Five things to consider before investing in cryptocurrency

One of the most difficult challenges for investors regarding cryptocurrencies is not getting caught up in the hype. Many institutional and retail investors have quickly incorporated digital currencies into their portfolios. Simultaneously, analysts have continued to warn investors about their unpredictable and volatile nature.

If you’ve decided to buy cryptocurrencies, you have to do your homework beforehand and understand the following aspects for a safe investment on your favourite exchange.

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Decide why you want to buy cryptocurrencies

One question you have to answer before investing is “Why am I buying it?”. If you don’t feel like investing in crypto, there are other sound investments in which you can put your money, like stocks and bonds, NFTs, etc. Some provide more stability than cryptocurrency, even if crypto’s volatility can also be an advantage for crypto owners.

Why is volatility a strong point? Because if your asset has a low value now, its price may skyrocket tomorrow, and so on. And are you investing only because crypto is popular? If so, you should explore the cryptocurrency space and familiarise yourself with this market.

After answering similar questions, get a feel for the business. It’s crucial for investors, particularly those new to crypto, to learn about the cryptocurrencies available and understand how the cryptocurrency world works.

Remember that timing is key

After thorough research, you’ve likely grasped the cryptocurrency industry and decided on one or more projects in which to invest. Because the digital currency world is volatile and moves quickly, your next crucial move is to time your investment.

“How do I do so?” Well, say you choose to invest in Ethereum because it’s the second most traded currency on the crypto market. After you register on a popular exchange that has safety measures in place, you check the ETH price chart to see its current value and performance. Remember that past performance can’t guarantee you profits and that there are risks involved in crypto investments, so invest a moderate amount when you’re first buying Ethereum, Bitcoin, or any digital currency or asset.

To learn more about the crypto you’re into and to decide what type of investor you’re going to be, you can join an online community of cryptocurrency enthusiasts and investors, like the ones found on Reddit. You can also read the white paper containing details about the crypto project you’re considering, and don’t forget that it can be a red flag if the project doesn’t have one.

Decide on the type of investor you’re going to be

The landscape of crypto investors ranges from professional day traders to holders and investors seeking thrills. Everyone has their motivations for investing in crypto, so ensure you’re aware of the four biggest crypto investing patterns.

The day trader. Crypto day trading means you buy and sell assets on the same day. It’s a high-risk venture made possible by the liquidity and volatility in this market. You basically take advantage of short-term fluctuations in the price of a cryptocurrency and are an active trader.

The HODLer. If you hold a digital currency for an extended period or until its price is high enough to gain you a sufficient profit, you will be a HODLer. Simply put, you only win if the cryptocurrency’s price grows instead of making frequent trades.

The tech evangelist. If you believe that the future of finance should be decentralised and digitalised, you’re a tech advocate buying for cryptocurrency’s revolutionary power. Trading platforms must explore how to simplify buying, selling, and spending crypto for customers and ensure a safe experience.

The thrill seeker. If you’re investing for the thrill and fun of analysing price charts and being up-to-date with what’s popular in the crypto world and the latest news, you most likely love the thrill crypto offers. You’re excited to see prices rise and only need a little information about your invested asset.

If you’re into diversification, you can stick to more than one strategy. For example, you can hold a cryptocurrency for extended periods and be a day trader with other digital currencies.

Choose a popular crypto exchange

Crypto exchanges have distinct rules, features, products, and services. These offer services like the following:

  • Direct selling of digital coins
  • Cryptocurrency trading
  • Cryptocurrency storage
  • Cryptocurrency lending.

The most popular way for an exchange to make a profit is to charge a fee for facilitating market transactions. However, there are many other aspects to check before choosing an exchange, other than the fees they earn. Security and safety are among the top priorities. No platform is immune to security breaches and cyber-attacks, so ensure you’re not trusting your virtual possessions to an app prone to theft or vulnerability.

Examining how seriously an exchange takes its security standards is an excellent place to start. A decent crypto platform will provide two-factor authentication and robust security measures against theft attempts like attacks and phishing scams.

Diversify your portfolio

Building a varied and balanced portfolio is a good tip for a newbie buying cryptocurrencies. It would help if you only put a portion of your money into a single digital currency in the hopes that its value will increase. Remember that they are high-risk assets compared to other investments, mainly because of volatility.

Additionally, the cryptocurrency world isn’t regulated, so you don’t have the legal backing of an insurance company if you’re losing your assets. There’s also the risk of being tricked into believing that a particular cryptocurrency will boom. Many staunch evangelists and scammers would go to any lengths to convince you to buy a certain digital asset that seemingly promises a hefty return.

As a first-time investor, you shouldn’t take such risks, so you should consider spreading your portfolio across various projects in different sectors like NFTs, DeFi, gaming, and so on.

Some stories are too good, so don’t fall into charlatans’ traps. You’re likely stumbling upon projects that promise to surpass Bitcoin and Ethereum. When a digital currency promises unrealistic benefits, check it out first, use common sense, and overcome the fear of missing out. 


The investment in crypto assets is not regulated, it may not be suitable for retail investors and the total amount invested could be lost
La inversión en criptoactivos no está regulada, puede no ser adecuada para inversores minoristas y perderse la totalidad del importe invertido
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