With high potential returns, cryptocurrencies are attracting more and more investors around the world. But diving into this universe, where volatility reigns supreme and scams are commonplace, requires caution and solid preparation.
Here are 5 essential steps that will help you enter the crypto world with all the cards in hand:
Step 1: Educate yourself and understand the fundamentals of cryptocurrencies
Investing in cryptocurrencies without knowing the basics could expose you to costly mistakes. Between volatility, cyberattacks and different regulations, the risks are numerous and can lead to significant financial losses. So, before embarking on this adventure, take the time to understand the fundamental concepts and regularly follow the news on dedicated sites, such as CryptoNeet. , to stock up on knowledge. This step is crucial to reduce the influence of emotional investment and adopt an informed approach.
Here are some tips to help you with this process.
- Blockchain: the technology on which all cryptocurrencies are based
- The different types of cryptocurrencies: Bitcoin, Ethereum and many others
- Consensus mechanisms for validating transactions in a blockchain: Proof of Work (PoW), Proof of Stake (PoS)…
Step 2: Choose a secure exchange platform
By definition, an exchange is a service that allows users to buy, sell, and trade digital assets. There are two broad categories: centralized platforms (CEX) and decentralized platforms (DEX).
Run by private companies, CEXs typically offer a more user-friendly experience with intuitive interfaces, advanced features, and more. But beware, security risks are not minimal. Before signing up on a platform, be sure to check its reputation and licenses. As part of the registration process, most CEXs require a KYC (Know Your Customer) check to ensure compliance before you can make any transactions.
On the other hand, DEXs allow you to trade directly with other users, without an intermediary. This means you can keep control of your assets. Plus, there’s no need to open an account; you just need a digital wallet and crypto assets to participate. However, these types of exchanges can be less user-friendly for beginners and offer less liquidity.
Step 3: Select cryptocurrencies and develop an investment strategy
After choosing the exchange platform, comes the step of selecting the cryptocurrencies in which invest. Each asset has its own characteristics, opportunities and risks that all potential investors should know before committing, in order to make better decisions.
In any case, diversification is the golden rule. Avoid concentrating your funds on a single cryptocurrency to minimize risks. Instead, spread your investments across several assets with varied profiles. For example, you can bet on well-established cryptos like Bitcoin and Ethereum to ensure some stability and include newer or more specialized projects to boost the potential return of your portfolio.
Moreover, you also need to develop a good investment strategy to succeed in this sector. To do this, base it on your risk tolerance and financial goals. If, based on your research, you believe in the long-term growth of cryptocurrencies, you can opt for HODLing, a technique that consists of holding your assets for a long period of time. Otherwise, you can take advantage of short-term price movements by adopting the active trading strategy.
Step 4: Store your assets securely in a wallet
Although exchange platforms often offer storage options, it is generally recommended to use a personal wallet to better control your funds. There are two main types of digital wallets, the choice of which depends on the value of the assets and the frequency of use.
- Hot wallets (online): connected to the Internet, these wallets are suitable for users who want to access their assets regularly or interact with decentralized applications. The downside is that they are exposed to cyberattacks.
- Cold wallets (offline): These solutions offer enhanced security for long-term storage. They are particularly aimed at large investors or people who do not need to access their cryptocurrencies frequently.
Step 5: Monitor and manage your portfolio regularly
To maximize success and minimize risk, monitoring portfolio performance remains essential. Monitor your assets so you can adjust your investments based on market fluctuations and emerging trends. This action will help you secure your profits, identify selling and buying opportunities, and rebalance your portfolio according to your goals.
Several analysis and monitoring tools are available to optimize this management. For example, you can rely on CoinMarketCap or CoinGecko, these platforms provide real-time data on price, capitalization and trading volumes. Some exchanges also integrate reporting features to help you analyze the performance of your portfolio over time.