Earning money with bitcoin is tempting, but you can take more than one risk. We’ll show you which ones to avoid. The article in short:
- In trading, nothing is written, but experience and study can make a difference.
- Never enter a market without having a strategy that contemplates the possible gains and losses.
- If it’s too risky for your pocket, don’t invest.
- Refrain from trusting the criteria of third parties. Compare different opinions and learn to make your own.
- Don’t invest more than you can afford to lose.
- Don’t be greedy, and don’t get carried away by FOMO and emotions.
- Study, study, and study.
“Don’t trade, you will lose your money,” joked Scott Melker, one of the most respected analysts of Bitcoin (BTC) and the US cryptocurrency market. This sentence contains a distressing truth. When we invest our capital in a financial asset, there is always a possibility of losing money, especially when we are in a bear market.
However, making your money make more money is the dream of many. And no matter how risky trading activities, or any investment method, are, more and more people are choosing to take their savings, or even their salary, to generate returns. In the case of the cryptocurrency ecosystem, there are not a few who dream of getting rich by buying bitcoin or altcoins.
Staying only with the face of wealth and success can be a beginner’s mistake for those who take their first steps in the cryptocurrency market. Investing is not consistently winning. Instead, it is an activity of resistance, courage, experience, and endurance in the face of failure. Because yes, anyone who has invested even $10 in any market knows how easily they can be lost.
That is why below we will list some of the advice that we have learned thanks to the experiences of others and the knowledge of long-standing investors in this market.
Here are 5 principles if you want to buy Bitcoin and other cryptocurrencies to make money.
Do not invest more than you can afford to lose
Let’s start with the most basic and obvious. Investing the money you have committed or cannot risk losing is never a good idea. Not a few people decide to use their life savings, commit money for the purchase of a house or car or take out loans that they cannot cover in order not to miss out on the “opportunity of their lives” to make money. However, it is never a good investment opportunity if, by betting that capital, you can be much more impoverished.
The Terra/Luna case, which occurred in the 2022 bear market, is an excellent example of what not to do. Many investors bet the money of their families and even their homes when they saw that the currency was giving them a lot of returns. When the project collapsed, they lost everything.
When it comes to your first investments or hard-earned money, it’s best to be conservative. Keep in mind that investing contributes to the possibility that the market behaves in one way or another, and although you can always analyze the past movements of an asset and be attentive to events that may affect it, there is a probability that your analysis will be wrong or something unexpected happens that changes market expectations.
In this sense, everyone who invests has to be open to the idea that he can lose the money he has. Starting with a moderate amount and with money you do not need immediately is a good option. Also, you can invest progressively while earning more With more confidence and experience, you can add more money to your operation and even try your luck with other market alternatives, such as derivatives or cryptocurrency loans.
Don’t be greedy, and don’t get carried away by FOMO and emotions
Many people invest more money than they have because they are greedy. Some even enter the market at an inopportune time for fear of missing out on an opportunity that will make them rich overnight. Easy money does not exist, just as investors should not base their investment strategies on a fluke.
Falling into FOMO is equal to losing
All markets experience what is known in English as FOMO, which in Spanish translates into “fear of missing out.” In 2021, the Bitcoin market registered one of its best bullish movements and reached $60,000 per unit, many investors bought BTC for fear of missing out on the investment opportunity. However, this euphoria only made them enter the market at a time of much speculation when more experienced investors left the market to minimize possible losses.
If you get nervous and impulsive when you see a price chart or rush to buy/sell when the market turns red or green, it is better to drink a glass of cold water and calm down before making a trade. financial. Emotions are not friends of money, and neither are premonitions. Between the euphoria and the panic, many traders can lose large sums of money.
Entering the market because everyone is investing is not a good idea. Exiting the market because everyone is selling is also not a good idea. Do you know why? Because it shows that the person who gets carried away by these two waves of buying and selling needs a clear investment strategy, and a plan to operate his money, much less has he planned the riskiest scenarios. All red flags!
