Cryptocurrency investing can be highly lucrative even for newbies, but it’s not without its risks. You may be enticed by stories of novice investors earning a fortune overnight, but rapid price fluctuations can also result in significant financial losses. And predicting market trends can be challenging for anybody, particularly those with little or no experience.
Before risking any of your finances, you should get to know the ten best practices for crypto newbies. In this guide, we discuss fundamentals such as learning the tech basics, researching cryptocurrencies and exchanges, effective investment strategies for beginners, and how to avoid scams.
1. Use reliable resources to learn the technology basics
Before delving into cryptocurrency trading, you should familiarize yourself with the basics. The most essential components to understand are cryptocurrencies, blockchain technology, and crypto wallets.
Bitcoin may be the best-known cryptocurrency, but there are thousands of different cryptocurrencies that serve different purposes and functions. Blockchain technology powers the trading of crypto, while crypto wallets allow individuals to securely store and manage their cryptocurrencies.
You can follow the biggest stories in crypto at Coin360 news section for the latest updates and developments in the world of blockchain. You can also get to grips with the tech behind crypto using free resources such as the Blockchain and Money course by MIT OpenCourseWare.
2. Use reputable cryptocurrency exchanges
Cryptocurrency exchanges are online marketplaces where you can sell, buy, and trade cryptocurrencies. You can also store crypto on some exchange platforms, though crypto wallets are much more secure (more on that later).
The two main types of exchanges are Decentralized Exchanges (DEXs) and Centralized Exchanges (CEXs). DEXs offer more flexibility and slightly lower rates, but CEXs are more user-friendly for beginners and usually have robust security and regulatory compliance mechanisms in place.
Some of the most popular exchanges for crypto beginners include Binance, Coinbase, OKX, Bybit, and Kraken. You can analyze data points including trading volumes, trading fees, and change in value from verified exchanges using our crypto exchange heatmap.
3. Gain market insights from crypto indicators
Crypto indicators use complex algorithms to analyze data points such as price, market sentiment, and trading volume to predict the future values of various cryptocurrencies. By understanding how to make sense of data from reputable indicators, you can gain insights into the potential best times to buy or sell.
Our Coin 360 Heatmap displays real-time data for the top 100 cryptocurrencies by market capitalization. Here, you can find information on current values, price changes over the past 24 hours, circulating supply, seven-day price trends, and more.
4. Research a variety of cryptocurrencies
According to some sources, there are now over 13,000 cryptocurrencies in circulation. Before investing in any of them, you should carry out fundamental analysis, which includes checking crypto indicators and diving deep into the team, history, technology, community support, and market potential of the cryptos that capture your interest.
You can start researching specific cryptocurrencies by browsing their official websites and reading their whitepapers. You should also check recent news, reviews, and community discussions to gain insights into a crypto’s market potential.
5. Consider straightforward long-term strategies (HODLing)
Investing in volatile cryptocurrencies with hopes of earning quick riches can be risky, and rapid market fluctuations are notoriously challenging to predict – particularly with lesser-known coins.
A straightforward and effective long-term investment strategy for beginners is to HODL (hold on for dear life), which means keeping hold of your crypto for the long term in spite of market fluctuations. The theory is that the values of major cryptos like Bitcoin and Ethereum are likely to steadily increase over time. So, you might want to HODL a few ‘safe’ cryptos as well as invest in riskier but potentially more lucrative ones. Remember – never invest more than you can afford to lose.
6. Dollar-cost averaging
Dollar-cost averaging is a straightforward strategy that involves buying a small amount of crypto according to a specific schedule instead of trying to time the market. For example, investing $50 a week on the same crypto allows you to buy more when prices are low and less when prices are high. This mitigates the risk of poor timing while reducing the impact of price fluctuations.
7. Diversify your portfolio
Diversifying your portfolio simply means investing in a variety of cryptocurrencies instead of risking your entire investment on one coin. By investing in multiple cryptocurrencies, the impact of certain coins dropping in value can be offset by a rise in value of others.
You may also want to utilize a range of investment strategies to further mitigate your financial risk. Besides dollar-cost averaging and HODLing, common strategies include swing trading, day trading, scalping, and arbitrage trading.
8. Select the most suitable cryptocurrency wallets
Cryptocurrency wallets provide you with a secure place to store, send, and receive your cryptocurrencies. The most common types of wallets are ‘hot wallets’ and ‘cold wallets’. As they’re connected to the internet, hot wallets usually offer the most convenience. However, while not connected to the internet, cold wallets are considered the most secure long-term storage option. Ledger and Trezor are among the best-known developers of reliable wallets.
9. Learn how to recognize scams
The decentralized and unregulated nature of the cryptocurrency market makes it highly attractive to scammers. Fraudsters use fake job listings, AI-generated celebrity endorsements, media hype, and even threats of blackmail to coerce their victims into transferring their crypto. Once completed, crypto transfers are irreversible.
Other common crypto scams include phishing, pump-and-dump schemes, and the use of fake exchanges and wallets.
10. Take profits
You should create a strategy to decide when to take profits, hold, or sell a failing coin before the losses mount up. A savvy approach is to reinvest profits from volatile cryptos into ‘safer’ coins that are less prone to risk over the long term. This strategy minimizes risks associated with exposure to potential market downturns and emotional decision-making.
