7 tips for your first Bitcoin investment

- 5 minute read

Sam Fröling
Sam Fröling

A low Bitcoin price and a tense international economic situation are an invitation to invest. At least if you follow the basics of investing. Besides, in the stock market they have always shouted:

"Buy when the cannons thunder, sell when the violins are playing."

Old stock market wisdom

To ensure that your first Bitcoin investment is a success, we have listed some basic principles that every investor should know.

Table of Contents

  1. 1. When do the Bitcoin bulls come? Recognise the moments
  2. 2. let the emotions out
  3. 3. Don't blow your budget
  4. 4. Bitcoin is on fire? Do you realise it?
  5. 5. Find your strategy
  6. 6. stick to your strategy
  7. 7. Consider a Bitcoin savings plan.

Key takeaways:

  • Recognise the moment.
  • Keep emotions out of it, don't let FOMO and FUD control you.
  • Invest only what you can spare.
  • You only make a profit or loss when you sell your crypto.
  • Determine your own strategy, When do you buy in? and when do you sell?
  • Stick to your target.
  • Buy with regularity at a fixed time, this will reduce the time you need to keep an eye on the market.

1. When do the Bitcoin bulls come? Recognise the moments

In investing, a distinction is made between bull and bear markets. In a bull market, the mood is basically positive ("bullish") and market prices rise. A bear market is when prices fall. The mood is usually then negative or also called "bearish".

Between these two moments, there is also the sideways market, where not much happens. Prices move without major fluctuations. But the fact that prices move north does not necessarily mean it is a bull market. Traditionally, we only speak of a bull market when prices have risen at least 20 per cent from the last low. Anything below that is considered a "rally".

A crash, on the other hand, again describes the phase when prices collapse overnight. If this happens during a bull market, it immediately turns into a bear market after a 20 per cent crash. On the other hand, if prices collapse only for a short time, it is called a correction during a bull market.

2. let the emotions out

FUD and FOMO are no friends of good investing. Behind FOMO ("Fear of Missing Out") is the fear of missing out on something. This fear usually leads to quick decisions. Then you may put money into a project just because it is trending at the time. Hardly any time is left for your own research for your own actions.

FOMO often occurs in rising market phases. For example, when Bitcoin's price rises sharply, this is headline-grabbing: media outlets that otherwise rarely report anything about cryptocurrencies suddenly report on the strong gains in the crypto market. This will attract inexperienced investors who now want to grab their part of the share. If things go badly, overheating or even a bubble will occur - and if you don't know what to do then, you will lose part of the deposit.

3. Don't blow your budget

How do you avoid such predictable reactions? Never put more money on the line than you are willing to lose. So, you should only invest money that you won't need in the next five to 10 years. Betting money you depend on can be a FUD (Fear, uncertainty, and Doubt) starter. If someone must fear for their money, they will be more inclined to try to quickly save whatever is left of it.

If, on the other hand, you are not dependent on that money, you can sit out such market phases. The rule here is: those who endure have a better chance of achieving their goal.

4. Bitcoin is on fire? Do you realise it?

You only make losses if you realise them. Even if the portfolio is still in the red and the losses seem painful: as long as you haven't sold them, you haven't made a loss yet. So if the whole market is bleeding, it may be worth waiting a bit longer. Maybe prices will still recover. Selling in a falling market is often not a good idea.

What is true for losses is also true for gains. When everything is green and the portfolio seems to be exploding, it might be time to take profits. Sure, theoretically it can always go up. But especially in the crypto market, it can also go down very quickly.

5. Find your strategy

First and always: there is no one right strategy that suits everyone. The magic formula has not yet been found here either. But everyone can find their own strategy. As preparation, it is important to know clearly in advance when you are investing, how much profit you want to make and how much loss you can take.

The investment checklist:

How much do I invest in which period (day/week/month/year)?

What is the maximum loss I can take?

Where do I set my limit order/stop loss order?

How high is the profit I want to make?

Where do I place my sell order/profit order?

If you can answer these questions for yourself, you already have an important edge over many amateur investors: certainty. Because once you have set a minimum and a maximum for yourself, you can act accordingly.

6. stick to your strategy

To stick to your objectives, there are several precautions you can take. With most brokers and exchanges, you can use the stop-loss feature. Here you enter a certain price at which to sell the cryptocurrency in question. On the other hand, there is the take-profit function. Here, too, you enter the desired price. Once this is reached, the coins are sold at a profit for you.

This saves you a lot of stress and, when in doubt, also money. By leaving the trading to the platform, you are not forced to keep an eye on the market all day but can occupy yourself with other things.

7. Consider a Bitcoin savings plan.

The cost-average effect, also known as Bitcoin savings plan, is one of the less stressful ways to profit in the crypto market. In the cost-average method, you invest a fixed amount at regular intervals, usually monthly.

As the price rises or falls, you get more or fewer coins for the fixed monthly amount. But in the long run, you build up a healthy portfolio. In any case, the idea behind the cost-average effect is that the average price compensates for the fluctuation between coins.