Top 20 Tips to keep in mind should you decide to invest in Bitcoin

While there is no formula of assured success with Bitcoin (or any investment for that matter), applying the following tips will help to increase your chances of success.

1. Knowledge is power, do not invest blindly. Truly understand what you are investing in. 

The problem with many people today is that they are quick to follow a trend even without fully understanding the risks and benefits involved. If you’re just getting started with investing in Bitcoin, it’s important that you do your homework. Research on how Bitcoin and other cryptocurrencies work. Learn about how to invest, and the risks involved. Learn about the underlying technology, and how you can trade Bitcoin for success.

There are various books and websites that provide information about Bitcoin and advice on how to trade/invest in Bitcoins for success. It is important to read available material with an open mind. Seek out authors that have had proven success with Bitcoin, and read about how they did it. Learn from the mistakes of those who have failed too.

Some great books to consider include:

Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond

This book offers a comprehensive guide to investing in Bitcoin. It is on the top 10 list of titles of books in Amazon dealing with digital currencies. That should tell you something about how popular it is. It is great for those who want to dive deep into strategies for building their portfolio. It offers insights into the future of Bitcoin, stocks and prospects.

Mastering Bitcoin: Programming the Open Blockchain

In this book, Andreas Antonopoulos provides prospective investors with an overview of how Bitcoin works. This volume explains the mechanics behind Bitcoin without being overly technical. It’s perfect for those who aren’t computer nerds but want to know what’s under the hood.

Bonus tip: If you want to dive even deeper into making a killing with cryptocurrencies, read Antonopoulos’ other book, The Internet of Money.

2. Choose your exchange and wallet carefully as they play a great role in profit-making

The exchange and wallet you choose play a major role in determining whether you’ll achieve your goals or not. Each platform comes with different benefits as well as terms and conditions. It’s important to research the different wallets and exchanges to determine which will best suit your needs. The following are some great options to get you started:

Coinbase

This is probably one of the most popular exchanges amongst Singaporean Bitcoin investors. It is simple to use making it a great choice for beginners. It offers investors the opportunity to purchase a wide variety of cryptocurrencies including Bitcoin in Singapore, Ehtereum, Bitcoin Cash and Litecoin. It’s the perfect exchange if you’re hoping to diversify your investments.

Kucoin.com

This is also an easy to use exchange and is beginner friendly. It gives investors the ability to trade cryptocurrency. There are also lots of bonuses and great giveaways that you can take advantage of.

Trezor

This is a highly secured hardware wallet. It is a great option for those who plan to hold their Bitcoin longterm.

Changelly

To use this exchange, you must already have cryptocurrency. It is therefore not ideal for anyone who is just starting out in investing in Bitcoin. However, it is an option worth considering once you have become familiar with trading Bitcoin. This exchange will allow you to exchange currency pairs that you probably wouldn’t be able to trade elsewhere. It is easy to use and offers great exchange rates. It partners with Coinomi Wallet to provide a safe way to store your crypto assets.

3. Diversify your investments wisely

You don’t have to research deeply to know the great gains that Bitcoin investors have had over the past few years. There are stories of Bitcoin millionaires all over the Internet. While it can be tempting to invest solely in Bitcoin, it isn’t a good idea to have all your eggs in one basket.

One of the keys to success is diversifying your portfolio. This means investing in a variety of cryptocurrencies. The idea behind diversification of your portfolio is to ensure that a decline in one component will correspond to an equivalent gain in another i.e. if one cryptocurrency falls by 5%, you will ideally experience a 20% rise in one of the other cryptocurrencies you invested in.

4. Avoid diversifying for the sake of it

This isn’t a contradiction of the previous point. Diversifying your investment portfolio will help to reduce your exposure. However, it is even more important to diversify in order to make more money. Diversifying with this in mind will help to increase your returns in the long term.

If you choose to diversify simply because you’ve heard that this is the right thing to do, you are likely to spread your investments too thin. You won’t become a Bitcoin millionaire this way. You should instead go for the best value. Decide on the maximum amount of money you’re willing to lose, and invest this in a single asset. For the sake of diversifying, you may choose to buy another coin with as much money as you can spare thereafter.

