Getting rich with Bitcoin
You may have heard a lot of stories of people who bought bitcoins a few years ago and got astonishing profits with the price rise, you may think that those were easy profits for lucky people, but when you look at it you will see that in most cases it wasn’t easy at all. In this post we will see what are the main mistakes that prevented people from becoming Bitcoin millionaires and how to avoid them.
Buying cheap was the easy part
People who got involved in Bitcoin in the early days had the occasion to acquire large quantities of coins for a low price, how they got there was often a mix of luck and intuition. To hear about Bitcoin in the early days you had to have some kind of luck, either having the right friends that would introduce you to it, follow the right online communities or read about it the first times it went on the news. To buy bitcoins you needed a bit of intuition of what it could have become, most people actually got in for the wrong reasons (e.g. free transactions) but still they saw some potential in that little decentralized money experiment.
However, getting the coins was the easy part, not losing them was much harder.
Common mistakes to lose your coins
Many people used to have have huge amount of bitcoins in the past, but then they lost most of them in multiple ways. Let’s see what are the most common mistakes that you have to avoid to hope to become a Bitcoin millionaire one day:
- Keeping money on the exchanges: Bitcoin wallets sometime can be a pain, you have to take care of your private key, have a strong password, back-ups etc, moreover if you are a trader you just want to have liquidity on a trading platform. For this reason many just prefer to leave their coin on the exchange where they bought it. Mistaking exchanges for banks cost a lot of money to several early investors, the infamous MtGox exchange caused thousand of bitcoiners to lose a relevant part of their holdings, even many Bitcoin Devs and known personalties in the industry got scammed by MtGox. So remember, you own your coins only if you control the private keys, otherwise you are just trusting someone else.
- Putting money in alt-coins: once you start to see some profits with Bitcoin, you may start to believe that you are some kind of finance genius and you should reinvest your fresh profit in something else. At this point you will probably try to invest in some other cryptocurrencies or even an ICOs, hoping for further profits. The truth is, Bitcoin is here to stay, it has network effect and validated use cases (store of value, data notarization and censorship-resistant transactions), alts are mostly just experiments, they come and go.
- Daily trading: after your first Bitcoin returns you will start thinking that trading is really your thing, that you are good at it and you should do it to increase you bitcoin wealth. Unfortunately there are only three ways to make money with trading: you have more information than the market, you are way smarter than other traders (unlikely) or you are just lucky. If you don’t fit into the first two categories, hoping to get into the third one is just gambling, and the only one that will make money in the long term is the exchange with its very nice trading fees. If you are into gambling you can probably find some Bitcoin dice site with lower house edge than most exchanges’ fees.
- Take profit and stop loss: the only way to get a 100x profit on Bitcoin is buy them and don’t touch them whatever happens. When you start seeing 200% or even 1000% returns on your investment you may be tempted to take the profit and close your position in Bitcoin, those who did it in 2011 missed the 100000% extra returns of the following years. Similarly, it is challenging to avoid panic sell when you see the value of your investment only going down for several months, between 2014 and 2015 indeed many ceded and sold their positions at loss, missing the huge profits that the soon to come bull market could have provided. Nobody knows how the market will behave in the coming years, but if you see the long term value you will be able to keep your coins and eventually see the profits.
Keep your coins safe: far too many people lost their wallet by either losing the private key or the password protecting it. Please spend so time to learn how to protect your coins and find the best solution for you. Hardware wallets are an option, but also other off-line cold storage solutions are available.