How to Reduce the Risk of Losing Money When Investing in Bitcoin

in #bitcoin5 years ago (edited)


Bitcoin is a tradable asset that shares various characteristics with forex and stocks. The blockchain technology used in Bitcoin transactions provides investors with an opportunity to make massive profits. However, it involves high risks, particularly, loss of money. The difference between stocks and Bitcoin is that people investing in the former are protected by government regulations put in place to regulate the market. There are no such regulations in the cryptocurrency market due to its decentralized nature. Thus, it is easy for you to lose money when investing in Bitcoin. Nevertheless, there are several measures you can take to reduce the risk of losing money when you invest in Bitcoin.

The first strategy you can use to avoid losing your investment is to be patient. Many people decide to invest in Bitcoin to make money quickly. If you want to make quick money then Bitcoin is not for you. The cryptocurrency market is extremely volatile due to its unregulated nature and is subject to manipulation, which makes it unstable. It is, therefore, difficult to predict the future of Bitcoin. So, when you buy Bitcoin give the market time to stabilize. Do not rush to sell when the price starts to dive. During the short history of Bitcoin, it has proved that it can provide significant gains to investors who invest in long-term goals. For instance, if you bought Bitcoins in January 2017 you paid $800 per coin and if you sold them in April then you made $1,250 per Bitcoin, making a profit of $450. However, if you had been patient you would have sold each Bitcoin at almost $20,000 in December 2017. Hence, your patience will help you to reduce the risk of losing money and improve your chances of making huge profits.

Another strategy you can use to reduce the risk of losing money is observing security. Hackers around the world spend time attempting to hack into personal computers and exchange websites to steal your Bitcoins. Therefore, you must take measures to protect yourself from getting hacked. One way of handling security is by setting up a two-factor authentication on transactions. A simple password is not enough because hackers can break into accounts with passwords. However, with stronger security measures, your investment will be protected. Also, you should avoid clicking links in spam emails because they are used by hackers often to get to your Bitcoins. Many spam links contain viruses and malware installed by hackers to gain access to your hardware wallet. So, avoiding them could save you from losing your Bitcoins.

Finally, avoid panic selling. Most people who panic and start selling cryptocurrency when the price begins to dip lose money. Bitcoin is highly unstable and its value moves up and down the price curve depending on the change in demand. When the demand for Bitcoin increases and many people start buying, the price plunges. As a result, many people panic and in fear of losing their investments, they begin to sell. If you want to reduce the risk of losing your money, do not follow the wave and sell when everyone is selling. In fact, you should wait for prices to stabilize and start rising then sell. Similarly, do not buy Bitcoin because you realized its value is rising, you will end up paying a lot of money and make little profit. Instead, wait for the price to plummet then purchase Bitcoin and hold. Using this strategy will enable you to reduce the risk of losing money.

Investing in digital currency, especially Bitcoin is profitable but can lead to massive loss of money if you do not understand the market. Therefore, it is important to study the market and take safety measures to protect your investment. Understanding how cryptocurrency works will enable you to avoid losing money when you invest in Bitcoin.

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