Why You Shouldn't Invest In Cryptocurrency – Nigerians should take note.
In cryptocurrency, there's a very high potential of losing all your money. We've seen a lot of bad advice online from people who have no idea what they're talking about; that could cost you a lot of money if you aren't careful. So we'll be taking the stance that you should probably not be investing in cryptocurrency unless you have the discipline to follow five strategies that will give you the best chance at coming out ahead profitable.
It's a lot more prevalent for people to lose their hard-earned money than it is to turn a small investment into a mini fortune while knowing the right time to cash out for a comfortable retirement. That's what we're going to be discussing today.
Hello there, and welcome to HotNaija, your one-stop destination for the latest entertainment news, celebrity gossips and stories, lifestyle content, and cryptocurrency news. Today we'll be taking a look at 5 reasons why investing in cryptocurrency is a bad idea. Let's dive in!
(1). DON'T INVEST TO GET RICH QUICK
We believe too many people are enamoured by looking back to the past and rationalizing that had they just invested $1,000 in Bitcoin on April 15th, 2011, they would now have $38 million. Or they think if they could just catch the next Dogecoin before it rallies 13,000% in a year, they would be wealthy.
But the honest truth is that doing that and exiting successfully is next to impossible! And more often than not, most people end up losing a significant amount of money trying to emulate other people's trades.
The other downside of this is that it encourages risky and speculative behaviour to the point where earning a 20% return on your money is no longer worthwhile.
To do something like this successfully (getting a 100x return) and make a life-changing amount of money from a small investment, it takes insurmountable emotional intelligence, self-control, and discipline (to ride through the volatility) to sell when you hit your goal and not get consumed by greed when everyone thinks it's going to continue going higher.
Very few people have the skills to do this effectively, and for a lot of people out there, we would chalk this up to luck rather than sophistication. This means replicating these same strategies over and over again while 10xing or 20xing your money is just really not feasible.
Of course, you can make a lot of money investing in cryptocurrency. However, if you view it as a way to get rich quickly, that would inevitably lead to what the Crypto community calls FUD (Fear, Uncertainty and Doubt). In other words, it's a mentality that causes you to buy when it's already going up and sell at the slightest glimpse of any vulnerability. Doing this would make you lose money without having the discipline of a pre-planned entry and exit point.
Instead of thinking of this as a get-rich-quick scheme, invest an amount you can hold on to long-term. And once it hits a level where it makes sense to sell, whether that's within a few days, years or decades – SELL.
(2). DON'T INVEST IF YOU'RE NOT PREPARED TO LOSE MONEY
Never invest in cryptocurrency if you're not prepared to lose money! At this point, it's pretty safe to assume that we're going to continue to see rather large corrections and sell-offs. If you're not prepared to invest your money and see 90% of it disappear into the abyss (potentially forever), then you should not be investing in cryptocurrency.
The biggest problem that we see with this is that it's way too easy to buy high all at once and then sell low whenever everyone moves on to something else, with the mindset that – 'You may as well sell now while you still can'.
That just winds up, creating a circle where you buy, you get discouraged, you lose, you save up more money, you buy again for all the wrong reasons, you sell it when it goes down, and you're perpetually caught in this trap of losing, even if the coins themselves are good.
So instead, you should only invest what you're willing to lose and only invest what you're comfortable watching drop in value. Otherwise, as soon as you get worried or emotional watching your account go up in flames, you're more likely to make impulsive, emotionally driven reactions that might end up hurting more than they help.
We advise you to buy consistently in small amounts and then add up on your position over time. This way, you never just purchase in all at once because you know your chances of timing the market correctly are pretty much non-existent. Instead, you could use any drop in price as a reason to go and buy a little bit more, and no matter what happens, you'll be able to average your buy-in over time.
So always remember, never invest more money than you prepare to lose since many don't even intend to use this money for decades. Make a plan that you're going to stick with no matter what the price trades at. By doing this, you're going to be much more likely to invest level-headed without reaction. That way, you'll be able to ride the volatility to your advantage.
