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My investment in Bitcoin has been a roller coaster journey. Here’s what I’ve learned
I have been reading and writing about cryptocurrencies for almost a year now. When I first started reading about Bitcoin in March last year, it was when the cryptocurrency’s price was lurking around US$5,000. Today, it’s crossed $50,000.
Since I’ve been reading about the crypto market so much, I saw this coming. After all, by the end of 2020, Bitcoin price had crossed the $20,000 barrier and broken its previous record.
It’s not that the idea of investing hadn’t occurred to me last March. But every time I seriously considered it, I chickened out. I had never invested in anything before, and cryptocurrencies aren’t exactly a low-risk starting point. In fact, they’re the epitome of risky investment given their history of price volatility and digital theft.
But at the dawn of 2021, I had a light-bulb moment. After saturating myself in Bitcoin literature to the point where cryptocurrency tickers swam behind my closed eyelids, I knew I needed to be part of the global crypto community – to engage with this budding technology that is slowly but surely gaining prominence.
Also, obviously, there was a profit motive. Although I’m chronically weak with numbers, even I could calculate that an investment in Bitcoin in March last year would have tripled my money. I said to myself: “That’s it, I’m not going to let this opportunity pass me by anymore.”
So, my New Year’s resolution became a promise to myself to invest in Bitcoin and cryptocurrencies in general. Usually, I forget my resolutions within a week. This year, however, has been different. Not only did I start investing in Bitcoin as promised, but with its price skyrocketing, I’ve also managed to earn a tidy profit.
It is important to mention here that this article is just meant to guide amateur crypto traders like myself in gently dipping their toes into the Bitcoin pool. Even if you’re not interested in making money, investing a tiny amount in Bitcoin and watching it grow is a jumping-off point for understanding how this explosive currency – and its underlying technology, blockchain – are poised to tackle some of the world’s greatest inefficiencies.
For those of you who are completely new to the cryptocurrency world, here’s an explainer to help you understand what Bitcoin is and how the cryptocurrency works.
Bitcoin baby steps
At first, I was highly apprehensive of Bitcoin trading exchanges in India. I wasn’t sure if my money would be safe, and whether I would be able to withdraw the money whenever I wanted. So I decided to do a test run first.
I went with WazirX, the crypto exchange platform that was acquired by Binance in 2019. Binance is one of the largest cryptocurrency exchanges in the world, so this provided me with some assurance.
The WazirX platform required me to complete a know-your-customer (KYC) process before beginning to trade. Since I was considering getting into crypto trading last year, I had already completed the process and opened an account. It had taken a few days to complete the KYC process.
So on January 1, 2021 I invested a small sum and decided to sell it as soon as I had made a profit, no matter how small, to see if I could withdraw whenever I wanted. Buying Bitcoins on WazirX was straightforward – you deposit money in your exchange wallet, select how much Bitcoin you want to buy, and within a few minutes, your order is executed and your exchange wallet contains your Bitcoin.
It is important to remember that when you place an order to buy or sell Bitcoin, the order can be executed instantly if your buy order matches a sell order in the book. But if your order does not match an existing order in the book, it will take time. The test run went smoothly and I withdrew the money after two days.
If you are planning to sign up on a cryptocurrency exchange for the first time, make sure you read their policies and restrictions carefully. For instance, on WazirX, you have to invest at least enough money to buy 0.0001 bitcoin. However, in order to be able to withdraw, you need at least INR1,000 (US$13.73) in the account.
Once the test run was over, I immediately reinvested. So here’s what I’ve learned from my Bitcoin trading experience so far.
FOMO is real
The first few days after my reinvestment, I was constantly anxious about which way the graph was moving. I was at the edge of my seat, biting my nails, and checking the price of Bitcoin almost every 10 minutes.
But the problem arose at night. Unlike financial markets, the crypto market trades 24×7. So when it was time for me to sleep I was overcome by fears that the market would crash overnight and I would be at a loss.
I wanted to sell my Bitcoin before I went to sleep just so I could be at peace, but each time you buy or sell Bitcoin, the exchange charges a transaction fee. So, unless you want to pay the exchange every time, it is advisable to hold your investment until you’re sure you want to sell.
Throughout the day, every small downward movement in the graph sent my mind into panic mode and every upward tick made me heave a sigh of relief. But after about a week, the anxiety passed and I became more and more relaxed.
Everyone reacts differently to pressure but if you feel anxious in the first few days of your crypto trading, just breathe and relax – it will pass.
Be prepared for glitches
Technology is not perfect all the time. Just like your phone hangs sometimes and your 4G speed can sometimes be worse than 2G speed, you can be sure that you will face some glitches in your crypto trading journey.
When I wanted to reinvest my money after the successful test run, I faced a glitch that almost drove me out of my mind. I deposited the money on the exchange and the transaction was successful – my account was debited. But the money did not reflect in my exchange wallet.
I waited for half an hour and wrote to the exchange support team. But as the minutes ticked by, my worries crept up until I couldn’t stand or sit in one place. I decided to have some tea to calm myself down, and watched meaningless TV to distract myself. When I returned to my laptop, the wallet balance had been updated and it felt like an enormous weight had been lifted.
Cryptocurrency trading systems are not perfect but they are becoming better every day. If you want to start trading, be prepared to deal with glitches once in a while.
Bide your time
Bitcoin’s price has been breaking all records over the last few months. But the price often goes down as well, as the market corrects itself. In December 2017, Bitcoin price reached a high at the time of $19,783.21. But the price did not keep climbing. And as mentioned earlier, it fell to as low as $5,000.
There are two inferences to be drawn from this. Firstly, Bitcoin investments are risky since the price is highly volatile. Secondly, it means that there are better times to buy Bitcoin than when it is at its highest.
Let me explain simply. If you buy one Bitcoin while it is trading at $50,000 and the price goes up to $55,000, your profit will be $5,000. On the other hand, if you buy Bitcoin while it is trading at $40,000 and the price reaches $55,000, your profit will be $15,000.
So, while the Bitcoin bull run is continuing as of now and is at its peak, investors believe that you can buy Bitcoins later at a better price when there is a market correction.
Keep an eye out for crypto news
All investments require you to stay abreast of the latest developments, and crypto trading is no exception. You need to stay updated with the latest news in the crypto world, especially events that can impact the price of Bitcoin, like an Elon Musk tweet or regulatory announcements.
For instance, after Musk announced that Tesla has bought $1.5 billion in Bitcoin, and that the automaker will start accepting the cryptocurrency as payment, Bitcoin’s price surged to new highs. Even the mere addition of “#bitcoin” to his Twitter bio pushed the price of the cryptocurrency by as much as 20%.
Moreover, the Indian government is currently considering a possible ban on all cryptocurrencies – an announcement that caused Bitcoin to trade at a 20% discount to global prices at the beginning of the month.
If you reside in India, you might want to consider your options carefully before you invest in cryptocurrencies. But if you reside outside India, check the cryptocurrency trading laws and regulations in your country to ensure that you are compliant.
Ultimately, you could either stand to gain or lose while trading cryptocurrencies, just like in any other investment. So make sure you read market forecasts carefully and consider the advice of financial experts before you invest in Bitcoin or any other cryptocurrency.
Header image by Thought Catalog on Unsplash