With the prices of major cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH) on the decline since the beginning of this year, the cryptocurrency market is widely believed to have entered its so-called “winter”. Despite the market downturn, many potential investors still want to buy on dips as they are optimistic about the future of crypto and want to experience the thrill of the blockchain world.
For those new to crypto, what should they do before starting their journey to protect their assets and enjoy the experience? This article provides the basic steps for beginners venturing into the crypto world.
Learn blockchain basics
The first thing is to learn about cryptocurrency and blockchain, including risk control which is a topic that investors should bear in mind from time to time.
With the fast development of blockchain industry, it is always good to learn as much as possible about topics such as decentralized technology, factors behind the market volatility, and trading strategies in a bearish or bullish market, for instance.
Finding such information across multiple sources is not difficult on the Internet. However, beginners should try to have a systematic learning process to gain a comprehensive view of the industry. Many top exchanges provide such learning resources, such as the Huobi Learn portal run by Huobi Global. In Huobi Learn, novice investors can easily acquire elementary knowledge such as what is blockchain, what is Web3 and what strategy should be used for a certain market cycle.
It should always be noted that the cryptocurrency market has higher volatility, which not only means higher possible returns, but also higher risks. As the cryptocurrency market abounds in “success stories” of individual striking it rich through trading, beginners are often encouraged to take a big leap into the market while ignoring the risks.
New investors who are unfamiliar with how the market works are advised to start with smaller amounts of money they can afford to lose, and avoid using high leverage at the outset.
Set up your investment portfolio
Many beginners may get dazzled when seeing thousands of tokens available on the market with varying levels of performance. In addition, many accounts of investors becoming crypto millionaires overnight may fuel unrealistic expectations of returns.
Veteran crypto investors often advocate having several mainstream tokens in your portfolio. While there is no clear definition of mainstream tokens, it is widely held that these refer to the top 10 tokens by market cap, such as BTC and ETH. Investors are better off starting with these tokens in their portfolio to lower their risks, as these mainstream tokens have gained public recognition and are relatively mature and stable.
Choose a reliable exchange
After setting up your investment portfolio, it is time to choose a reliable exchange to kick off your trading properly. However, as there are many exchanges, including prominent global names that advertise heavily to get noticed, what factors should you assess in choosing an exchange?
Typically, the exchange’s security level, business compliance, financial position, and risk control measures are the most important factors beginners should take into consideration.
The technology behind the security deployed by an exchange serves to protect user assets. Beginners should first seek to understand how advanced an exchange’s technology is compared with its peers, and check its track record for security incidents. For instance, the world-leading cryptocurrency exchange Huobi Global applies a set of unique security technologies in the industry, such as a professional distributed architecture and an anti-DDOS attack system. This ensures it has never had any known security incidents in the past nine years, since its inception.
In addition to security, crypto novices should check if the services offered by an exchange are regulated. For example, has it received any license to offer financial or crypto exchange services?
As one of the earliest global cryptocurrency exchanges, Huobi Global has been working towards compliant growth since 2017. To date, it has obtained licenses for various cryptocurrency-related services across different markets, including South Korea, Japan, and Gibraltar.
Another key indicator of an exchange’s safety is its financial position, especially its cash flow which is closely tied to its liquidity. Put simply, it means whether an exchange has sufficient funds to meet all user obligations, such as user withdrawals regardless of timing or market conditions.
Huobi Global’s risk controls have enabled it to keep its operations steady even amidst the recent market volatility, when several exchanges had to suspend or limit withdrawals due to a liquidity crisis. The exchange has always guaranteed users their right to deposit and withdraw funds at any point in time.
A comprehensive risk control mechanism goes hand in hand with robust security when it comes to responding effectively to incidents. This goes beyond technology, as it places the onus on the exchange to meet its responsibility to uphold the stability of the industry. Taking Huobi Global as an example, the exchange has an established security and risk control system honed over nine years of operations to counter potential threats to user assets.
After taking the few steps mentioned above, first-time investors should be well-placed to explore the blockchain and cryptocurrency world. They should always be mindful that returns are almost always commensurate with risks, and that continuous learning goes a long way to help them better manage their risks.