5. Be cautious and only invest with the amount you can afford 

This brings us to the next point: proceed with caution. Investments that yield high returns often come with great risks. Bitcoin is no different. Digital currency is still in the early stages of development compared to other assets available in the market such as stocks and bonds. It is therefore a high risk investment. You should therefore invest money that you don’t mind losing.

Start out small. Invest only a small portion of your capital. You can reinvest the returns to increase your capital later. It’s also important to avoid chasing Bitcoin prices. You should instead decide on your point of entry and stick to this. Invest in a little at a time even when the price seems right.

6. Don’t let the price put you off (very important for first time Bitcoin investors)

One of the most common mistakes newbies make when investing in cryptocurrencies is purchasing coins based on the price. However, it is more important to consider the market cap of the coins among other fundamental aspects of the project as a whole. Market cap is the price of the coins multiplied by the number of coins in circulation. A good project with a low market cap has great potential of growing in value once the team delivers what is on their roadmap/vision in both the short and long-terms.

For example, some newbies are put off by the cost of one Bitcoin. They assume that if they can’t afford to purchase one coin it is not worth even bothering with it. However, if you invest S$ 5000 and the price of Bitcoin increases by 20%, you will have made S$1000 from the investment. It doesn’t matter that you couldn’t afford to buy a full coin.

It’s important to note that some coins such as Bitcoin increase more easily in price as a result of their popularity–many people have heard of Bitcoin.

7. Store your coins in your wallet to avoid unnecessary risks

Many people opt to purchase Bitcoin on exchanges. However, these aren’t the best place to store your coins. Exchanges have a history of being hacked. You may therefore lose your assets if you choose to store them here.

You can further manage risk by using both hot (online) and cold (offline) wallets. Just as you would keep some money in your wallet, more in your bank account, and the most precious items in a safe, so should you with your digital assets.

8. Use paper or hardware wallets, keep your coins and particulars safe

To further increase the security of your wallet, consider using a paper or hardware wallet. Hardware wallets allow the user to store their private key on a device that is similar to a USB. The key is stored offline but can be used to make transactions online. This limits the exposure of the private key, and therefore increases your security. These wallets support a wide variety of currencies and can be used on your phone or computer. You simply need to enter a pin in order to trade, and unplug when you’re done to keep your coins safe.

Contrary to popular belief, paper wallets don’t have to be printed on paper. Paper wallets refer to software that can be used to generate private or public keys that you can then print or write down.

9. Understand the importance of timing, only take your profits if your circumstances change

Many newbies are anxious to take out the profits they’ve made sooner rather than later. If you really want to make a killing with Bitcoin, you should avoid taking profits too early. That is unless your circumstances have changed e.g. your net worth has shifted or the prospects of the cryptocurrency have taken a turn for the worse. In this case, you may find that your money would do better if invested somewhere else. You would therefore be justified in reallocating these funds.

10. Don’t aim to be right, profits and returns are the bottom line

Your primary goal when investing in Bitcoin isn’t to be right. It is to make as much money as you possibly can. You’d rather be wrong 90% of the time, and still make 100 times in returns when you are right 10% of the time. While being right may be comforting, it is only great when it comes with a payoff.

11. Compare the value of Bitcoin with other cryptocurrencies

It’s important to note that increasing your Bitcoin value doesn’t mean that you will only buy and hold Bitcoin. If you want to know the true worth of your investment, don’t just consider the amount of money you have. You should also consider the value of the Bitcoin compared to other cryptocurrencies. This will help you make trades that will increase your Bitcoin value.

12. Buy and hold, don’t get thrown off course by the sudden highs or lows in the market

One of the best strategies to use when it comes to investing in Bitcoin is to buy and hold onto your investment. Don’t get thrown off course by the sudden highs or lows in the market. If there is one thing that you should know about the cryptocurrency market is that it is very volatile. In fact, many investors in traditional assets are terrified of Bitcoin for precisely this reason.

