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Since the meteoric rise of the Bitcoin market in 2013, the price of Bitcoin and crypto-assets have naturally become a major point of intrigue for speculation. Even with a lack of legal clarity and institutional advisory services, the commotions about the glamour of the decentralized monetary system has brought remarkable interest across the globe. The uncertainty about the future of the industry, however, has led to wild price fluctuations and an environment of fear and greed. These two emotions are regular companies of market convulsions which have been a normal part of our financial systems for centuries now. What is new in our era though, are the individual investors who no longer need (or currently have) financial institutions or their professionals to help guide them through the investment process.
I have been in the field of finance for many years and am currently working as a financial adviser, but–just so we are clear–I am not telling you whether you should invest in Bitcoin or not. This is not only because the future is uncertain but because I don’t know who you are or your situation. What I can do, which is part of my everyday work, is help you reduce the fear of investing.
#1: You don’t have to buy now, or do as I do, but you need to do your homework!!!
I can’t tell you where the market is going. The best thing I can tell you is to do your homework because I lost out on my first quarter million when I failed to do mine. I was exposed to Bitcoin back in 2011 when my college roommate, who involved early on an a miner, asked me to buy in $100 with him. During that time, the Bitcoin peak was below a dollar. My buddy was so passionate that he asked me hundreds of times. Each time I denied his offer, citing that I am poor student. Then each time we would watched the price go up and I still think, “Shoot! Why would I buy now when I could have had 10 TIMES as much if I just did it yesterday?” I didn’t understand anything about not selling your appreciating assets at the time, but looking back, I think the real reason I never bought in was because I knew almost nothing except for what my friend told me. I did not take the one hour it may have taken to understand what may be the start of what Don Tapscott dubs the ”internet of value,” and I missed out because of it.
We tend to want immediate gratification. You may have come to this article hoping I would tell you to buy the right golden token, but I am sorry to tell you, it may be too late by the time someone tells you about it. You aren’t too late now though if you are reading this article in 2017. If you want to be ahead of the game like many people were at the start of this year when they researched the Ethereum project, then keep up with and research the space. Keep showing up here for updates, reading news and watching videos for project developments. Answer anything you don’t understand. It may be the rock where your $250,000 is hiding.
Even if you are not fascinated by blockchain like I am, I think if you stick around, this interest will pay.
#2: Don’t bet the farm.
On a daily basis, I help to face and put away people’s fears with goal-oriented financial planning. In the case of crypto, the great fear that many of us experience comes from this sense of missing out. For example, many people hear that BTC will be $50,000 one day. Suddenly people are speculating that BTC is undervalued at its market cap of $40 billion. With all that buzzing, you could give into the greed of getting something for nothing and betting all you have.
When you feel that coming on, do this: ignore all of it, then look at your situation and only invest what you can afford to lose. The truth is you never know if the market is on the way up or on the way down. Back in 2013, before Mt. Gox collapsed due to hacking, the largest exchange at the time, people were clamoring about Bitcoin becoming $20,000 one day. Then, when the hack happened, the Bitcoin community reeled for 3 years before regaining momentum to overtake the previous high of 1000 dollars. If you bet the house then, you probably couldn’t afford to ride out the wave even if you believe in the technology. However, if you only invested a small amount, the drop in market price would have been an opportunity for you to buy.
My clients know that the surest way to build wealth is to pay yourself first 10% of your gross income. I would recommend you to put a tenth of that if you believe in the technology at all. If your investment goes well, your money will snowball so the value is even larger than your yearly income. I can’t tell you if you should invest now or later, but I do want to remind you to start small and be persistent.
So all in all…..
Don’t let what you don’t know spook you. Do not let the hype trick you into selling your home. Do your research because it’s still the beginning. However, no matter where this goes, I would approach it as you would any other speculative market: don’t wait if you believe in it, and invest what you can right now so it can start to grow for you.
Tune in later for more observations on the world of crypto-finance.