What are the Pitfalls of Bitcoin Investing?

Bitcoin made headlines worldwide in 2017-18. The king of crypto had gone from a few thousand to almost ten times that value. Then it crashed. That’s the obvious pitfall of Bitcoin investing -- volatility. But that’s only if you sell when you panic. If you hold on then you could recoup your costs and even make more.

In this article we’ll examine some of the pitfalls of bitcoin investing and see how they can be avoided.

Much of this info comes from worthwhile bitcoin investment sites that strive to educate and enlighten investors so they can make the soundest decisions possible. Hopefully after this article you’ll have a well balanced perspective on the pitfalls as well as the peaks.

1. Dismissing Bitcoin as a Passing Bubble

One of the biggest pitfalls of bitcoin investing is not learning or experimenting with Bitcoin and other cryptocurrencies. A closed mind means missed opportunity.

To be clear, this is not advocating sinking your entire life savings into cryptocurrencies. That is a pitfall that is easy to see the negative sides of and has no positive way out.

But closing the mind off entirely is a pitfall that can be just as bad. It often happens when people listen to people they fully and deeply trust -- and then take their word for it.

Warren Buffet is a prime example. He is a legendary investor. Yet time and time after time over the last few years he has stated on mainstream media that “Cryptocurrencies basically have no value," Buffett said. "They don't produce anything." And that "You can't do anything with it except sell it to somebody else," he added. "But then that person's got the problem."

The trouble here is that when Mr. Buffet is asked for specifics as to why cryptocurrencies are so worthless, he doesn’t have any responses that indicate he dug into and learned about them. He simply dismisses them.

This is a pitfall for the regular investor who listens to Mr. Buffet or other experts and then takes their word for it.

Experts around the world called the dot-com run up a “bubble” -- but we’re still using computers today, more than ever. The housing crisis was also a “bubble” -- but we’re still living in houses.

Those may sound simplistic but the media often has a tendency to exaggerate and sensationalise. Bitcoin’s been pronounced dead by experts over 381 times -- yet it’s still around.

Therefore the best way to get past this pitfall is to read about cryptocurrencies from many different sources. You could also purchase $10 worth or some small amount and experiment with it yourself to really help you come to a conclusion if it’s something for you to invest in or not.

2. Dismissing Blockchain Technology.

A similar pitfall for investors, like the one above, is dismissing blockchain technology.

Bitcoin and cryptocurrencies may rise, fall, and even die out….but blockchain technology is here to stay. It’s like saying the internet will die in the 1990’s or 2000’s just because companies like Apple suffered and companies like Myspace died away. Those titans of the industry may have had problems, but the internet -- the technology -- only grew.

The same can be said of blockchain technology. In fact, INC magazine wrote:

“Blockchain will make it so any entrepreneur from any location in the world can, at a minimum, gain access to capital. While not all ideas are created equal and deserving of funding, at least all makers will have the opportunity to fundraise for their idea, given that digital currencies, like bitcoin, operate independent of geographic location. In other words, everyone is able to accept and send cryptocurrencies without hidden international fees and exchanges.”

For investors who are angels or venture capitalists, dismissing the technology powering Bitcoin -- and powering many other fascinating business projects -- is a pitfall that must be avoided.

This pitfall is best avoided by, once again, reading up on and experimenting with blockchain technology. You don’t need to be a developer or computer engineer to try out blockchain either -- you can purchase, sell, and transact tokens on smart contracts quite easily. Then you can see if there’s potential for investment.

These types of experiments with this technology may even help governments attract startups and other small businesses, particularly now after COVID has caused so much disruption in businesses big and small.

The bottom line in this article is that the best way to avoid pitfalls of bitcoin investing is to remain open-minded and try the technology and investment on a small, easily manageable scale before making a final decision.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes