How to Invest in Cryptocurrency: A Beginner’s Guide

| Updated on March 26, 2024

Crypto assets represent an intriguing investment proposition; one which many have already taken advantage of.

If you’ve yet to pull the trigger and purchase cryptocurrency with a view to seeing significant gains, this introductory guide will help you do so without making the same mistakes as other newcomers.

Buy Your Cryptocurrency Through a Reliable and Reputable Platform

First and foremost, you have to make sure that the assets you buy are supplied from a well-respected and thoroughly regulated exchange.

There are lots of less salubrious routes to crypto ownership, but dabbling in the murkier side of the market always leaves you open to exploitation by more experienced third parties.

As this investment guide from SoFi explains, when you buy cryptocurrencies through one platform that you trust, it’s not just safer, but also much easier to manage your assets.

Research Coins Rigorously Before You Commit

There are literally thousands of different cryptocurrencies out there, each of which can be chosen as an investment. However, there are major differences between projects in terms of everything from the purpose they are designed for to the amount of energy they consume.

This is where doing your own research is essential, as you would with traditional investments. You should read as much available documentation and independent info on coins as possible in order to make an informed decision.

For a lot of new investors, it makes sense to choose tried and tested assets like Bitcoin and Ethereum, since these have a track record of being a robust investment options. Be wary of newer coins with limited details available, especially if they promise sky-high returns in a short time period because this is the quickest way to get burned.

Know the Risks

Speaking of the potential for encountering issues when investing in cryptocurrency, there’s no getting away from the volatility that’s innate to the market.

Even supposedly resilient assets like Bitcoin are prone to sizable fluctuations in value, and unless you are comfortable with the possibility that you could recoup less than you originally invested, this is not an area to get into in the first place.

Consider Your Strategy

Every investor should have a solid strategy to support their decisions, and this applies in the crypto space as much as anywhere else.

Which approach you pick will depend on how much time you are willing to dedicate to playing the market and making trades.

For the average investor who isn’t going to spend hours every day juggling their assets around, dollar cost averaging is a recommended approach. This basically means investing a consistent amount on a regular schedule regardless of market conditions, which leaves you less exposed to peaks and troughs.

Another point to consider is how diverse your portfolio is. If you go all-in on a couple of assets, the fate of your investment is tied to them and it’s generally riskier. However, if you spread yourself too thinly then your gains might be diluted.

Consider Your Aims

With any investment, it is a bad move to put in more than you can afford to lose. For crypto investors, the aforementioned volatility makes this more likely than in other markets.

However, play your cards right, plan carefully, and you may come out on top. This is a matter of setting goals and being willing to pull out once you’ve hit them, rather than holding assets indefinitely irrespective of your original intent.

Wrapping Up

It’s easy to get caught up in the hype surrounding crypto, but if you’re looking at it as a long-term investment rather than as a get-rich-quick scheme, you can afford to take your time and choose where you put your cash with care.

John M. Flood

John is a crypto enthusiast, Fintech writer, and stock trader. His writings provide guides to perform your best in the crypto world and stock planet. He is a B-Tech graduate from Stanford University and also holds a certification in creative writing. John also has 5 years of experience in exploring and understanding better about the FinTech industry. Over time, he gained experience and expertise by implementing his customized strategies to play in the crypto market.

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