Common MistakesJuly 14, 2021 2021-07-14 9:28
Five Common Mistakes to Avoid.
Bitcoin is a novel technology where the key characteristics are somewhat easy to understand but the nuances are very complex. Newcomers to the space run into a number of common mistakes with Bitcoin that we will address here. Our goal is to explain each pitfall and the action or argument that will help you get over that hurdle.
1 Bitcoin = 100,000,000 Satoshis
Just like 1 dollar breaks down into 100 cents, 1 Bitcoin breaks down into smaller units called Satoshis. There are 100 million Satoshis in each Bitcoin, which makes it easy to purchase small amounts for $10, $20, $100, and so forth. For example, at $50,000 per Bitcoin, you could buy 5,000 Satoshis for $2.50, or 50,000 for $25. Don’t let the unit bias prevent you from getting into Bitcoin.
Avoid Alternative Coins
As you learn more about cryptocurrencies, you will start to learn about other prominent coins, such as Etherium, Ripple, and Cardano. You may hear arguments from people involved in these projects. You may be tempted to do some research and find out more. By all means, learn about these to the extent you need to do so. Compare them against Bitcoin’s characteristics, network effects and level of success. You’ll find that Bitcoin is the best possible money and store of value. Bitcoin is successful now. It is the soundest money ever created. Nothing else compares.
Increase your Time Horizon
While Bitcoin is quite volatile day to day on a short term horizon, there has been an average annualized gain of over 200% each year. Over any 4 year period, Bitcoin has gained in value. Ways to address volatility concerns include dollar cost averaging, adjusting your position size, and increasing your conviction through learning.
Trading the market
Increase your Time Horizon
Do not trade. It is difficult enough to buy and hold. Trying to trade means you are competing against online bots and people with far more knowledge or experience than you. Trying to time the market highs and lows against people better than you is a losing game. On top of that, there are capital gains tax implications to consider. Buy and hold. That’s it. It is very unlikely you will do better by trading over the long term.
Difficult to Learn
Learn the Basics
It doesn’t require too much information to get some skin in the game and stake your claim on some Bitcoin. However, there are a few things you really should know to safely invest and protect your investment. Once you have a small amount invested, continue to educate yourself because Bitcoin is an incredibly interesting technology. Start with some of the content in our resources section or consider taking our Bitcoin Basics course.