any needed rules and incentives can be enforced with this consensus mechanism."

That means the miners not only can, but eventually will change the rules at their convenience, including the 21 million limit.

Bitcoin Mining Now Consuming More Electricity Than 159 Countries - https://powercompare.co.uk/bitcoin/

I'm curious to know who will pay the electricity bill. Bitcoiners probably believe in free energy as well.

milo_hoffman's picture

And since it is now impossible for regular people to mine BTC with a regular computer.

We have gotten to the point where only a very small number of people, who are the only ones with the very specialized computer chips that can mine BTC now.

So, all the power is centralized in a tiny number of entities who will be able to control it all. This massive risk fact is totally overlooked.

IH8OBAMA's picture

And with the futures and option contracts coming that will enable Wall Street to take a stab at the Bitcon, I suspect that the last hurrrah is getting close.  There is going to be some painful moments ahead for some stubborn Bitconers.

The final spike could start as soon as December 10th.

 

Mango327's picture

Yep, the entry of institutional capital and entire systems of access coming online should certainly be bearish for Bitcoin. The end is near, surely. Best prepare for that EMP, chaps. Cheerio.

herkomilchen's picture

LOL.  You don't understand how Bitcoin works.

The consensus mechanism around what is a valid block is distinct from the mining mechanism finding a valid block.  Those who run full nodes provide the consensus around what are the correct rules.  Nodes conclusively decide what are valid Bitcoin blocks by either forwarding them to other nodes or dropping them as invalid.  Nodes are run by ordinary people holding Bitcoin who have a stake in preserving its rules such as the 21 million cap.  Nodes are run on common home PCs and require no extraordinary computing power.

From a discussion of the question on bitcointalk.org:

"The nodes that are miners (or pools) MUST follow the consensus rules when they build their block. If they don't then ALL of the other nodes will refuse to relay their block and the block will simply be ignored by everyone as if it never existed."

As for the whitepaper quote you reference, you altered it, editorially inserting "Miners" where Satoshi actually said "Nodes."  Below is the full actual quote from Satoshi's whitepaper:

"Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof of what happened while they were gone. They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism."

tmosley's picture

The market enforces the rule, idiot. If the devs push updates that the market rejects, there will be a fork, as there has been with BCH. Now there is a battle on to see which protocol will reign.

If the devs pushed something so stupid as dilution of all users, they would be laughed right off the last page of coinmarketcap.

malek's picture

You are arguing against Satoshi's white paper?

"updates that the market rejects"
Again for you dumbfuck, in this case "the market" are actually "the miners" (so NOT all of the owners), and it's not the majority [of miners] who decides which branch of a fork survives and becomes persistent, but a small group of most powerful miners [by hash computing power].
And if the rules are changed, that's not a fork but your tulipcoins have suddenly become something slightly different. Or bigly.

Golden Phoenix's picture

BCH pump should be done November 27 then it'll fall back to oblivion. Fool you twice shame on you.

MonetaryApostate's picture

Stock, guns, bullets, ammo, non-perishable foods, massive water (Cause Nestlé will soon own us hard after they pollute the springs!), and with all of this radiation flying about, it's anyones guess how much time we have left, but expect a massive assault on Europe SOON!

BitCoin will mean little to those who bugout, there is no real hedge against the money printers, & hyper inflation may lead to massive wars & rebellions!  Remember 2008 to now & all the riots?

Raffie's picture

PM and Cryptos is the winning combo.

ReasonForLife's picture

And both physical gold and digital bitcoin are made of atoms.  The value of each depends just the same on the value you place on it in your mind, plain and simple.

FreeShitter's picture

Know when to HODL and when to FODL.....same applies to women.

kamikun's picture

And when times are good, SODL a part of your virtual stack is not a bad game plan either.

Raffie's picture

if she is ROUND that is no reason why you should have ever held her in the first place.

FreeShitter's picture

Agreed, slim and trim for me....

Grave's picture

beginners guide to cryptocurrencies:

1. bitcoin is the blockchain - period - anyone telling you otherwise doesnt know shit or is lying to your face
2. there is only one bitcoin, with core development team (failed shitforks are bankster sponsored hostile takeover attacks)
3. if it doesnt have its own blockchain, its worthless shit (basically all the parasitic ico shit)
4. if its network isn't in at least thash range, its worthless shit (any retard can take over the network)
5. if its not compatible with bitcoin (segwit, lightning network, atomic swaps, etc), its worthless obsolete shit
6. if its not deflationary, its worthless shit

all the fraudulent ico shit has only one purpose - noob fleecing

HRClinton's picture

A few years ago, I would've told you "Go ALL in. Sell stocks, bonds, and buy BTC. Trade PM for BTC."

