As the new year kicks off, the crypto ecosystem shows no signs of stopping. Not only has innovation been rapid, but throughout 2023, the industry’s total market cap has more than doubled, setting 2024 up to be an exciting year for new and old investors.
That said, navigating the digital asset realm can be challenging for newcomers, especially given its dynamic nature. However, there are still some basic and effective ways that new investors can explore this space.
Select the right exchange
When venturing into the crypto investment space, selecting the right exchange is probably the most critical first step for anyone. The exchange’s security and reputation are paramount, so investors should choose a platform with a proven track record of safeguarding client investments and providing excellent customer service.
In addition to security, ensuring the exchange supports a wide range of assets is crucial. Whether interested in mainstream cryptocurrencies or exploring niche assets like wrapped tokens and memecoins, the availability of an investor’s desired assets can significantly influence their overall trading experience.
Another often overlooked aspect to consider is an exchange’s fee structure. It is important to scrutinize a platform’s trading fees and other costs, such as holding, withdrawal and transfer rates, as they can vary widely and impact overall returns. An attractive user interface plays a significant role, too, with an intuitive and user-friendly platform greatly enhancing the investment process, especially for those new to the field.
Furthermore, liquidity is a factor to consider because a higher liquidity pool ensures more efficient and faster transactions, enhancing an investor’s ability to buy or sell assets swiftly.
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Lastly, an exchange’s regulatory compliance cannot be overstated, with investors ensuring that their platform of choice adheres to local laws and legal standards set in their country. This compliance is essential since it adds a layer of security and protects individuals from future legal and financial complications.
Some exchanges that newcomers to the crypto space can consider include Coinbase, Binance and Kraken. These platforms are known for their highly intuitive user interfaces, robust security protocols and a wide range of supported cryptocurrencies and educational resources.
Pick the right wallet
When dabbling in crypto, investors should carefully select a crypto wallet, as it plays a pivotal role in determining the safety and accessibility of their digital assets. Understanding the distinction between hot wallets and cold wallets is the first step.
Hot wallets are online-based and provide more convenience for regular transactions. However, they are generally considered less secure due to their direct link to the internet (particularly to different decentralized applications and blockchains). On the other hand, cold wallets are offline solutions, such as hardware wallets, which offer enhanced security by being less susceptible to online hacking attempts, albeit at the cost of convenience.
Security features in digital wallets are of key importance. Ideally, individuals should look for wallets that offer robust security measures like two-factor authentication. This adds an extra layer of protection beyond just a password and multisignature options, which require multiple approvals before transactions can be completed.
The importance of backup and recovery options cannot be overstated. Investors should ensure that their chosen wallet provides a reliable and straightforward mechanism for backing up their storage device. This usually involves generating and securely storing a recovery phrase or backup key that can be used to regain access to your funds in case of device loss, theft or failure.
Lastly, compatibility is important. Investors in multiple cryptocurrencies can choose a wallet that supports a wide range of cryptocurrencies and is compatible with different operating systems and devices. Some popular hot wallet options include MetaMask and Exodus, while cold wallet solutions include the Ledger Nano X and S and the Trezor Model T.
Examine different investment strategies
Novice investors should consider exploring a few key, basic strategies when investing in the crypto space, as well as managing their portfolios effectively in the long term. A popular strategy, for instance, is the dollar-cost averaging method, where a fixed amount is invested regularly, smoothing out the purchase cost of a digital asset over time and reducing the impact of market fluctuations.
Another strategy worth considering is the “buy and hold” method, which, as the name suggests, is rooted in the expectation that crypto assets like Bitcoin (BTC) and Ether (ETH) will appreciate in value over time.
Lastly, diversification is another tool that new market entrants can use to minimize risks. This is achieved by investing across different assets, including a mix of established and emerging cryptocurrencies.
Identify blossoming markets with strong fundamentals
While investing in tried and tested cryptocurrencies like Bitcoin is certainly a solid choice for any first-time investor, identifying burgeoning markets with strong fundamentals can also be a potent means of entering the crypto fray. For example, sectors like GameFi, which blends gaming and decentralized finance, have shown immense promise. Giving his thoughts on the subject, Pavel Bains, executive producer for blockchain-based game Mixmob, told cryptodirectories:
“GameFi is an easy concept for new market entrants to understand. Most investors, especially those considering making their way into the crypto market, have played games their whole lives and, therefore, understand the value of in-game assets and in-game currencies. Up until now, they’ve only seen these items operate in a closed, centralized setting. With GameFi, it is possible for these assets to be used as part of an open, real-world economic system.”
Use high-quality investment tools and resources
In the realm of cryptocurrency investing, novice investors can greatly benefit from utilizing tools such as robo-advisors. They offer a low-cost, efficient way for beginners to start investing by automating investment decisions based on individual risk profiles and financial goals. These digital advisers, such as Hedgehog and Wealthfront, use algorithms to manage cryptocurrency portfolios, adjusting an investor’s holdings in response to any pervading market changes and balancing their portfolios to align with their larger investment strategy.
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In addition to robo-advisors, using high-quality investment apps and platforms (like Robinhood and eToro) can also help investors. These platforms provide comprehensive tools for research, trading and portfolio tracking and offer real-time market data, analytical tools and insights into market trends, enabling investors to make informed decisions.
Stay informed about recent market developments
Regularly following market trends and news is essential for new investors to understand the current state and potential future directions of the crypto market. This involves keeping track of price movements, industry developments, regulatory changes and technological advancements. Moreover, continuous learning is crucial in maintaining an edge in this dynamic field.
Engaging with the latest financial and investment education resources, attending webinars, participating in online courses, and reading up-to-date publications can also help deepen understanding and enhance decision-making skills.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.