Lessons Learned from the Bitcoin Crash of 2013

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Bitcoin's parabolic rise during 2013 from $13 to $1,100 caught the attention of the mainstream media and brought many new investors to the market. For those who bought in at the top, the sudden crash to below $700 and the continuing slide downwards to a low of just over $200 by mid-January 2015 hit hard. Many of these people decided to cut their losses and cash out during this period, thinking that it was the end of the road for Bitcoin.

Little did they know, or anyone else for that matter, that 2017 would see Bitcoin surge to a price that dwarfs that of 2013. There is also talk circulating, that Bitcoin will go significantly higher again before the year is out. With this in mind, and with similar stories abounding in 2013, it is worth looking back to see what we can learn from the past that will help us to invest wisely today.

1. Only invest what you can afford to lose. Many people invested at $1,100 feeling certain that the price of Bitcoin would continue to rise. It didn't. Those who needed that money for daily expenses and were hoping to make a quick buck got burned. Consider the worst case scenario and where you would be financially if the price crashed.

2. Only invest what you can afford to leave in the market long term. Those who bought Bitcoin at $1,100 in 2013 and have held until today are now in a very strong position, having made a significant profit. This, however, has only been made possible by their ability to hold. For three years they were carrying a loss, and if their circumstances determined the need to cash out during that time, they would have had to take the loss, rather than receive the upside that lay ahead.

3. If you have money invested in Bitcoin and the market crashes, hold if you can, rather than sell at a loss. There may be big rewards ahead in the future that you can't imagine right now. Just ask those who have held strong since the 2013 crash.

4. If the market crashes, and you have additional funds available that you can afford to lose, this may be a buying opportunity. Those who invested more money in Bitcoin during the lowest points after the crash, and held, are now very glad that they did. Of course, there is risk involved, as the market may not react the same way in the future. That is why, and I can't emphasize this enough, you must only invest what you can afford to lose.

5. Take some profits if you need to, but leave your seed investment there so that it can continue to produce profits for you into the future. In other words, don't kill the goose that lays the golden eggs.