The popularity of cryptocurrencies has never been greater than it is today, with over 56 million registered users on Coinbase alone, and bitcoin search results reaching all-time highs on Google. Although analysts are divided, some say crypto is the future, while others claim an impending bubble is imminent. Yet, institutional and corporation investments have helped raise investor sentiment towards bitcoin and other digital currencies.
In contrast to stock and other assets, cryptocurrency is a speculative network effect and its prices are directly linked to adoption and market reports. As an example, the price of the largest digital coin rocketed from 40k early this year to 70k after Tesla announced it could be used for payment.
After Musk expressed concern over the bitcoin mining process through non-renewable energy sources, the price has fallen below $40,000 from its all-time high. While market analysts have been looking for credible on-chain metrics for valuing crypto coins, it’s not clear whether making a sell or buy call based on technical factors is an excellent idea. This has made people wonder if Bitcoin Trader is real. With that said, here are certain mistakes you shouldn’t make as an investor
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The low-cost price doesn’t mean it’s cheap
In the retail market where there are more than 55,000 inspired coins. Most of these coins have no value or acceptability. Dogecoin, for example, which once traded at a very low price saw a whopping growth, which helped made many early millionaires and billionaires.
As we have already established, a low price does not necessarily mean the coin is being sold at a discount. It reflects its actual value and demand. As with Dogecoin, Elon Musk’s support was instrumental in driving its demand and encouraging retail investors to invest in the coin.
Many other coins are also trading at low prices, but eventually, due to low demand and volume, these coins disappear, resulting in losers for early adopters. Coinbase alone has 6.6 million registered users, and bitcoin search gets millions of hits.
Risk Tolerance
Invest only what you are willing to lose. Winning and losing are part of investing so you have to be open-minded. However, one can minimize losses by intelligently allocating investments based on risk tolerance. Purchasing cryptocurrency by liquidating your other investments could be a risky move on several levels.
Instead, you might want to focus on long-term investments while allocating a very small percentage of your portfolio to speculative assets.
Purchasing on Speculation
A common mistake investors make is to buy on speculation and sell at a loss. The majority of newcomers simply want to ride the rally and profit without considering the prospects of that coin or what factors are driving its price higher. Earlier this year, high expectations for crypto adoption and the surge in the crypto market forced institutional and retail investors alike to purchase several coins at a higher price. It’s quite difficult to predict the future price movement of cryptocurrency markets since they are volatile. Following a surprise collapse in the market, investors who bought digital coins on the recent surge lost money. The cause is largely a Banning of bitcoin by Tesla.
In general, altcoins tend to follow the market trend when Bitcoin rises. This means that cryptocurrencies will generally perform well in the year ahead. However, just like investing in any other type of asset, cryptocurrencies are volatile as well, so you must proceed with an abundance of caution before investing/predicting the future price movement of cryptocurrency markets since they are volatile. Following a surprise collapse in the market, investors who bought digital coins on the recent surge lost money. The cause is largely a Banning of bitcoin by Tesla.
Bottom Line
In general, altcoins tend to follow the market trend when Bitcoin rises. This means that cryptocurrencies will generally perform well in the year ahead. However, just like investing in any other type of asset, cryptocurrencies are volatile as well, so you must proceed with an abundance of caution before investing.
