Bitcoin, Ethereum, or Something Else? