4 Things New Crypto Investors Must Know Before Buying Crypto

Jack R. Mitchell

Cryptocurrency has become a popular investment option in recent years. It’s known to offer a long-term investment option with the potential for large gains, investment diversification, and a possible hedge against inflation.

two coins eth btc

While some investors have been buying and selling digital currencies since Bitcoin was launched in 2009, others are just getting started. For anyone new to the world of investing in cryptocurrency, there are a few key concepts that every crypto investor should know before getting started. 

1. Research, Research, Research: 

Conducting thorough research is vital before buying into any new investment, and that includes cryptocurrency. Researching will support investors in learning about crypto technology, like blockchain, and different available assets like Bitcoin, Ethereum, and meme coins. It’s important to compare your options, and learning about what is available is the first step. Technology expert Michael Graw shares that it’s normal for investors to feel overwhelmed by the sheer amount of crypto options in the market. The best way to combat this is with research. 

Beyond understanding crypto tech basics and comparing available digital currency options, investors should consider researching some or all of the following: 

    • Market Trends: It’s wise to review market trends. This can include looking into the historical price data of a coin along with current market trends. Look for any patterns and potential investment opportunities. 
    • Development Team: If a digital asset or new coin looks promising, researching the team behind the project before buying can be a smart move. Look for teams with high levels of experience and expertise and proven track records. In addition, look for teams that are open about their development process and communicate regularly with their project community. These are all good signs that a new coin or project may be successful in the long run. 
    • Adoption: When searching for a coin or project to invest in, look for one that solves a real-world problem or seems useful. The most successful digital currencies often solve a problem or make a process easier. For example, Steller (XLM) is a blockchain platform designed for cross-border payments, while Chainlink (LINK) connects smart contracts and data, and FunFair (FUN) is used at online casinos for players who enjoy crypto poker, or other games like blackjack, slots or roulette. 
  • Regulations: Before buying into a new coin, review the regulations around crypto in your area. Some experienced investors keep an eye on the federal and local news to monitor any regulatory updates and assess how these changes may impact their investments over time. Consider a similar approach. 

Investors who take the time to research and compare their options before jumping into crypto investing are more likely to succeed in the long term.  By using a variety of reliable resources and learning about cryptocurrency, investors can set themselves up for success from the start.

2. Volatility Is the Norm

For those new to investing in crypto, volatility can be scary. However, it is important to understand that cryptocurrency is a volatile asset and that it is normal for the price of digital currencies to move up and down quickly. Volatility can work both for and against investors. If the market drops suddenly, an investor may feel like they’ve lost all of their money. However, if a coin’s value rises dramatically, an investor may double their money overnight. 

Experienced crypto investors are able to cope with dramatic market swings, and do not bolt when the market drops. The key is to remain steady in the market and not act rashly in response to price fluctuations. New investors should prepare for the value of their investments to move up and down. Consider a long-term investment mindset and avoid making impulsive decisions. 

Bitcoin, for example, has moved up and down in value over the years. Some investors have stayed the course while others have sold their holdings when prices dropped. 2017 was a big year for Bitcoin, which saw the value of the coin reach $20,000 for the first time ever. However, by December 2017 the price plummeted to about $12,000 and remained there through the early part of 2018. However, if we look at Bitcoin’s value today, which is sitting around $60,000, it’s clear that investors who retained their coins during the 2017 volatility have earned more over the years than those who sold off during volatile times. This case study shows the importance of keeping a long-term view and not letting market fluctuations determine your actions. 

3. Security is Paramount

Digital currencies are purchased, sold, and stored online, and as such, security is vital for any crypto investor. New crypto investors must learn how to safeguard their investments against potential threats. 

One of the easiest ways to protect digital assets online is by storing them in secure places and only purchasing from reputable exchanges. When searching for an exchange to buy crypto from, look for an operator that uses encryption technology and multi-layered authentication. Before buying from any exchange, or storing assets in a wallet, research the platform to ensure that it’s safe and reputable. 

Beyond choosing safe exchanges and wallets, another key safety measure that is easy to implement is using strong passwords. Investors should always opt for long, complex passwords that use a combination of letters, numbers, and symbols. Avoid using any words that relate to you, like your name, the street you live on, pets’ names, or favorite foods. If you’re prone to forgetting complex passwords, consider a password manager. 

For cautious crypto investors, consider keeping some of your assets in cold storage or in a hardware wallet. Because cold storage is offline it’s usually harder for bad actors to access it and less vulnerable to cyber attacks. Similarly, hardware wallets are known to be a secure way of storing digital assets as well. 

4.  Diversify Your Assets 

When an investor purchases a variety of assets, it means they have diversified their portfolio. It’s a smart move because if one asset does poorly, it’s likely that the others will still be doing well, and will buffet any losses. 

For investors who are new to cryptocurrency, consider investing in a variety of digital currencies, rather than putting all of your money into one coin. This will spread your funds out, so even if one of your investments does poorly, it’s likely that the others will be successful. 

This is a risk mitigation strategy and can be extremely useful for investors who are new to the world of digital currency assets. However, it’s worth noting that just because an investor diversifies their portfolio, it does not remove the need for research. Thorough research is still a key step that should be completed before buying into any asset. 

Conclusion 

Cryptocurrency is a new and exciting investment opportunity. However, for those new to digital currency, thorough research should be conducted before buying in. Newbies should research and learn about crypto technology and compare the available options in the market. Beyond this, learning about market trends, development teams, regulations, and adoption are also key. 

Understanding the volatile nature of cryptocurrencies is important for new investors, who should be ready to see the value of their digital assets move both up and down at any time. New investors can take certain precautions to protect their assets, once purchased, like using strong passwords and only purchasing crypto from reputable exchanges. By purchasing a variety of digital assets, investors can diversify their portfolios and set themselves up for long-term success. 

The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

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