Cryptocurrencies have shown fantastic growth. The ROI of Bitcoin – the leader of the crypto market was more than 6,500%. This means that if you had bought BTC for $100 at the beginning of 2013, the amount of your capital would now exceed $6,500. A handful of crypto enthusiasts were able to increase their capital by tens or hundreds of times: they have mined a few bitcoins once and forgot about them until they came across news headlines about the extraordinary growth of the cryptocurrency.
This fact attracts many newcomers, and also gives a wide scope for speculation, which is used by many exchanges and other crypto services. They point to these factors to attract as many buyers as possible and get them to deposit money. Under these conditions, it is important for novice users to know that along with the possible increase in capital, there are also risks of losing money. In this article, we will tell you what newcomers should avoid when getting acquainted with cryptocurrencies, to make sure they don’t lose their money.
What newcomers should know before buying bitcoin
Financial management requires skills. Therefore, the “buy and hold ” strategy will work as effectively as the investor is aware of the principles of investment. Not only the principle itself plays an important role – all the nuances are hidden in the details. Time and the circumstances behind the reasons for buying and selling are of key importance. Without understanding this, one can rely only on luck. In this case, investing will be more like playing in a casino than a calculated business: you place a bet and expect it to play or not. And here we can highlight the first rule, which can be worded as follows: do not buy an asset if you do not know what fundamental factors affect its growth.
The crypto market is very volatile. This means that the exchange rate can change significantly in a short period of time. It happens that cryptocurrencies can grow by 20% – 100% in just one day. But they can also fall just as quickly. This volatility is characterized by relatively low liquidity. The crypto market is quite young compared to the stock and currency markets. The stock market has been around for more than 100 years, and the cryptocurrency market is only about 10 years old. For example, capitalization (the total value of market instruments such as stocks, raw materials, cryptocurrencies, etc.) of the stock market is approximately 400 times higher than the capitalization of the crypto market.
Therefore, just $1 billion dollars can cause noticeable changes in the market, and for a group of large investors and funds, this is not such a large amount, which makes it easy to manipulate crypto assets. Beginners are often “hooked” by the market whales (large investors). This is done in a simple way: whales buy cryptocurrency for a large amount, artificially inflating its rate. Other market participants see this and begin to believe that a wave of growth has started, i.e. the FOMO effect (fear of missed opportunity) is triggered. After purchases by other market participants, the whales sell their coins and sharply collapse the exchange rate, leaving newcomers in the red, and taking profit themselves. This scheme is known as Pump & Dump. At this stage, you can formulate a second rule: avoid emotions when trading and investing.
Emotions when working with finance lower your awareness and make you make quick and thoughtless decisions. When trading, it is always necessary to stay calm and focus on the fundamental factors that are behind the rise or fall in prices for cryptocurrencies or other assets. Figure out why the exchange rate is changing and try to predict further market behavior. Make it a habit to ask yourself these questions every time you see significant movements in the market.
At this point, we smoothly approach one of the most dangerous mistakes of newcomers: the use of leverage when trading cryptocurrency. Leverage allows you to borrow money from a broker or exchange against collateral in the form of a crypto asset stored on an account or deposit. When using leverage, you can both make a huge profit and completely lose your own funds, if you are not lucky, and the forecast turns out to be wrong. Leverage can vary from 10x to 200x or more. The larger the leverage, the higher the risks, respectively. Therefore, beginners are strongly discouraged from resorting to margin trading if they have not yet had enough experience. The conclusion of this phenomenon sounds rather ironic: do not wear shorts if you do not want to remain without pants.
How to buy and sell bitcoin and get a profit
Active cryptocurrency trading carries high risks for both beginners and experienced traders. In addition to volatility risks are associated with fees: with frequent trades, the cost of trading fees will increase. Therefore, for those who want to make a profit without understanding the nuances of trading, it is preferable to invest calmly. You need to choose the right moment, buy a cryptocurrency and store it in your wallet until the rate rises.
After the value of the digital currency has increased, you will be interested in the next question: how to sell bitcoin profitably? You can sell a crypto asset on an exchange, but there are services that allow you to sell cryptocurrency at a higher rate and get more profit. One of such services is the HiRiBi crypto exchange platform.
The rates on different platforms may differ significantly, but it will take a long time to check all the sites and find the highest rate for selling bitcoin. In addition, while you are doing this, the rate may fall. The hiribi exchange is notable in that it tracks the rates of more than 20 crypto exchanges, which allows holders to sell bitcoin at the 10% or more above the weighted average value of BTC on cryptocurrency exchanges.
HiRiBi supports the exchange of BTC to PayPal USD. The service has a lot of reviews on Trustpilot, and you can contact the support service at any time to resolve any issue. The exchange takes place automatically: after sending the coins you need 2 confirmations of the Bitcoin network and the money is sent to your PayPal wallet.
We have reviewed the main mistakes that novice crypto investors make. Avoid these mistakes to reduce the risks of investing in cryptocurrencies and increase the efficiency of your investments.
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