Want to Start Investing in Crypto? Here Are 5 Basic Things to Consider
Learn the basic tips to navigate with confidence and mitigate potential risks in crypto.
While cryptocurrencies are worth the attention and hype due to their real-world applications in reshaping modern finance and offering alternatives to traditional banking through decentralized technology, speed, and accessibility, they also come with risks and complexities that can leave one rekt and in debt.
However, with the right knowledge and strategies, you can position yourself to maximize the opportunities cryptocurrencies offer while mitigating potential pitfalls. Whether you're curious about Bitcoin, intrigued by DeFi, or eager to explore altcoins, this guide will walk you through the fundamental things you need to consider before starting your crypto investment journey.
David Adubiina
1. Do Your Own Research on Cryptocurrencies
It’s normal to get excited about the gains and opportunities crypto offers. However, it is essential to note that the same volatility that can yield massive profits can also lead to devastating losses leaving you rekt.
So if you are a beginner, always do your due diligence before investing or trading in cryptocurrencies.
You can start with the basics of blockchain technology, tokenomics, and the project’s goals. Afterward, you can investigate the team behind a cryptocurrency, its partnerships, and its community.
If you're unsure where to begin, check here on how to DYOR (Do Your Own Research). Trust only reputable sources, and be wary of hype-driven advice on social media.
2. Look for Real-World Use Cases
Once you’ve conducted your research, next is to evaluate whether the cryptocurrencies you’re considering have real-world applications. Cryptocurrencies with tangible use cases—such as powering decentralized finance (DeFi), enabling smart contracts, or facilitating cross-border payments—are more likely to have long-term value.
Avoid coins or tokens with no clear utility, as these are often associated with scams or rug pulls. Meme coins or projects heavily promoted by influencers often lack substance and pose higher risks.
To verify a project's utility, use platforms like DeFiLlama and CoinMarketCap or search for terms like “utility of [token name].”
A cryptocurrency’s role in its ecosystem can help you understand and make informed decisions and reduce the risk of falling victim to scams.
3. Diversify Your Portfolio
Rather than putting all your eggs in one basket, consider diversifying your investments across multiple cryptocurrencies to minimize risk. While Bitcoin is often considered the safest option, other altcoins like Ethereum, Solana, or Polkadot offer unique functionalities that may appeal to different investment strategies.
Incorporate stablecoins into your portfolio as well, as they can provide stability during market downturns. A well-diversified portfolio balances high-growth potential with risk management, ensuring you’re better positioned to weather market volatility.
4. Explore Decentralized Finance (DeFi)
DeFi represents one of the most transformative aspects of cryptocurrency as it allows users to access financial services without relying on traditional intermediaries such as banks.
According to Nansen, the DeFi boom of 2022 witnessed a significant 40% increase in the number of Defi users. The total number of users grew from 4.7 million at the beginning of the year to over 6.5 million by the end. Despite the current dominance of AI in the market, DeFi's market capitalization remains strong, standing at $116 billion.
This indicates that DeFi is a sector with practical utility. By participating in DeFi, individuals can engage in activities such as staking, lending, borrowing, and yield farming, often earning rewards in the process.
However, it's important to note as a beginner–DeFi protocols can be complex and not without risks. Therefore, it's crucial to thoroughly review cryptocurrency smart contracts, security audits, and user reviews before making any investments.
5. Make Security and Privacy Your Priority
With the crypto space rife with hacks, phishing attempts, and fraud, you need to consider how you want to safeguard your investments before making them.
You can secure your assets in a reliable wallet—preferably a hardware wallet like Ledger or Trezor for maximum security.
However, if you do not have the funds for it, you can make use of reliable self-custodial crypto wallets like Coinbase, Metamask, and Trust Wallet.
If you don't know how to use a self-custodial crypto wallet check here. To secure your crypto on a custodial wallet, you can enable two-factor authentication (2FA) on your account, use a strong password, and avoid sharing private keys or seed phrases. Most importantly, you need to be cautious when interacting with unknown links or platforms, and only trade on trusted exchanges like Binance, Coinbase, or Kraken.
Conclusion
The crypto space is constantly growing with innovations like layer-2 scaling, cross-chain interoperability, NFTs, and DAOs to open new possibilities.
If you want to start investing in crypto, you need to keep an eye out for these basic things to successfully navigate the crypto world with confidence and mitigate potential risks.
