- Error #1: Regarding Tax Return
- Error #2: No Trading Strategy
- Error #3: Losing Coins
- Error #4: Investment in unknown Altcoins
- Error #5: No Diversification
It seems that the sideways movement of Bitcoin, Ethereum & Co. has come to an end again. If you take a look at the price development of the cryptocurrencies, you will see that things are on the upswing again. The Bitcoin price has increased again by 5.8 percent in the last 7 days. The so-called mother of all digital currencies is not alone in this, on the contrary. Other cryptos have even performed better.
Litecoin value has even increased by up to 34.9 percent in the same period. Obviously, therefore, the Crypto and Bitcoin forecasts are increasing strongly again, predicting that the 10,000 US dollar mark will be reached. For now! In the long term, many experts see the price of Bitcoin at almost dizzying heights, at least when viewed in relation to its current price. However, do these rosy prospects automatically mean that one will also achieve rich returns?
Not at all! There are a number of stumbling blocks lurking in crypto and Bitcoin trading that need to be avoided.
If you want to buy Bitcoin online, you don’t need much more than a suitable platform to handle the investment. So far, so good. However, if you rush into an investment head over heels and without a strategy, there is a chance that you will not be able to profit from the crypto and Bitcoin boom, even with rising prices.
In this case, too, knowledge is power: research prevents many a mistake. We have summarized frequently made mistakes and valuable Bitcoin trading tips in this feature: So that your pockets become fuller, not emptier!
Error #1: No or wrong Information in the Tax Return
Ignorance is no excuse. Some people recognize the great potential of Bitcoin, make significant profits, but do not tax them. While we’re on the subject: do you actually have to tax profits from crypto trading? Are there perhaps even legal tricks that can be used to avoid paying tax? The answer to the first question is “Yes, but…” – the same applies to question number 2.
It is always helpful to take a closer look. First of all, however, we would like to mention that we certainly strongly recommend that everyone should not take the subject of taxes on their left shoulder. We also distance ourselves strictly from illegal activities of any kind.
Ultimately, criminal acts harm oneself, the honest taxpayer and also the development of Bitcoin and other cryptos. Why? Well, there are numerous Bitcoin scams and dishonest Bitcoin casinos (surely there are also reputable providers) that counteract a broad acceptance of digital currencies among the population. In the end, this even has a negative impact on the Bitcoin price!
Anyone who speculates on the price development of Bitcoin or other digital currencies by means of CFD Trading is in principle subject to the normal income tax. However, the situation is different if you buy Bitcoins and do not exclusively “bet” on fluctuations. In this case the final withholding tax does not come into effect.
Instead, the profits are subject to other income (Annex SO). And here is a particularly important Bitcoin Trading tip: If there is more than a year between the purchase and sale of the cryptocurrency, the capital gains are tax-free.
It is therefore worthwhile in most cases to hold the currency for at least one year. On the other hand, one can literally make profits from losses. After all, if one trades in a loss within the one-year period, then these losses can be deducted from other profits from private sales transactions.
Error #2: No or little efficient Bitcoin Trading Strategy
Irrational trading from the gut
If you want to trade successfully with cryptocurrencies, you should definitely consider a crypto and Bitcoin strategy. Because it definitely is possible to make money on a Bitcoin broker if you follow a precise plan. This strategy should also be well thought out. Of course you can also buy digital currencies just like that, only to arbitrarily discard them a few days, weeks or months later.
And of course you can make a profit even then. However, this is more like a game of chance than a smart investment. In this case there are different dangers. At this point we would like to point these out briefly:
Sometimes coins are sold too soon in the event of a Bitcoin price rise. Although you take profits with you, these may be even greater if you hold the coins for a longer period of time.
On the other hand, the similar game: Many panic when the crypto or Bitcoin price fluctuates and falls for a short time. However, this should be taken literally on the light shoulder.
The crypto market is so volatile that one should always plan for such market movements. If you sell too quickly with losses, you will lose your hard-earned money. But sometimes it makes sense. This should always be weighed up. In any case, it helps to analyze the crypto and Bitcoin potential and include Bitcoin News in the decision.
Great Opportunities through considered Action
However, we do not want to be destructive and point out errors in this feature. On the contrary. In the following we will introduce a crypto trading strategy. However, this should not be seen as a trading recommendation, but rather as an inspiration. You should always consciously consider your own trading decisions. It is probably one of the best tips to not only listen to external tips!
Buy low, sell high: If you follow this maxim, you will always buy the corresponding digital currencies when their value has just fallen. Others also call this anti-cyclical trading. Here, one can make use of one’s own market characteristics. Take the crypto spring 2019 as an example: In April, the Bitcoin value initially rose disproportionately compared to other currencies.
