After a year of 2021 characterized by massive adoption, the cryptocurrency market is going through a period of decline in the context of a global economic recession. This drop in prices offers an ideal opportunity for anyone looking to take their first steps into the world of cryptocurrencies. But be careful, because there are many risks. To avoid unpleasant surprises, we have compiled the tips and precautions for you to take before investing in cryptocurrencies.
With their extreme volatility and high growth potential, cryptocurrencies are a great way to diversify your investments. However, we advise you to be careful, as their management is complex and scams abound to the detriment of gullible investors.
Find out before you spend a penny
Before investing in cryptocurrency, take your time to learn about these digital assets. Understanding how the blockchain works, exploring the different uses allowed by cryptocurrencies, finding out what differentiates each crypto-asset … This phase commonly called “DYOR” by those familiar with the ecosystem, for “Do your research”, will allow you form your opinion on the projects that seem to you the most promising, the safest.
To check the legitimacy of each cryptocurrency you want to add to your wallet, here are some keys that will help you decide:
- Read the white paper of the project, which summarizes the general objective and the means developed to achieve it,
- Consult all the official resources of the project: website, social network, etc.,
- Consult the opinions of the specialized media on cryptocurrencies and on the web3,
- Talk to more experienced investors on specialized forums.
Choose a platform regulated in France
Make sure you choose a reputable cryptocurrency exchange. Many scammers try to exploit the credulity of investors who discover these revolutionary technologies. So be very careful before investing, and avoid suspicious offers, such as those that promise you a high return without risk or that push you to invest quickly.
To get started safely, we strongly recommend that you choose a player registered with the Autorité des Marchés Financiers (AMF) as your digital asset service provider (PSAN). Binance, eToro, Feel Mining … there is something for all investor profiles. To help you see things more clearly, the MFA has compiled a white list that lists all approved cryptocurrency exchange platforms.
If you do not wish to declare one or more foreign accounts to the tax authorities, we recommend investing in a French exchange platform such as Coinhouse or Paymium. This will save you from completing Form 3916-bis on your next tax return.
Diversify your investments
If Bitcoin remains the king of cryptocurrencies, with a market share of nearly 40% in August 2022, we recommend that you diversify your cryptocurrency investments. This will not only allow you to mitigate the risks, it will also prevent you from losing a project with high growth potential.
We therefore advise you to allocate a large part of your investment to safe values such as Bitcoin (BTC) and Ether (ETH), and to bet smaller amounts on recognized cryptocurrencies such as XRP (XRP), Cardano (ADA), Binance Coin (BNB) or Solana (SOL).
You can also invest in more embryonic projects. But to limit the risks, invest only in cryptocurrencies with real use. Don’t be blinded by the amazing returns of some memes or coin projects that simply try to ride the market trends.
Protect your cryptocurrencies
It is one thing to take precautions when investing in cryptocurrencies, but it is also important to protect your cryptocurrencies. Currently, the best way to protect them is to keep them in a physical wallet (or “hardware wallet”), such as those offered by Ledger or Trezor. This allows them to be put out of the reach of hackers, but it is not without risk. In fact, if this storage method is considered the safest, it is also the one that gives you the most responsibility for your cryptocurrencies. The slightest mistake, like sending your coins to the wrong address or sharing your private key, can result in the loss of your investment.
If you prefer to keep your cryptocurrencies on an exchange platform, never disclose your access codes, not even to your friends. Scammers could take advantage of this to gain access to your wallet and steal your assets. Also pay attention to all communications (e-mails, SMS, private messages on social networks, etc.) you receive in relation to cryptocurrencies: never click on the links contained therein before making sure they are legitimate.
In conclusion, always keep in mind the golden rule in the cryptocurrency market: invest only what you can afford to lose.
This content was produced in collaboration with Finance Héros. The editorial staff of BFM Business did not participate in the production of this content.