It wasn’t that long ago that Bitcoin seemed like a total scam. I recall trying to figure out how to buy some back in 2010 and seeing instructions that suggest I mail a guy a cheque and in return I would receive some Bitcoin. At the time it seemed absolutely ridiculous.
You may have just learned about Bitcoin and cryptocurrencies. Or, maybe you’re like me and you have known about Bitcoin for years, but for one reason or another you never invested until recently.
Bitcoin, as well as many other cryptocurrencies (Such as Ethereum, Litecoin, Dash, and Ripple) have skyrocketed in the past few months. There are more cryptocurrency millionaires than ever before, and major news outlets like CNN and CNBC are reporting on these cryptocurrencies.
Even I have to admit that its tempting to throw some money into some of these coins, even though I don’t necessarily see their long term value. However, more than likely I would be buying in at the top, and be tempted to sell at a loss. Despite self awareness, it can be very difficult to keep one’s greed in check when faced with large potential gains.
Many potential investors see these prices rising and experience a form of social anxiety, know as “Fear of missing out” or simply, FOMO. When you see the price of something like Bitcoin start to rise, you are going to be tempted to buy in. After all, you wouldn’t want to miss out on 1000%+ gains would you?
This is a dangerous position to be in, and recently it seems that people are going all out. Some families are taking out equity in their homes just to buy more Bitcoin. While it may seem like a sure bet, it’s important to remember not to invest more than you can afford to lose.
There is a place for high-risk speculation and investing, but before you make any decisions you need to ask yourself a few questions:
- Why did you not invest before? What has changed (besides the price) that makes you want to invest now? In many cases the answer will be.. FOMO.
- Is your goal to get rich quick? Bitcoin is not a get-rich-quick scheme. While it has happened for some people, it may not happen for you.
- Are you financially stable? This is by far the most important one. If you currently have debts or are struggling to provide for yourself and/or others, sinking money into cryptocurrencies is a bad idea
So, before you go and sink your retirement money into today’s hot altcoin, take a step, breathe, and re-evaluate your situation.