Now?  Don't know what to tell you. If you go in, go long.

gunzeon's picture

Let's shepherd the herd in for the slaughter

HRClinton's picture

Whenever a TRANSFORMATIONAL event occurs, the reaction varies with psychological demographics. 

Early Adopters realize the biggest benefits and wealth. Laggards and Losers don't. You sound like the latter. 

Did you buy hundreds of BTC at 2-digit prices, like I did? No? Loooooser!

adr's picture

Ha, yeah right. If you did that you wouldn't be blabbering on a blog. You'd be retired somewhere nice sipping cocktails. 

HRClinton's picture

Who says you can't be (a) swapping BTC for other CC with faster short-term rise times, and (b) using BTC for mining other CC?

My drinking is limited to a quality, no-Sulphites wine with dinner. Else I get horrific headaches. It's my curse, not being able to get drunk.

My addiction is News, but trying to kick it.

Well, time to sign out and spend time with family.

HRClinton's picture

p.s. here are some YT clips that might help educate those who are still willing to learn...

BTC Tipping Point.  https://youtu.be/CDPlLluNR6I

Bitcoin documentary, Discovery Channel. https://youtu.be/a8SDnI3fNl0

Bill Gates on Bit coin.  https://youtu.be/r6mOUh_NY8M

(If you're smarter and more visionary than Bill Gates, how come you're not richer than Bill? Truth seekers are allowed to ask hard questions of naysayers, who simply disagree without constructing a robust set of counter arguments to cyber and banking progress.)

BarkingCat's picture

Sorry but using Bill Gates to support your argument is ridiculous. There is nothing Visionary about Bill Gates.

He's just a lucky asshole whose sucess is based on buying and stealing other people's ideas and having a great marketing campaign to monopolize on his initial luck and then using extremely dishonest business techniques to keep competition down.

 

tmosley's picture

>Retired people can't drunkpost

Cognitive dissonance strikes again.

PumpherDumper's picture

Wrong.  You obviously never met me.  Average BTC purchase price $88.  Current ROI - 92 fold.  You don't do that with anything else.  First and foremost, I am a PM HODLer.  I am just waiting for the day when their suppression ends.  Until then, cryptos are where the action is.  Good news for you is that BTC is STILL a 5 bagger by this time next year.

BarkingCat's picture

No one really knows where anyof the cryptos will go or how long it takes them, before returning to their intrinsic value of zero.

It really does not matter. Right now there are enough greater fools to keep it going up.

People have turned profit on tons of worthless stuff. As long as you buy low and sell high you can trade dehydrated dog shit.

gunzeon's picture

sure, been in and out of it since Cyprus, still got a few left too, but still the hypes being spread to lure in the suckers

and good for you pal if you made some doh !

Serious.Lee's picture

"...the investment world is also trying to simplify things..."  "The introduction of [futures contracts] will help people understand how Bitcoin works."

That's an enormous relief.    /s^2

Pinot Grigio's picture

Bitcoin will soon run out of the irrational exuberance of greater fools. Time to switch to bullion.

Raffie's picture

I guess if SOON is the next 75 years or more, then YES soon....ish..

ShrNfr's picture

First and foremost. Prepare a large sign that reads "SUCKER!!" and hang it over your bathroom mirror.

coast1's picture

I am going to buy one bitcoin cash...its at about $1300.00  and that is all I am willing to risk. ...interesting, crypto totally puts investing out of the hands of most, and puts those people into buying lottery tickets for a buck.  Everyone gambles i suppose, look at las vegas, lottery tickets and all the casinos...I suppose a person just takes a chance sometimes, and never spend anymore than you are willing to lose...Altho, I will always be a silver bug over all types of moneys. The majority of my investment is in silver.

tmosley's picture

>its at about $1300.00

You misspelled $1600 MWUAHAHAHAHAHAHAHHAHAHAAlso, you can buy a fraction of any crypto you like.

freedogger's picture

Nice work! Now it's at $1668!

Blue Dog's picture

I'm not interested in investing in 50 different cryptos. Bitcoin is all I'm interested in. And no, I don't have to understand how blockchain works in order to invest in Bitcoin.

freedogger's picture

My accountant who is not into technology read that paper and she was converted. Pestered the crap out of me for days worth questions. So it's accessible, don't be afraid of reading eight pages.