Sometimes a stroke of luck can benefit you when it comes to investing or some intuition (based on previous experiences) can help you get out of a risky situation. But, investing based on market behavior analysis is always more effective under a fixed profit strategy and open to the various scenarios that can occur with an asset such as cryptocurrencies.
Always do risk management
Due to everything described above, it is always important to do risk management. Investment losses can be controlled and even scheduled. The most experienced traders are always open to the possibility of losing money because they know that it is part of the trade. But instead of passively accepting this fate, they decide to explore the different scenarios that can occur with their money and thus limit the chances of losing everything.
To reach this level, knowing how and when you want to generate money with your investment is essential. The way you want to generate returns increases the opportunities for risk and the ways to counteract them. For example, suppose you are a person who wants to take advantage of price volatility in your favor and make several trades in a matter of days.
In that case, it is essential that you learn how to open stop-loss trades to get out of the market when the price drops more than you expect. you are willing to lose. Similarly, place some take-profit orders to get out when you hit your target and take profit.
An experienced trader sees the positive and negative scenarios
When planning an investment strategy, a trader calculates how much return a specific trade will generate if the most favorable market factors are met. Likewise, he will consider what must happen for you to lose money in said operation and how much you could lose. This way, he will keep his profits and possible losses in check.
On the contrary, if you want to hold (save) your money in the long term, it would be good for you to analyze the most appropriate time to enter the market and for how long you will leave said capital untouched. Likewise, you can invest all your capital in one fell swoop or periodically accumulate money in your crypto asset account, which is also known as DCA.
In all cases, it is essential that, if you want to invest in an asset, you get to know it first, read news about its ecosystem, study its operation and see its possibilities in the market.
In the same way, it will help you to internalize that what differentiates a trader who lasts in the market from one who does not is the planning of losses. A trader who knows how to manage his operations will always have a second chance to continue investing since he will not have lost all his capital in a single attempt.
Beware of social media guru
Hand in hand with investing based on your emotions and not developing a clear investment strategy, another common mistake is entering a market because your favorite influencer told you, a relative advised you, or you saw it on a social network. Red flag: maximum loss alert!
Although some experienced traders and analysts are dedicated to sharing their knowledge on Twitter, YouTube, and even Facebook, not all people have good intentions. Some may recommend a bad investment or even a scam token out of ignorance; others because they can enrich themselves at the expense of the most unwary. In that sense, do not follow any advice that promises you an opportunity that is too good to be true.
The evil at the heart of crypto finance
Under the promise of profit, many pyramid schemes and multilevel businesses offer the possibility of making money based on cryptocurrencies. However, these business models only make their creators and top members rich, exposing other clients to the possibility of them running away with their money or the scheme going bankrupt.
Listen to the experts on the subject who, instead of giving you investment advice, will give you tools to analyze and monitor market opportunities for yourself. Similarly, avoid marrying a single person’s opinion, compare charts from different specialists, read about the market in general, and take the risk of learning to read a price chart. Immersing yourself in the most significant amount of quality information can be a before and after in your journey as an investor.
Study, study, and study
The last piece of advice is also very obvious, but it’s the one they run away from the most. A good investment is based on the trader’s experience and knowledge, not on lucky breaks or advice from third parties.
Instead of reading the tweets of Elon Musk, Robert Kiyosaki, or Bukele and running out to buy some bitcoins and dogecoins, it is better to spend a few hours of your life reading news that affects the price of assets, taking trading classes, and learn to open market orders that help you program your investments.
Before you even think about buying bitcoin, ether, or dogecoin, we recommend that you fully understand these cryptocurrencies and the risks involved in pouring money into their markets. The more tools you have to protect yourself and the more experience you gain over time, the easier it will be for you to navigate challenging times like the bear market we are experiencing today. However, it is always important to remember: not even the most experienced trader escapes screwing up.