BITCOIN | FINANCE

Things I Wish I Knew Before Buying Bitcoin

I'm sharing my experience in the hope, you can learn from my mistakes and not go through the pain of making them yourself.

I first got involved in the enigma that is cryptocurrency in 2018. Since then it’s been an emotional roller-coaster, consisting of nonmetaphorical highs and lows.

When I first jumped on the bandwagon, I knew nothing. Despite it being on my radar since 2012. I was in no way prepared.

I had no idea what I was doing. I decided I was going to buy some, do some amazing trades and become insanely rich. Needless to say, that did not happen.

In the last three years, I have learnt a lot. Mostly what not to do. In more recent times, I have become more knowledgeable and experienced. I have learnt my lessons the hard way.

Now Crypto is rallying again, and the bull market is in full swing. Unfortunately, despite the significant gains that are being made, people will still lose money. This bothers me. If I can help just one person who is contemplating buying into the market not lose money, then it is well worth me writing this.

This piece is aimed at informing those who know little to nothing about cryptocurrency. You will find no technical analysis or price predictions here.

So with no further ado, this is what I learnt.

Fuck leverage

Pardon my French, but that’s how I feel about it. That’s the cold, hard truth for you. Sure, there’re some geniuses out there who can use it to their advantage and increase their profit margins. Average Joe though will in all likelihood lose money and lose it quickly.

Before I knew it, I had been liquidated more times than I care to remember. I won a few times, so it gave me the misguided confidence to carry on making these bets. Yes, I say bets because it is gambling. You might as well go to the casino and put it all on red.

Since then, I have learnt what leverage is the hard way. I know what it is, and I don’t want any thanks.

A friend told me a nice analogy. He said, “leverage is like a path, the more you add the narrower the path becomes, until eventually you are walking on a knife edge and the smallest mistake can cause you to fall to your demise. Likewise, without leverage, or only a little, it’s like walking comfortably on a wide path, with plenty of room for error.”

This is the most important take away from this piece. Out of everything leverage has led me to lose the most. I wish I had never even started. I would be in a much better position now.

Time preference

Millennials have a habit of being too fast-paced. We want what we want and we want it now. Well, that’s my experience, anyway. We’ve become so accustomed to living life in the fast lane, you might feel tempted to apply this ideology to crypto.

Sure, it’s true that the market is incredibly fast-paced and volatile. Especially when compared to traditional markets, but still you are extremely unlikely to reach financial freedom in a matter of weeks.

I’ve profited from having a long-term perspective. Ideally you want to buy the fear, meaning a time when the rhetoric around the market is full of doom. Then hold that position for months or even years.

My view is that Bitcoin has four-year cycles. Consisting of the bear market and the bull market. So be aiming to make the most of that.

If your time preference is hours, or days, or weeks then you‘re likely to lose money.

Ignore the hype

There’s so many idiots on YouTube and other platforms. Prophesying about the next big pump or dump. Most of them are wrong most of the time.

You have the ‘permabulls’ these are the people who constantly blast “Bitcoin to the moon”. Then you have the ‘permabears’ these are the people who will announce Bitcoins impending doom daily. The types which will predict figures like zero.

These guys are straight up charlatans. All creating click bait content with the only goal being to gain views. Stay clear of them.

I have profited mostly from doing my own technical analysis. I have a good idea of where the bottom and top are. I honour my original analysis and ignore all the nonsense that finds its way into my feed.

There are some who are knowledgeable and unbiased but this is the minority. Most encourage high leverage trading. Most will say that all their predictions have all been accurate and correct, but if you were listening at the time of these being made then you would know that it was not the case.

Don’t try to call the tippy top

Another point worth touching on. When I have tried to maximize my profits, I’ve ended up losing. If you identify the area in which you believe it will reach this cycle, then don’t try to sell at the top of that exact point. In my experience, you will miss it and you will end up losing out.

I have a target box on my chart that spans over 90 days. The bottom of the box is less than half the value of the top. I will most definitely not hold out for my top target to be hit. It probably won’t and I am all too aware of this. Instead, I will consider the timing, general market conditions and taking all that into account I will aim for somewhere in the bottom half of my box.

Greed never leads to anything good.

Don’t day trade

With or without leverage, Bitcoin is less than ideal for day trading or intraday day trading. You are much better off day trading Forex markets.

This is because Bitcoin still has a relatively low market cap. It doesn’t take much to move it. It’s manipulated (it really is), so you can be pattern trading or support and resistance trading. You spot a perfect entry and you get stopped out or liquidated. This happens all the time. The chart is riddled with fake outs.

Whereas in Forex this is less so. When it breaks support, it tends to continue down. It’s just not so for Bitcoin. In years to come, as the market cap increases, it will probably be less of a problem and may have the potential to be effectively day traded.

Any person who has made money with Bitcoin will tell you the easiest way to do it, is to buy and wait. It’s that simple, but people are often tempted to take action, intervene and make trades. Then they end up losing money.

I wish you all good luck on your crypto journeys.

DISCLAIMER

I am not a financial advisor. This is not financial advice. This article is for educational and entertainment purposes only. The information in this article does not constitute or intended to be investment, financial, trading or any other advice. The information in this article is general and in no way specific to you or any reader. Before making any financial decisions, be it investment, trade or otherwise always consult with a registered professional or financial advisor.

April 2021

Delilah Brass