How to Invest in Bitcoin Without Losing Your Life Savings
The rise of cryptocurrency has had its fair share of controversy. It’s rarely met with high regards, especially with news like hacking, ransomware attacks, and investment frauds making rounds now and then. However, this isn’t to say that its investors aren’t making bad decisions themselves.
Admittedly, hooks like high returns in a matter of days can mislead people into thinking that they can be overnight millionaires through crypto. However, simple research will tell you that much like any other investment, cryptocurrencies should be tread on cautiously.
For instance, a crypto user deposited his Bitcoin into QuadrigaCX, a Canadian crypto exchange platform, and liquidated the coins for $560,000. Unfortunately, when it came time for him to withdraw the money from QuadrigaCX, the company failed to pay its dues, with Ethereum and Bitcoin both speculating that the company never held coins in their cold storage wallets.
In another story, a Japanese employee living in Tokyo who initially invested only ¥100,000 got excited when his funds grew by 150% in a month—which made him shell out an additional ¥1 million. Sadly, the second investment failed due to a crash, and he ended up losing half of his life savings.
Conversely, there were also success stories from those who put their life savings on the line and saw it grew thanks to crypto. But what could be the differentiators that made other investors successful from those who regretted it?
Here‘s how you can invest in crypto in the smartest ways possible:
1. Do your homework
It’s not that hard to find resources about crypto—in fact, if you have a stable internet connection and a desktop/laptop/mobile device, not only can you read and learn more about altcoins but also transact with or exchange it. There is no excuse for not being enlightened about its underlying asset.
Before putting your money down, make sure to understand enough about a cryptocurrency. Look at not only its market cap, but also other aspects like types, plans, and management. Almost every single kind of coin has available whitepapers online—check out sites like All Crypto Whitepapers and brush up on knowledge about potential investments.
In addition, blogs like Cointelegraph, CoinDesk, CCN, The Coinbase Blog, and many others can serve not just as supplemental learning sites but also as sources for the latest crypto news, recommendations, and stories that may affect your decision to invest.
A good rule of thumb is to invest only in what you understand. If you feel like you’re having a hard time grasping how crypto operates and make money, it may be wise for you to seek other investment opportunities.
2. Learn with practice
Reading is good, but to apply this knowledge means you actually have to invest in something. You don’t have to go all out at the onset—start small and study the environment first. Whether you earn or lose, at least you have learned some more from experience.
Repeat the elements that made it happen and apply the lessons you learned from any of the mistakes you did. Over time, you’ll build up enough knowledge and confidence to make a considerable investment in your cryptocurrency of choice.
One of the lessons that you can apply right away is that like other investments, diversification is key. A healthy cryptocurrency portfolio means investing in different coins, which may serve different use cases. It can help you realize potential future cryptocurrency gains.
3. Be wary of scams and gurus
If you’re not adequately educated about crypto before getting into it, you’re likely to fall for scams perpetrated by those who want to take advantage of the newbies in the game.
Pump and dump groups, which work like a pyramid scheme, are among the most common forms of fraud in crypto. It starts with a person who wants to move up the ranks and get trade signals ahead of other people inviting you to a group. If you’re going to achieve the same goal, you’d have to attract people, too, but soon it will be difficult to increase your rank because there are not enough people that you can invite.
There are also so-called gurus who give investment tips regarding a particular coin. Unless you have done due diligence yourself, don’t heedlessly follow their suggestions. In addition, try to find out more about the gurus you choose to follow—more often than not, most of them are in it just to fool people into handing over their life savings.
4. Never invest more than you can afford to lose
There are many reasons why you shouldn’t invest too much on crypto. First and foremost is the volatility of the market—it’s very vulnerable to huge price swings that don’t often happen in traditional finance. Investing just the right amount is a security blanket against an unexpected crash.
Of course, if you like living dangerously, you can turn crypto’s high volatility to your advantage through crypto trading. But you can only find success in this strategy if you do your due diligence and consistently educate yourself on the ins and outs of each cryptocurrency.
The second read why you should avoid investing too much on crypto is similar to why you shouldn’t put all of your eggs in one basket. You can spend on other altcoins, and should one experience a crash, you have at least an assurance that you didn’t put everything you have on it.
5. Find Success in Crypto
Investing in altcoins entails being aware of the risk. Anything is possible: it may be successful today, but it can all come crashing down tomorrow. Buy responsibly and be mindful of volatility. Invest your life savings only in cryptocurrencies you understand fully.
Keeping yourself educated is essential to achieving success in crypto investing. Check out our blog to learn and better understand cryptocurrencies before you start spending your hard-earned money on it.