Before stepping into the cryptocurrency market, you must understand that it is a space where high risk coexists with high reward; proceed with caution.
I. Basic Knowledge of Digital Currency
Digital currency is a type of virtual currency issued and traded online based on cryptographic technology. Bitcoin is the pioneer of digital currency, with a fixed total supply of 21 million coins. Decentralization is its core feature, with no central issuing authority; transactions are secured and traceable through distributed ledgers and cryptographic technology. Ethereum is not only a digital currency but also a smart contract platform, allowing developers to create various applications based on it. In addition to these two major currencies, there are thousands of other digital currencies in the market, commonly referred to as altcoins. Some of them improve upon the shortcomings of Bitcoin or Ethereum, while others are attempts at entirely new concepts, but their quality varies widely.
II. Choosing a Trading Platform
Choosing the right trading platform is crucial. Major platforms like Binance, Huobi, and OKEx have a large user base, good trading depth, and relatively high asset security with multiple encryption and cold wallet storage for user assets. However, even so, there have been security incidents, so the platform's reputation and security measures should be carefully examined. New platforms may offer attractive promotions, but they also come with significant risks, and the risk of scams cannot be ignored. When registering, understand the trading pairs supported by the platform and the fee standards; for instance, some platforms have different fee regulations for fiat trading and cryptocurrency trading. Over time, fees can accumulate to a substantial expense.
III. Using Wallets
A wallet is a place to store digital currency, divided into hot wallets and cold wallets. Hot wallets are connected to the internet, making them convenient for frequent daily transactions, such as mobile wallet applications like imToken. They manage assets through mnemonic phrases, which are akin to wallet passwords and must be kept secure; once leaked, assets can be stolen. Cold wallets are not connected to the internet, like the hardware wallet Ledger Nano S, which offers high security and is suitable for long-term storage of large amounts of digital currency. It stores private keys in hardware devices, avoiding online attacks.
IV. Investment Strategies and Risk Control
You must never invest all your funds in the cryptocurrency market; reasonable asset allocation is key. For example, allocate 5%-10% of your assets for investment, so even if you lose everything, it won't affect your life. Do not blindly chase prices up and down; conduct fundamental analysis to understand the project's technical strength, team background, and market application prospects, etc. Set stop-loss and take-profit points; for instance, decisively sell to stop loss when losses reach 10%, and cash out partially when profits reach 50%. Furthermore, the cryptocurrency market operates 24/7 with extreme volatility, so do not let short-term fluctuations affect your mindset; maintain rational investment.
