First steps in crypto investing: a complete checklist before your first purchase

Where to Start: Conscious Choice Before Investment

Before spending money on crypto assets, pause and honestly answer the main question: why are you doing this? Were you attracted by the hype on social media? Do you want to experiment with new technologies? Or are you hoping for quick profits?

Your answer directly affects the strategy. Cryptocurrencies exhibit extreme volatility — prices can drop by 50% in a week or triple in a month. This is not a traditional investment tool, and you should only invest amounts that losing them will not disrupt your financial plan.

Also consider the role of crypto in your portfolio. Should it be a symbolic part of (5-10%) or a more substantial position? The answer depends on your investment horizon, financial cushion, and risk tolerance.

Minimum theory: how blockchain and cryptocurrencies work

The crypto space contains thousands of projects, and understanding the basic principles will help distinguish a promising asset from empty hype.

What is blockchain in simple terms? It is a distributed ledger — essentially, a digital accounting book that is maintained simultaneously by thousands of computers around the world. No one can forge a record or change the history of transactions because all participants in the network keep a copy of this ledger. Such decentralization is the main feature of the technology.

Two main consensus mechanisms:

• Proof of Work (PoW) — computers solve complex mathematical problems to confirm transactions and receive rewards. This is an energy-intensive but very reliable method. Bitcoin operates this way.
• Proof of Stake (PoS) — network participants lock their coins (staking) and as a result, gain the right to validate transactions. Ethereum has transitioned to PoS and saved a tremendous amount of electricity.

What are altcoins in simple terms? All cryptocurrencies other than Bitcoin are called altcoins. This can include Ethereum with its smart contracts, Solana with its high transaction speed, Polkadot with its interoperability, or thousands of other projects. Each altcoin has its own goals and carries its own risks. Not all of them will achieve success.

Mandatory analysis before investing funds

Before investing in a new project, study its whitepaper — a technical document that describes the essence of the project, network architecture, and long-term goals. A quality whitepaper should be detailed, logical, and contain clear success metrics.

Red flags that should raise your concerns:

• Vague descriptions without specific problems being solved
• The development team that periodically disappears from sight
• Lack of regular updates on project progress
• Promises of astronomical returns without explaining the economic model
• Lack of information about who is behind the project

Also check the code audit ( if this is a technical project ) and community reviews. If everything looks suspicious, it's better to pass.

Managing Volatility: Practical Tips

Cryptocurrency prices move unpredictably. Bitcoin has repeatedly fallen by 70-80% from its peaks and then recovered several times. Such swings create psychological stress, so a clear strategy is important:

Risk Management Tools:

• Set target prices for entry and exit in advance to avoid buying in a frenzy at the peak.
• Use stop-loss orders — they automatically sell an asset when a certain price drop occurs, protecting against catastrophic losses.
• Diversify your portfolio across different assets and blockchains
• Don't rush — it's better to miss out on 20% of the profit than to lose all your capital.
• For new, experimental tokens, apply even stricter risk management rules.

Cryptocurrency Security: Where and How to Store Funds

This is a critically important point. If you lose access to your assets due to hacking or your own mistake, it will be impossible to recover them. Cryptocurrency transactions are irreversible.

Two main types of wallets:

Hot wallets (online storage):

• Always connected to the internet
• Convenient for frequent transactions
• Less secure ( vulnerable to hackers )
• Examples: mobile applications, wallets on exchange

Cold wallets (offline storage):

• Disconnected from the internet
• Maximally protected against network attacks
• Less convenient for quick operations
• Examples: hardware devices, paper wallets

Recommended scheme: store the majority of funds in cold storage, and only the necessary amount for trading in a hot wallet. Private keys ( passwords that provide full access to coins ) should never be disclosed to anyone and, if possible, keep them in offline mode.

How to Start Trading Correctly: Step by Step

Choose a trusted platform for cryptocurrency trading. When registering, complete the identity verification (KYC) — this is a requirement of most regulatory bodies and a safeguard for the platform itself.

After verification, fund your account using traditional methods: bank transfer, credit or debit card. Check if the asset you need is available on the chosen platform — not all cryptocurrencies are traded everywhere.

When the money arrived:

• Start with a market order for immediate purchase at the current price ( if you're in a hurry )
• Or use a limit order to automatically buy at the desired price ( more economically, but it may not be executed )

Critically important: before sending a large amount, always make a test transfer of a small amount. Check if you have copied the wallet address correctly and if the system is working. This will take 10 minutes, but will save you from losing all your funds.

After purchasing cryptocurrency, it can be left on the platform or transferred to a personal wallet. For large amounts — transfer to cold storage.

Taxes: a mandatory item that is often forgotten

In most countries, cryptocurrency transactions are taxed. This can be a capital gains tax ( when you sell at a profit), a staking income tax, or even a tax on the purchase itself.

Tax regulation is still being formed, so:

• Keep detailed records of all operations ( dates, amounts, exchange rates )
• Use specialized software for calculating cryptocurrency taxes
• Consult a tax advisor familiar with cryptocurrencies.
• Keep an eye on changes in the tax legislation of your country

Failure to pay taxes can result in fines and legal disputes, so it should not be ignored.

Protection Against Fraudulent Schemes

The crypto space attracts not only investors but also scammers. Main threats:

• Phishing farming: fake websites that look like popular platforms. Check the address in the browser three times before entering your password.
• Pump & dump: a coordinated price pump of a little-known token followed by a dump by the owners
• Fake projects: beautifully designed websites that promise miraculous profits and disappear with your money
• Fake solicitations: people in the comments asking to send them crypto, promising to double it.

The general rule is: if something sounds too good to be true — it is not true.

Conclusion: a cautious path to crypto

Entering the world of cryptocurrencies requires preparation, but it is feasible. Before the first purchase:

✓ Clearly define your investment goals and acceptable level of risk ✓ Learn the basics of blockchain and how altcoins work in simple terms ✓ Analyze the project's whitepaper before investing ✓ Prepare for volatility with stop-loss and diversification ✓ Choose a safe storage method (cold + hot wallets) ✓ Always make a test transfer before large transactions ✓ Understand your tax obligations in your country ✓ Protect yourself from fraudulent schemes

Don't rush, study the market, invest wisely. Cryptocurrencies are a powerful tool, but they need to be handled carefully.