Everyone has heard the stories of people becoming wealthy essentially overnight with Bitcoin. Going from having nothing to making life-changing money in the blink of an eye. That exact dream eventually causes most people to enter the market hoping to do the same.
It is Bitcoin’s greatest strength and also its biggest curse.
The problem is that most people don’t understand what type of market they are entering. Entering with these unrealistic expectations will make you unprepared for the journey ahead. They have no idea that investing in Bitcoin will be one of the most stressful experiences of their financial lifetime.
The Mistake
In a perfect world, everyone would understand what type of market they are devoting their cash to, and what type of experience they should expect to have.
Even better would be if they had fully gone down the rabbit hole of Bitcoin. Not only understanding the traits that make it valuable but also its past price history.
Unfortunately, that is not the case.
The truth is that Bitcoin is one of the most volatile financial assets the world has ever seen. There are days when its price goes up by as much as 20% and others when it drops just as quickly. There are also four-year cycles where Bitcoin’s price will appreciate by several thousands of percent. However, the bear market soon follows, and typically the price will drop by at least 70%–90%.
Once people enter the crypto market, they start to believe that this is the best possible method for them to increase their wealth dramatically and quickly. The average 10% average yearly return when investing in the stock market S&P 500 seems like chump change compared to the hundreds of percentage gains that are typical for Bitcoin.
Therefore they begin shifting to having their portfolio overly weighted in Bitcoin or crypto to a point where it makes up the majority of their portfolio. Many of these investors even decide to go 100% into this market.
When you have everything riding on this market performing well and have unrealistic expectations, that is when the path begins to become very bumpy.
The Devastating Consequences
There is a popular way of thinking amongst crypto market veterans on how long it takes to become wealthy in this market.
During your first full four-year cycle you can make great gains. During your second cycle, you can become rich. Finally, during your third cycle, you can achieve generational wealth.
All of that is possible if you’re able to survive the stress that the crypto market delivers constantly.
Many would think that most of the stress comes directly from the extremely volatile price action. After all, there will be days when you wake up feeling that you are on the verge of achieving life-changing wealth. Only for prices to take the very next day causing that dream to quickly become an illusion.
Then comes the multi-year-long bear markets where it seems like the death blow had finally been dealt to this industry. That it will never be able to recover.
For most people, that would be enough to cause people to lose conviction in Bitcoin and sell out of their positions.
But that isn’t even mentioning the constant FUD attacks that seem to be thrown in Bitcoin’s direction.
Here are just a handful of FUD situations that Bitcoiners & crypto investors have had to deal with throughout the last handful of years.
- China Banning Bitcoin Mining & Bitcoin Within Its Borders
- The US Government executing “Operation Chokepoint 2.0” to try to end the crypto industry in the US
- The SEC declaring most altcoins as securities
- Environmental experts claiming that Bitcoin mining will melt the oceans
- FTX crypto exchange fraud that shook the entire industry
- Terra Luna/UST becoming de-pegged and market selling several thousands of Bitcoin
And the list goes on and on.
It takes a person with superhuman strength, patience, and conviction to not succumb to the stress that the cryptocurrency market gives on a daily basis. The truth is that most people give in, and fulfill the stereotype of buying high and panic selling low.
How to Avoid It & Thrive
The easiest method to avoid the stress that this market can so easily give is to remain a diversified investor. When only relying on Bitcoin, and only investing what you can afford to lose.
That action alone will help to eliminate most of the stress that this market provides.
Next, constantly dollar-cost-average into Bitcoin and crypto. Even better would be to automate those purchases. By buying when the price is up, down, or even sideways. That helps to eliminate a lot of the pressure to perfectly time the market. It also reduces regret when prices fall immediately after you buy. The truth is that over the course of Bitcoin’s history typically those who have simply dollar-cost-averaged in BTC over the years have significantly outperformed those who try to time the market.
Finally, don’t stay glued to watching Bitcoin’s price action all throughout the day. Checking it periodically is fine, but maintain hobbies outside of the Bitcoin market as well. This will help you to retain your sanity when Bitcoin’s volatility begins to heat up.
The single most important thing you need to do to be successful with Bitcoin is to simply survive the market for the long term. Always remember, “When in doubt, just zoom out.” In five or ten years from now, life-changing gains can be made from Bitcoin. You just need to put in the work now.
How about you? What’s your biggest Bitcoin mistake?
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This article is for informational purposes only and should not be considered financial, tax, or legal advice. You should consult a financial professional before making any significant financial decisions.
