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Cryptocurrencies have seen significant spread around the world in recent years, attracting many investors due to the large potential profit opportunities they offer.
However, these digital assets carry unique challenges not found in traditional investments, most notably sudden price volatility, incomplete regulatory frameworks, and the need for special security measures. This article aims to guide beginners in the world of cryptocurrencies with the essential information to start with confidence.
What are cryptocurrencies
Cryptocurrencies are a digital form of cash, but they differ from traditional currencies that represent physical money, as they exist entirely in the digital world.
Cryptocurrencies are often used for electronic transfers, but they are also suitable for purchasing physical assets. Unlike traditional payment methods, which are managed by governments or central banks, cryptocurrencies are decentralized and managed via blockchain technology, which uses encryption techniques to secure, verify, and issue transactions.
Digital transfers are also recorded on the blockchain and transmitted via encryption, providing high speed, low costs, and ease of access, compared to traditional currencies.
Why do we buy cryptocurrencies?
Before starting to invest money in cryptocurrencies, one should determine the purpose of buying them, such as making large profits or benefiting from the unique technology. Knowing the reasons helps in making better decisions and avoiding rash moves, especially since cryptocurrency investments are highly volatile and expose capital to risks.
Therefore, it is advised to invest an amount that one can afford to lose only, while determining the percentage of funds allocated for investment in cryptocurrencies compared to other investments, and linking the investment to financial goals whether they are long-term or short-term.
Know the basics of blockchain and cryptocurrencies
Blockchain technology includes many projects and networks, most notably Bitcoin (BTC) and Ethereum (ETH), where each cryptocurrency has different benefits and risks, so understanding the basics of blockchain and how cryptocurrencies work helps in choosing the right project for investment.
It is worth noting that blockchains operate as a shared and secure digital ledger across multiple computers around the world, making them resistant to tampering and attacks. Blockchains use mechanisms like Proof of Work (PoW) and Proof of Stake (PoS) to maintain network security and verify transactions.
Verify the details before investing
Before investing in any digital project, one should review the roadmap and the white paper (a document that explains the cryptocurrency project, its goals, and how it operates), and it is also advisable to check for regular updates and the project's adherence to its commitments.
Prepare for market fluctuations
Due to the extreme price volatility, investors must be prepared for sudden ups and downs. For example, Bitcoin has experienced huge increases in some years, and sharp declines in others.
Therefore, it is advisable to have a pre-planned strategy to determine buy and sell points, and to use tools like Stop Loss orders to reduce risks. It is also preferable to diversify investments across several cryptocurrencies and practice patience to achieve the best results.
The security of cryptocurrencies and the experience before large transfers
Since digital transfers cannot be reversed, one must ensure the security of assets against mistakes and breaches. There are two main types of wallets:
Hot wallets connected to the internet
Cold wallets that are not connected, which offer higher security but are less convenient.
Thus, it is better to use both types, one for quick and small access, and the other for long-term storage. A small transfer should be tried first to ensure the correctness of the procedures before
Make any large transfer.
How to buy cryptocurrencies
Buying cryptocurrencies is considered simple, but following specific steps will reduce risks:
Choose a reliable platform or exchange and the cryptocurrencies available on it.
Create an account and verify your identity to ensure regulatory compliance and security.
Determine the method of deposit (credit card, debit card, bank transfer).
After ensuring that funds are available, place a buy order.
Transfer the cryptocurrencies to the wallet for security, especially if the amount is large.
Finally, we emphasize that the most important thing is not to invest an amount that cannot be afforded to lose, take sufficient time before making any decision, and ask relevant questions to ensure a safe and well-considered investment.