(3). DON'T INVEST IF YOU'RE NOT PREPARED TO DIVERSIFY
Right now, on CoinMarketCap, there are precisely 13,666 different projects in cryptocurrencies that people have a chance to invest in, but how many of them do you think will be successful and will be around 10-20 years from now? Like, do you think "Lady Luck" is going to be the next big thing? Or what about "Babytoken" or "Anti-scam token"?
Well, most likely, the entire cryptocurrency market will look vastly different 10 years from now, and predicting which ones are going to be successful will be pretty much impossible without diversifying.
To put this into perspective, just look at the dot-com bubble 20 years ago. In 1999, there were 457 IPOs, with 117 of them doubling in price on the first day of trading. The biggest dot-com company was "Netscape", which dominated the internet like a search engine before "Google". Near the bottom of the top 10 list were "Amazon" and "Yahoo", of which only one of the previous top 10 became incredibly successful.
Amazon also went through a time where it dropped 90% in value and took nearly a decade to recover to where it once was, before the sell-off. We guarantee in 2002 when it fell in price, very few people could have predicted the Goliath (Amazon) that would be here today.
The point we're trying to make here is that we feel that something similar is also going to happen with cryptocurrency. And the current top 10 coins on exchanges will look dramatically different 10 years from now as the market changes.
That's why we recommend diversifying your investment across multiple cryptocurrencies instead of just picking one or two that you think might 100x and make you as rich as possible. By doing this, you're going to have a greater likelihood of investing in something that will be around in the long term.
And if a few of them don't work out, well, that's fine because you're going to have something else to fall back on. We would also see your entire cryptocurrency investment as a small part of your entire portfolio, bolstered by other asset classes that have a long-standing track record.
For example, combine your cryptocurrency with the stock market/index fund/rental property, which would give you consistent income regardless of what happens. With investments like this, it's going to be pretty much impossible to lose money as long as you take the proper step to diversify.
(4). DON'T INVEST WITHOUT DOING YOUR RESEARCH
At this point, everyone jokes about the shills that post their mind-blowing profits with the disclaimer – "NOT FINANCIAL ADVICE" plastered across the whole thing as though that's going to keep them out of jail if the SEC ever decides to regulate them as securities. But truth be told, too many people are buying into whatever they see, getting the slightest glimpse of hype, hoping to ride it as close to the moon as possible without doing any actual research into what they're buying into.
I know we're all guilty of this to some degree. Many of us have been dumb to have purchased crap that we didn't do our due diligence research on, and we have to say, every single time you listen to somebody on a highly speculative volatile investment, you will lose money. But where people go wrong is when they listen to someone like that, invest all of their money into one single project, and then get caught in the dump when everything plunges in value.
It's a costly lesson to learn, but it's something easily avoidable by instead waiting 5 days before you make the investment and using that time to research as much as you can. In the big picture, if it's something worth investigating, waiting 5 days will not make any difference, and that's going to give you enough time to sift through all the crap and provide you with something worth investing into.
Not to mention that chances are if you're worried about investing as fast as possible because, in five days from now, it would have tripled in price, and you have missed out on all the upside. Then realistically, it's probably not something that you should be partaking in. Good companies and currencies don't just have a 5-day window of profit, and that's it.
Also, when it comes to investing, patience is one of the best qualities to have.
(5). DON'T INVEST IF YOU'RE TOO EMOTIONAL
This basically has to do with the price fluctuations. It's, unfortunately, one of the most challenging aspects of cryptocurrency right now. And when emotions are high, it makes it impossible to make a level-headed logical decision. This is far too common in the cryptocurrency world, where if you say anything negative or critical about a project, you're downvoted into oblivion for spreading FUD.
People may love your blind optimism and passionately follow along because they believe that cryptocurrency is the golden parachute that will make them rich. However, the problem this creates is an echo chamber of only hearing the information you want to hear without hearing other viewpoints, which would give you a more broad perspective.
That's it, friends, and as always, make sure you check out our other blog posts for more information about the crypto market and trending entertainment headlines. Thanks for reading. Cheers!
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