According to surveys, while 6 in 10 Americans have heard of Bitcoin only 5% of Americans actually own bitcoin. However, 20% are looking to get into bitcoin soon. If you’re in this 20%, here are some pointers to get into the right mindset:
Don’t invest more than you can lose. Everyone says this, but then you hear people of putting their life savings into bitcoin or maxing out credit cards. Hopefully you’re not in that extreme, but how much is too much to put in? If you’ve never invested in anything before before, I wouldn’t recommend getting into cryptocurrency. It’s way too volatile. I also think that investing in crypto bears a lot of similarity to investing in the stock market, so the stock market is a good place to learn. I would recommend to not put more than 5% of your net worth and probably closer to 1%. So if all you have is $1000 of savings, then I wouldn’t put more than $10-$20 into bitcoin. The other 99% you should be for emergency savings. If you have $100k, then put a thousand in bitcoin and put the rest in an index mutual fund.
You may think that bitcoin is easy money. But according to Cointracking.info’s user statistics, over 20% of cryptoinvestors have lost money, some over $3,000.
Don’t quit your day job. Even if you don’t lose money on crypto, you’re not going to become rich over night. Don’t get me wrong, I think there are still plenty of gains to be made. But if you’re just buying bitcoin, you might get a good return, but you’re probably not going to get insanely rich. With bitcoin hovering around 10k to 14k, even if it goes to 100k, that’s at most a 10x on your return. Unless you’re investing 100k, you’re not going to get to $1 million on bitcoin alone. So if you want to get a high return, you’re going to have to look into altcoins, and that involves research and investing time to sift through the thousands of cryptocoins.
Don’t chase the hottest crypto. At any given moment, there’s likely going to be some coin that’s going up 20% in an hour and you’re going to want to throw your money into some trendy coin. I looked at the data of the top 50 largest coins of each the last 10 weeks. Of those coins, I looked at the #1 performing coin of the week and looked at how they performed the week after. So from the below chart, the #1 performing coin on Nov 19 became the 45th performing coin the following week.
n/a means that the coin dropped out of the top 50 performing coins the following week. Only once did the #1 coin repeat the following week as a top performing coin (Jan 7). People inevitably sell off pretty quickly once their coin makes a huge jump, especially if said coin is an obscure coin.
That said, some people think it’s too late to get into bitcoin, but we’ve barely scratched the surface in terms of what blockchain can do. Not only are profits to be made, but also the chance to get in early on a potentially societal-altering technology. Check out my post on how to get started. Invest wisely!