Many people think that investing in Bitcoin will make them rich by default ―which is not the case because cryptocurrencies are not that easy to use or obtain. Although individuals regret not buying Bitcoin in 2010, when prices were significantly lower, and anyone could mine on a simple laptop, learning where to purchase Bitcoin now isn’t that bad. Considering Bitcoin’s long life and increasing value, it might be even better to get into crypto now because it will become much more prominent.
However, people need patience to compensate for the time spent investing in a cryptocurrency because not everyone is able to overcome FOMO and market uncertainties. Bitcoin has been prone to high volatility spikes since day one, and it will continue in the same manner, meaning stability is out of the question.
Hence, learning patience and developing timing abilities are crucial to earning money and building a reliable portfolio. So, how can you do it?
Understanding Crypto Bias And How it Affects Your Decisions
Making certain moves when investing or trading with Bitcoin isn’t entirely based on our free-thinking because we’re all exposed to biases that influence our decisions. There are different types of crypto biases that might’ve affected your judgment over the years, such as the following:
- The action bias happens when you’re inclined to take action instead of waiting. Investors may feel the need to do something, especially during bear markets, fearing not losing their assets, which is precisely what sets them to failure;
- The anchor bias makes you believe only the first piece of information that reaches you. This is why investors should check more resources when deciding what to do with their assets so as not to limit themselves;
- The confirmation bias might be the trickiest because your mind is looking for info that corresponds with your beliefs, so it’s not that easy to shift to another idea and adopt it;
- The sunk cost bias triggers an uncontrollable behavior of never returning despite being at a loss. Hence, people who are overcommitting will risk all their assets only to continue rising and increasing profits, even if the odds are against them;
Timing The Market to Leverage the Ideal Results
Investing in Bitcoin can be done anywhere, at any time, by anyone, but that doesn’t mean it’s always profitable to do so. Trying to predict future crypto prices is difficult due to extreme volatility. Still, crypto is also influenced by media coverage and trends, so there’s no way to state in which direction prices will go clearly.
However, timing is necessary to understand the market and decide on the next step because, despite unpredictability, prices are prone to bullish and bearish patterns that can be anticipated in some cases, even if it is too early or too late to do something.
Timing can also come to your advantage as an investor if you can use strategies and methods to counteract massive price movements. One of the most famous methods is dollar cost averaging, in which you invest a fixed amount of money at regular intervals, whether it’s weekly or monthly, regardless of the price of the asset. The DCA method helps you withstand any crypto event and also gives you a correct perspective on how prices have changed.
Dealing With FOMO as an Investor
Fear of missing out is a typical sentiment that every human has been through, but it can be more detrimental to investors, who must handle their feelings when it comes to money. FOMO can be exacerbated by two factors:
- Previous biases and personal experiences, such as sudden wins or loses;
- Community influence, of whose people’s experiences may or not may have been accurate;
Indeed, social media influences are considerably powerful over an individual’s perception of crypto investments. Seeing multiple success stories can hype investors to give their all, but the hustle isn’t always the answer to the problem.
That’s why some investors get too emotional and impulsive buy or sell Bitcoin, which only leads them to poor timing and bypassed opportunities. Therefore, combatting FOMO is all about understanding biases and setting and sticking to a strategy. Sometimes, being consistent is better than being guided by your gut feeling.
Keeping a Trade Journal
As an investor, you should always look to the past and not only in the future because previous trading strategies and movements can be more valuable than forecasting upcoming prices. It would help if you could keep a trade journal and record all types of transactions made since the beginning.
You can organize your input by highlighting methods that worked during certain times, but also write down the losses and lost opportunities to understand what could’ve worked. The profit-to-loss ratio should also be accompanied by a report on your feelings during that investment, which can give you an idea of how detrimental FOMO is.
Remembering to Diversify
Every Bitcoin investor should learn to diversify their portfolio with multiple other assets. This builds a safety net over their portfolio risk management, making them less prone to being hit by volatility waves when bear markets occur.
Therefore, it’s always best to research profitable cryptocurrencies, stablecoins, NFTs and dApps that are part of exciting projects and can offer security. Ethereum, for example, is the second most popular cryptocurrency people invest in, but the USD Coin, Doge and XRP are also famous and known for their excellent features and yields. But don’t limit yourself to coins because NFTs and Ordinals are promising in terms of value. At the same time, dApps can immerse you in the blockchain ecosystem that’s full of endless creation possibilities.
Are You Prepared to Invest in Bitcoin?
Investing in Bitcoin seems easy, but it’s actually a slippery slope that few can resist due to intense emotions and a lack of diligence. In the crypto world, being patient is more profitable in the long term, especially when paired with timing strategies. Therefore, investors must learn about crypto biases and escape FOMO, and they’ll be able to leverage the best methods of crypto investing.
