Bitcoin has been the great revelation of the last year, and the number of traders on exchange platforms has increased dramatically. But to make the most of BTC’s popularity on the market, there are a few mistakes to avoid.
Despite its constant fluctuations, bitcoin remains one of the hottest assets on the market, dragging with it the many altcoins – from Ethereum to Monero – and exchange platforms.
Although the digital currency is now a long way from the prices that attracted so many investors, notably in April when bitcoin broke the record of over $62,000, trader interest remains high.
But to capitalize on the strong interest that continues to surround the crypto, you need to have a clear idea of how BTC and its market work: here are 5 mistakes to avoid to get profits from their investments.
1. Storing bitcoins in an unsecured wallet
As you know, bitcoins are stored in digital wallets. There are two types: Hot Wallets, which are always connected to the network, and Cold Wallets, which operate offline. Before starting to trade, investors need to carefully assess which wallet is best suited to their needs, paying particular attention to the degree of security offered.
Indeed, wallets are often affected by piracy activities, and the (poor) protection of digital wallets remains one of the main factors behind the losses suffered by operators. Thus, investors who value security over operational potential should focus on cold wallets, which are not connected to the network and can offer solid protection against hacker incursions.
2. Not analyzing Bitcoin
Another common mistake made by novice traders is failing to carry out a thorough analysis of the cryptocurrency before trading. This failure exposes investors to high valuation risks, which can lead to heavy losses.
It’s therefore essential to fully understand how the asset works, study past movements and, above all, continue to monitor news that could affect its performance as the weeks go by.
3. Being influenced by rumours and emotions
It’s crucial for a trader to keep abreast of the latest developments in cryptocurrencies, as a major company’s purchase of BTC or an online payment giant’s overture to virtual currencies could promote a price rise, just as a central bank board’s statements on the need for new regulations could have a negative effect on the price.
However, it’s important to distinguish between news and rumours: all too often, traders are influenced by inaccurate information or data, and end up buying or selling at the wrong time. Similarly, emotions need to be kept in check, as people’s irrationality often gets in the way of accurate, predictive analysis.
4. Selling bitcoin without a strategy
When the price of bitcoin tends to soar, traders are tempted to change hands and cash in their BTC. A peaceful operation, to be sure, but one that must be accompanied by a thorough analysis of costs, profits and losses.
In short, strategies are essential for understanding the bitcoin trend and therefore for identifying the most appropriate time to sell your bitcoin holdings and maximize profits.
5. Expecting too much
Many traders have been betting on bitcoin since last spring, when the cryptocurrency began to embrace an uptrend that – despite high volatility – eventually pushed BTC above the $60,000 mark.
But last year’s rise could now be misleading investors about earnings prospects, leading them to set over-ambitious targets. To avoid disappointment, and therefore demotivation, it’s also important to be aware of the darker side of crypto-currency, such as sudden price fluctuations, as has happened in recent months, and the (ever-present) risk of a speculative bubble, useful for drawing strategies that aren’t completely detached from reality.