A massive drop in the price of Bitcoin doesn’t spell doom. The price could go up in a matter of days or even hours. Hold onto your investment and you are likely to see greater returns in the long term.

13. Just buy when you feel that it is the right time and price 

If you look around for advice on buying Bitcoin, you’ll probably come across many people saying that you should buy when the price is low. The problem with this advice is that it is difficult to recognize the dips when they occur.

As mentioned earlier, the cryptocurrency market is volatile. However, if you believe it is a good investment, don’t wait. Just go ahead and buy as much as you can afford at the moment. You can purchase more when you get more money in future. You can’t afford to waste time watching a market that changes so unpredictably.

What if you miscalculate the timing of your purchase? If you buy when the price is high, don’t fret. There will be dips and gains in the future. You will still come away with some money. However, don’t sell at a lower price than you bought.

14. Buy coins early and sell them early, learn to maximize your profits

Most Bitcoin investors buy with the intention of holding for the long term. However, if you’re actively trading the coins, you won’t want to hold them forever. You will therefore need a strategy for buying and selling to maximize your profits.

The cryptocurrency market is volatile. This can’t be repeated enough. There will be dips and gains almost daily when you get started. However, you can’t afford to be distracted by these short-term fluctuations. You need to look at the big picture.

The most effective strategy for those interested in trading Bitcoin is to buy early and sell early. Buying early will allow you to take advantage of the gains. Selling early may seem counterproductive but it is actually a great strategy in the cryptocurrency market. It is better to unload coins early rather than too late. The markets can shift in a matter of hours. You may not see the gain that you hoped for if you decide to wait. Selling early allows you to avoid risk and walk away with some money.

15. There’s no portfolio allocation that is right for everyone

There are many Bitcoin millionaires, and we’d all like to enjoy similar success. It can be tempting to do exactly what they did in the hope of making a fortune. However, this may not work for everyone. There’s no magical portfolio allocation that will guarantee success for everyone. Your portfolio will be dictated by the amount of money you’re willing to invest, your risk tolerance, as well as the time you have available to really study the market and learn how to buy and trade coins for increased profits.

It is best to do your research and approach the market with the knowledge of what others have done for success. However, determine your own path based on your unique circumstances.

16. Familiarize yourself with Bitcoin correlations

After getting your feet wet, you may notice that when the price of Bitcoin rises or falls, several other coins experience the same fate. There are several cryptocurrencies whose value is tied to that of Bitcoin. The value of some will move incredibly close to Bitcoin value or even act to cushion falling prices.

Correlations tell you whether two currencies move in the opposite, same or random direction over a specified period. This type of information is vital if you want to trade more than just one type of currency at a time.

This information will help you to know which currency to trade to maximize your profits and diversify your portfolio. It also helps to reduce your risk.

17. Trade with good reason and set clear goals (this is a zero-sum game)

Don’t start a trade if you’re not sure or simply because you feel like. You should have a reason for each trade you make. Have a clear strategy and objective.

It is worth remembering that cryptocurrency trading is a zero-sum game. This means that when someone benefits, there is someone on the other side making a loss. These markets are driven by large sharks that are waiting patiently for the little fish to make a mistake and pounce on them. Even if your aim is to trade on a daily basis, you may be better off doing nothing and earning nothing, instead of rushing in and exposing your assets to risk and losing them in the process.

18. Keep your ear on the ground

The right time to buy is when you hear rumors of great opportunities. However, once that news hits major news sites, this is the time to sell. Follow the rule of ‘buy the rumor and sell the news.’

19. Keep logs and observe trends and patterns

Keeping logs of your investments is vital for the long term. Review your investments from time to time. Observe price charts and study trends. This will help you in making investments in the future.

20. Always keep calm and get a hold of your emotions

Lastly, it’s easy to get excited and overly confident when you make a good trade. It’s also easy to get disheartened and feel like a complete failure when a trade goes wrong. This is all natural. Just don’t let it take over you. Don’t let your emotions affect the decisions you make. There will be ups and downs when trading. Many times they won’t make any sense. You simply need to keep on keeping on.