Numerous Altcoins initially rose somewhat more slowly in price. Clever investors used this moment for themselves. Namely to the effect that they made a shift, and in time – before the strengthening of the Altcoins and after the Bitcoin boom – invested more in Altcoins with great potential.
However, this requires the right timing. It is by no means certain that you always get the best timing. The following are therefore two more general tips. Very important: This is rather a personal opinion, not a recommendation!
Concrete Trading Tips
Analyse the potential of some cryptos in detail. Invest only in those that are not scams. Especially cryptocurrencies with high market capitalization are considered safe. It also seems advisable to invest in Altcoins, but also to buy or keep Bitcoin.
Write Down Your Goals!
This seems extremely important. If you quote selling prices beforehand, you probably have a much higher chance of achieving good returns. This prevents panic selling or too early sales. It is also considered sensible not to sell all coins.
For example, you could set yourself the goal of selling a certain percentage of the coins at a Bitcoin price of 25,000 US dollars. Particularly resourceful investors even determine in advance into which currency or into which coins the profit made should be shifted.
Error #3: Badly protected Crypto or Bitcoin Wallet
Losing coins
This tip is probably the most important one. The Bitcoin potential can be as great as the amount invested: If the coins aren’t protected, every investment will fizzle out. In the worst case, this even leads to a total loss. A Bitcoin Wallet comparison should therefore be a must for every trader.
There are a number of ways to store digital currencies. There are different hot and cold wallets to choose from. However, there are also different methods in each case. Some swear by a hardware wallet, others by a paper wallet. Whatever you choose: this aspect should be handled with the utmost care. There are a number of dangers that must be avoided. We don’t want to go into too much detail here, but they should be mentioned briefly:
Private key loss: In the example of a paper wallet, the private keys must always be kept safe. Bomb-proof! Even a fire or the like should not be able to damage the access to the coins. Among other things, it is suitable for storage in a safe. Some people also write down the key on a stone or the like, as paper is simply too exposed to the most diverse environmental influences.
Hacks: In any case you should make sure that no third party is watching. Various security measures must be taken for this. If you simply want to store the coins on a good exchange, then you should choose a good password on the one hand and decide on a 2-factor authentication on the other hand.
Error #4: Investment in unknown Altcoins
Only invest in ICOs and Altcoins with very low market capitalization
One thing is quite clear. Not only the Bitcoin potential and not only Bitcoin forecasts are positive. For good reasons, many also decide to buy, for example, Ethereum or IOTA online. A diversification is even advisable. However, one should take care not to over-represent high-risk speculations.
The following rule of thumb enjoys a relatively large consensus among experts: the lower the market capitalization, the higher the risk, and since there are digital currencies in the four-digit range, investments on the lower scale are only recommended to a limited extent.
Of course, there is nothing to stop you from investing small sums of money. Ideally, however, the majority of the capital should be distributed in Bitcoin, Ethereum, Ripple and other top cryptos – at least if you want to increase the probability of success.
Error #5: Diversification – do not forget other Assets
Put all on one card
Cryptocurrencies are indeed very promising. The outlook for many coins could hardly be better. Especially in the long run, the chances are surprisingly high that the market will develop positively. And yet it is risky to invest 100% of the available capital exclusively in digital currencies.
Especially as there are a number of alternatives. Depending on your preferences and area of interest, different investments are suitable. The question of what the best investment in 2019 is is often the subject of very controversial discussion.
For example, online stock trading, or CFD and Forex Trading are possible. However, not every asset is equally suitable for every investor. In some cases a high degree of activity is required, in others not.
But why not invest everything in digital currencies? There are several reasons. Firstly, because it is not yet clear which currency will prevail and will still be traded in 10 years time. As already mentioned, especially high market capitalization coins are promising – but certainly not at all!
Secondly, because it is simply possible that other assets will develop more positively in the coming years. If you actively invest in several sectors, you can secure your piece of the cake everywhere. Last but not least, thirdly, because the ideal portfolio has a healthy mix between risky investments and less risky investments.
The crypto market is considered to be volatile; extremely high profit opportunities are offset by a realistic risk of loss. Whoever hedges this type of investment with crisis-proof dividend shares seems to be on the safe side.
Good risk/reward ratio
These and other tips are, as mentioned above, to be considered merely as inspiration. Every trader is different, has a different starting point and different goals. In any case, it makes sense to set your own maxims. The Crypto and Bitcoin outlook seems almost better than ever. Therefore, it might even be negligent not to invest money in cryptocurrencies.