Bitcoin has come to be regarded as a legitimate investment by many people. The token is traded alongside other cryptocurrencies on many exchanges. It can be found in mutual funds and even IRAs. Traders can buy and sell options. There are large numbers of people making their first cryptocurrency investments today. Many more would like to get involved but want to know if you can lose more than you invest in Bitcoin.
All forms of investment carry risk. When you make an investment you are speculating that the investment will grow in value. Bitcoin has increased significantly in value since it was introduced in 2009, but will this trend continue? No one knows. What we do know is that some types of crypto investments offer less risk than others.
A Cautionary Tale of Bitcoin Investing
It was November 2017. Sean Russell watched with the rest of the world as the cryptocurrency known as Bitcoin was in the midst of a bull run saw its value jump to new heights. Even though Russell had very little investing experience he knew opportunity when he saw it. He took his life savings of $120,000 and put it all in Bitcoin.
In just one month Russell’s investment had ballooned to $500,000 in value. Russell awoke one morning to discover that he had made more than $15,000 while he slept. His thoughts naturally turned to what he would do with all of the money. He was going to pay off his house, take trips he had long dreamed of, and more.
Then the dream became a nightmare.
In December of 2017 Bitcoin briefly surpassed the $20,000 mark and then began a tumble that would last throughout all of 2018. The currency fell to $15K. Then 10K. It hit $6,000 and there was no end in sight as the so-called crypto winter took hold.
Sean Russell panicked. Even though he had little experience investing in cryptocurrency, he tried to ride out the market crash. He began shifting money from Bitcoin into other cryptocurrencies like Bitcoin Cash, Ethereum, and Ripple. Nothing worked. When all was said and done Sean Russell had lost 96% of his initial Bitcoin investment.
Sadly, these types of tales are all too common today. The Bitcoin boom of 2017 attracted many new investors to the market. Some were housewives. Others were students. Some had lots of money to invest while others couldn’t afford to lose what little they had to invest. Some of these people have ridden out the storm and still hold crypto today. Others have disappeared just like the money they put into the market.
Avoiding Bitcoin Investment Losses
If we look at the story of Sean Russel and others like him we can perhaps take away some wisdom. Hindsight provides us with some tips about avoiding losses with Bitcoin. Learning from the mistakes of others is one way to limit the risk of investing and minimize losses.
The first thing we notice is that Russell had very little investing knowledge. He had rarely played the stock market and knew even less about crypto. All he knew was that Bitcoin soaring in value and he wanted to be a part of it. With only minimal study he jumped headfirst into a pool filled with sharks and all sorts of hazards.
You can certainly lose more money than you invest in Bitcoin when you are unprepared to invest. You should not put money into the market without taking the time to study and learn how the market moves. Crypto markets are very volatile, even more volatile than the Forex markets which deal with fiat investments. Without knowledge you are setting yourself up for losses.
Another thing Russell did was take his entire life savings and put it into a Bitcoin investment. This was another serious mistake. Until you have proven that you can successfully invest in cryptocurrency you should limit your investment. It would have been a far better choice for Russell to start small as he learned more about Bitcoin.
Putting all your eggs into one basket is also a failed investment strategy. This will never work. Russell could have invested some of his money in Bitcoin and put some in other investments. In this way you are safeguarding against massive loss when your primary investment tanks.
Finally, we see how panic set in when Russell began to lose his money. He started to make very bad choices and invest in other cryptocurrencies, some of which were unproven commodities at the time. This only led to more losses and finally helped to wipe him out.
Making More Than You Invest In Bitcoin
It is possible to invest in Bitcoin and make a good return on your money. Just ask those people who bought Bitcoin when it was valued at under $100. Some of them are millionaires today. So, how did these people make money instead of losing it?
Some of them got in the Bitcoin market very early. The early adopters are always primed to make a good return because they can buy very low. Others actively traded the market, looking for opportunities to buy low and sell high.
Today there are people trading Bitcoin options, a very risky but profitable strategy. These people can make or lose vast sums of money in a few day’s time. Even though the cryptocurrency market will have its ups and downs, the pros at Bitcoin investing always find a way to make money.
What can you do to make money as a Bitcoin investor? Learn all you can about the cryptocurrency market. Wisely diversify your investments. Take profits when they can be taken and await new investing opportunities. Lastly, be patient. It has taken ten years for Bitcoin to rise from a single digit value to it’s current value of around $10,000. This is one long game.
What you must remember is that you can only play the game when you have the money to invest.