1 Silly Trick That’ll Help You Avoid 1 Serious Mistake When Buying Bitcoin

Bitcoin (CRYPTO: BTC) is widely accepted as an asset that will be around for a while, but it can still be scary for many investors. It’s easy to understand why this is the case, because everyone has heard stories of investors losing everything with their cryptocurrency investments.

But huge losses are not an inevitable outcome, and with a very simple trick, you will be able to avoid even one of the most serious mistakes that people tend to make with Bitcoin. Let’s dive.

Some investors make this mistake over and over again

To start, let’s look at a few snapshots of Bitcoin’s price action to see where you could screw up your investment, starting from a one-month view.

Bitcoin Price Chart

As you can see, if you purchased the coin at the beginning of last month, you have lost more than 10% of your investment in the last 30 days. If this happened in your retirement account immediately after purchasing the stock, it would probably cause consternation. The potential outcome is clear: This goes straight to zero. Your risk-averse friends and relatives may be warning or even pleading with you that it’s better to walk out with most of your money now, even if your losses aren’t that serious.

But wait. A small drop in coin price is far from a death knell, and selling could actually be a serious mistake. Therefore, not being able to tolerate temporary losses can lead to missing out on much larger gains. Let’s zoom out and look at a six-month view:

Bitcoin Price Chart

There is still a risk of making the same mistake selling early here.

But this time, the logic of anxious viewers and perhaps your own brain seems a little different. As sell-side proponents would say, there is no way the bull run can continue after such a rapid rise in the coin’s price. Also, Bitcoin is a bubble and will go to zero one day, so it is better to exit now with a tidy profit before you lose most of your money.

The fact that a bull run is ongoing is not evidence that the bull run will end immediately, although it is true that it will probably end eventually. Additionally, the end of all bull runs is not evidence that the price of a security will fall lower than the price at which you purchased it. Cutting your gains too early can ultimately be just as devastating to your portfolio growth as cutting your losses too early.

Now let’s look at the 10-year period:

Bitcoin Price Chart

Examine this table. Where are you most tempted to buy or sell your Bitcoin?

The story continues

Be honest. If you’re like most investors, the temptation to sell will hit you hardest during sharp declines after price peaks, when your investment is rapidly losing value. The opposite situation is when you are most inclined to buy exactly when the price has reached its peak and just before it starts to fall.

One more question: Where on the chart is it most appropriate to buy or sell? It is clear that the right move would be to buy on declines and sell on rises. Take a closer look at roughly how much time passes between troughs and peaks.

Herein lies the roots of the biggest challenge of investing in Bitcoin or any volatile cryptocurrency. With perfect timing, you should hold onto your coins for a few years for the best investment results. Most investors are not patient enough to make this basic strategy work. Others panic in times of crisis and sell before their patience can reward them.

Don’t be afraid. There is an easy solution.

This trick is a magic wand

Timing the market or Bitcoin is not possible for most people. Remember, you cannot see the 10-year chart of the coin’s future performance the day you sit down to make your investment. You can only see what happened in the past. This means it’s even more important to rely on patience, such as using dollar cost averaging (DCAing) rather than buying in bulk.

But this is not even the trick, it is just a tool to help you reduce the impact of daily price fluctuations on the total value of your investment.

The most important tip to avoid selling your shares too early before reaching the price target specified in your investment plan is to not look at your Bitcoin or crypto investment every day.

Looking at the price of Bitcoin doesn’t change this. Looking at the value of your investment will not help it appreciate or regain lost value. Stressing out about your investment won’t do anything positive either; However, it can wear out your patience and cause you to make a serious mistake, such as selling before the time is right.

Set up your DCA plan with your broker, then close the browser window. Find some distractions, preferably enjoyable ones, that can keep you busy for months or years. Check back every once in a while, and if you haven’t yet reached your set price target, try checking back later. It’s out of sight, out of mind, so there’s no opportunity to flounder.

Bitcoin is an investment to be held for the long term. Don’t trade and don’t be afraid to play with your own psychology to build the patience you need to make a profit. When in doubt, zoom out from the chart, take a look at the trend, and log off.

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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in Bitcoin and recommends it. The Motley Fool has a disclosure policy.

1 Foolish Trick to Help You Avoid 1 Serious Mistake When Buying Bitcoin Originally published by The Motley Fool