As a beginner in the crypto world, acquiring essential information before you start buying cryptocurrencies is essential. Digital currencies are complex investments and are characterized by extremely high risks. So, before joining the crypto movement, you need to know how to buy crypto currency and what are the best digital coins to opt for. Also, it will be wise to invest only the amount of money you can afford to lose.
Bitcoin is the most popular crypto, as it was the first coin of this kind that appeared in the market. Bitcoin was the only virtual currency in the market for many years, but things have changed since then. Nowadays, plenty of other cryptocurrencies are present and have brought even more innovation, as is the case with Ethereum. But it might be daunting to figure out what digital currencies to opt for or how to buy them.
So, to help you, we have prepared some essential tips to ensure you buy cryptocurrencies safely.
The best way to handle a high-risk investment is to know what you get yourself into. So, having a strategy and knowing what you’re doing is imperative.
Buying digital currencies is similar to buying stock, but cryptocurrencies are still very volatile because they are at an early stage. Also, because there are many digital currencies out there, you have plenty of options to explore.
Cryptocurrencies are very appealing to investors, as there are loose regulations around this kind of investment. Still, you need to do a long research before you decide to buy cryptos, as you surely don’t want to lose all your funds.
Opt for an appropriate cryptocurrency
The crypto market is home to a large array of virtual coins beyond Bitcoin. However, you need to be cautious with what you choose, as over the years, not all digital currencies have been able to survive on the market. So, to choose something suitable for you, you need to keep in mind several factors, like the following.
- Look at the price charts. It is recommended to check out the price charts and stay away from those digital currencies that show low trading volumes because these coins are very susceptible to market manipulation due to their low demand.
- Know your risk tolerance. Before investing in any type of crypto, you must clearly understand your risk tolerance. Keep in mind that the crypto market is extremely volatile, and you will often feel like you are on a rollercoaster because of the rapid fluctuations in the crypto sector. The price of the cryptos can be influenced by small things, like a mere tweet, and it can change drastically.
- Learn more about digital currencies. It is good to know everything about the coin you want to opt for, like its history and price fluctuation, so you will have a better image of what you will be dealing with.
Choose an exchange
A cryptocurrency exchange works similarly to a stock exchange, as it helps investors sell and buy digital currencies like Bitcoin and Ethereum. They provide a wide range of investing and trading tools to their users. Cryptocurrency exchanges can be centralized and decentralized, with many differences that set the two apart.
Centralized exchanges (CEX) work like full-time brokerages or conventional equity stock exchanges. As the name suggests, centralized exchanges are regulated by an authority that monitors accounts and transactions.
- The possibility to handle transactions faster
- Great liquidity
- The user’s funds can be recovered
- Because CEX stores valuable users’ data, they might be victims of data breaches
Decentralized exchanges (DEX) are different from centralized ones as they allow trading without the need for any authority. Decentralized exchanges are autonomous, and the users are the only ones that control their digital assets. Also, in the decentralized exchanges, users benefit from more privacy, as they don’t need to complete any formality.
- Improved privacy and security
- Full custody of funds
- Reduced chances of cyber attacks
- Low liquidity
Select a storage method
It is important for crypto owners to choose a storage method, to reduce the risk of getting hacked. This is why it is imperative to have a secure storage place to keep your digital coins. You have several options to store your cryptocurrencies.
- Leave your digital assets on the exchange. When you buy any digital coin, it will be stored in a crypto wallet attached to the exchange.
- Hot wallets are crypto wallets stored online, which run with access to the Internet on several devices, like computers, tablets or phones. Hot wallets are a convenient alternative, but they present a high risk of cyber-attacks because they are connected to the Internet.
- Cold wallets aren’t connected to the Internet, making them more secure. Cold wallets can be external devices, like a hard drive or a USB drive. But, if you choose this alternative, you need to be very careful, as if you forget your code associated with the wallet, your access to your cold wallet might be lost for good.
Diversify your portfolio
There is a quote that says don’t put all your eggs in one basket, so it will be a good idea to diversify your portfolio with more than just a single kind of digital coin. This will mean that you will not be exposed to that many risks, as even if the price of a digital currency might drop, you still have other assets in your portfolio. There are thousands of alternatives from which to choose, so do your research and opt for the ones that look the most secure.
As with any other investment, users need to set investment goals and consider their financial situation. Cryptocurrencies are very volatile, so they have some high risks. This is why you must remember to invest only the amount you are comfortable losing.