Bitcoin beginner mistakes

Introduction

Over the last few months, I have been helping friends, family, and paid clients to invest in cryptocurrency. As rewarding as this endeavor is, both spiritually and financially, I can't help but become frustrated when I hear the same false assumptions over and over.

I wanted to share a few of the most common false assumptions I hear, and why they are flat out wrong. Maybe you think one of these things now. Maybe you won't think them tomorrow.

BTC is too expensive

"Dude, it’s too late to buy BTC!"
"It’s too expensive."
"I like Litecoin because it’s cheaper than Bitcoin."

I hate this one. Argh.

That line of thinking is naive. It's not too late to buy BTC. And it's not too expensive. Frankly, BTC is a bargain right now.

If you think this about BTC, I encourage you to try on a different perspective. Think about the fact that there are only 16 million BTC in circulation today[^https://blockchain.info/charts/total-bitcoins]. That means if every one of the worlds 12 million millionaires[^https://en.wikipedia.org/wiki/Millionaire] wanted to buy 2 BTC each, they would not be able to.

I see a future where 1 BTC is a crazy amount of money. Like USD 1 million. Daily, we won't talk about the BTC denomination. We will instead deal in Bits. Lunch will be 10 Bits. Rent will be 2,000 Bits[^If a Satoshi (0.000000 was equivalent to one penny, a Bit would be equivalent to one dollar, and one BTC would be equivalent to $1 million.].

I advise clients to buy a piece of BTC at a time. To dollar cost average their way into a sizable holding. Whatever you can afford to lose, and not a cent more. If Bitcoin doubles against the USD, whatever portion you own will double as well.

Bitcoin isn’t the first

One thing I hear often is that Bitcoin is cryptocurrency 1.0, so I’ll wait for the 2.0 version.

To me, this line of thinking is a mistake. Bitcoin is not the first digital currency[^https://en.wikipedia.org/wiki/DigiCash]. Not by a few decades[^https://en.wikipedia.org/wiki/E-gold]. And it’s not even the first mainstream one either.

Bitcoin is the Apple of the cryptocurrency Microsoft. It stands on the shoulders of the giants before it, as noted in the white paper[^https://bitcoin.org/bitcoin.pdf], and improved on their work.

I’ll expand on that to say that Bitcoin isn’t even the “best” cryptocurrency. It doesn’t have to be. To continue with the Apple metaphor, there are phones being manufactured today that are "better" than the iPhone. Better processor. Better screen. Better camera. But better alone won’t knock Bitcoin, or the iPhone for that matter, off its throne.

Incorrectly trading currency pairs

Lots of people start trading crypto without understanding the fundamentals of currency trading. There are tons of great forex resources so I won't delve too deeply here.

Let’s say you bought 1 LTC for 0.00001 BTC. At the time of purchase, that 0.00001 BTC was worth $50.

Later you want to see how much profit you’ve made. That same 1 LTC is now worth 0.00002 BTC. It seems like you’ve doubled your money, so why not. Wrong!

In that same time, the use value of LTC went up, and the value of BTC went down. 0.00002 BTC is now worth $50. This means that you will be breaking even in fiat. However, if your goal is to store as much BTC as possible, and it should be, then closing the position makes sense.

I've seen the opposite, too. Let's say your LTC/BTC (This is an example of a currency pair), is down. You bought at 0.00001 BTC, but LTC/BTC is trading at 0.000009 BTC. This doesn't automatically mean your losing money. If the value of BTC/USD went up, and 0.000009 BTC is worth $50 or more than selling might be profitable. You would've been better off HODLing your BTC (and you usually are), but you aren't losing money. Depending on how you look at it, of course.

Conclusion

Bitcoin, and cryptocurrencies in general, are extremely complex. Be wary of anyone who claims to be an expert. There are probably only a couple hundred in the world. The remainder is split up between posers (80%), and students (20%) like me.