6 Beginner Tips When Buying Your First Crypto
It’s no secret that the crypto market is one of, if not the most rapidly growing markets in the industry, with a global market cap of $1.71 trillion after only 13 years of history. Furthermore, the prices of many crypto coins can increase by up to 10 times within a few days and can drop equally as much. In other words, it’s the type of market where it might not be a surprise for beginners to have an interest despite the volatility.
But much like any other financial venture, you need to have a decent knowledge of crypto to make sure that you are informed before you start trading. With this regard, read more for steps to try and help give you a head start on your first crypto purchase.
- Choose A Reliable Trading Platform
To enter the crypto market, you will need to first create an account on a crypto exchange platform where you can buy and sell currencies. Of course, you have to be mindful of which ones to choose. Keep in mind that not all trading platforms are legitimate or secure. With that being said, here are a few pointers to help you choose a reliable trading platform:
- Check the platform’s history: When looking for an exchange, consider checking its history if there’s any record of hacking. A history of getting hacked could be a testament that a platform is insecure.
- Make sure there are educational resources: As someone who has yet to buy any crypto, you most likely have limited knowledge of the market. Therefore, it would be in your best interest to learn the ropes first, and what better way to do that than by reading educational resources. You can find this information in crypto exchanges and some platforms even have plenty of resources to learn from.
In particular, you may want to look for an exchange with a paper trading platform. Moreover, paper trading is when you simulate trading without the need for real money.
- Ensure they have numerous coins available: You may also want to consider the number of coins available on the platform. An exchange with over 300 available coins to trade could be considered the minimum standard by some.
- Assess the trading volume of the platform: Trading volume refers to how many trades are happening at specific points in time. Naturally, you might want to use an exchange with a relatively high trading volume. This insinuates there are more people to buy from or sell to. On the contrary, when there’s only one trade available for a specific coin, you may have no option but to pay for it, no matter how high the price they’ve set for the transaction.
- Make Sure Your Wallet Is Secure
On top of a trading platform, you must also get yourself a cryptocurrency wallet. Your wallet would be where you store your cryptocurrency. There are generally two types of crypto wallet:
- Hot wallet: A hot wallet is an online storage where you can store your crypto assets. It’s easy to set up and access from anywhere as long as you have an internet connection. But since it’s connected to the internet, it’s not always as secure as its counterpart.
- Cold wallet: Cold wallet, also known as a hardware wallet, is the counterpart of a hot wallet—it’s offline and a bit difficult to set up. Moreover, you can only access it if you have the physical hardware, which is usually a flash drive. Since it’s only accessible to the holder of the drive, it can be more secure than any hot wallet.
When choosing between these two, you must keep in mind your trading pattern. For starters, hot wallets can be best suited for storing coins you’ll trade daily. Cold wallets, on the other hand, could be the ideal choice for crypto assets that you plan to store for a long time. With this, you now have the two things you need to buy your very first crypto.
- Avoid Buying A Crypto Immediately After Its Takeoff
When a cryptocurrency experiences a massive increase in price, also known as a ‘takeoff,’ many beginners often make the mistake of buying the crypto immediately in fear of missing out.
However, it’s important to understand that a ‘takeoff’ can often followed by an even greater decrease in price. Therefore, those who invest in that coin could shortly lose a lot of money after their purchase. For this reason, make sure you don’t buy crypto simply because of a price increase in the past few days. Do your research first, or better yet, ask a professional.
- Don’t Invest All Your Money In One Crypto.
For every well-reputed coin you’re investing in, like Bitcoin or Solana, you must also be investing in a lesser-known token, such as Shiba Inu or Dogecoin. The reason behind this is when a particular crypto increase in price, other coins might react. Some may increase in price together, while others could take the fall and experience a price drop.
Therefore, some people look at several cryptocurrency assets to make sure they can diversify their crypto holdings. But of course, you should pnly use what you can afford, do your own research and get professional advice.
- Beware Of Coins That Are Too Good To Be True
When a crypto coin is first created, its creator can do what experts call a rug pull. This is when they advertise it almost excessively and promise prospective investors great returns. Some may even craft a most likely fake story to make it more believable.
If ever they get enough investors, the creators could then siphon that particular coin’s liquidity pool, which often causes the crypto asset’s price to fall to zero. Hence, you must beware of coins that are too good to be true because they likely are.
- Take A Look At Each Coin’s Trading Volume
One of the main factors you must consider when buying crypto is whether you’ll hold the coin for a long time. If not, then it must be because you’re planning on selling it shortly after.
A general rule of thumb is that the higher the coin’s trading volume, the more people may be trading it. For example, Bitcoin has the highest trading volume in the market. Hence, it’s arguably the most popular asset long-term for some people. On the contrary, lesser-known crypto tokens with low trading volumes can sometimes drastically increase in price for a few days but drop in price and never go up again shortly after. Therefore, people may hold them for different periods of time.
Over the past few years, a lot of people have achieved success in crypto trading. Perhaps this is the main reason why crypto has caught many peoples attention in the first place. Needless to say, trading crypto is possible for everyone if they do proper research. But as always, it can be daunting if you have zero trading experience. However, this shouldn’t stop you from leanring more and making sure that you only trade when properly informed and know a bit about crypto trading.
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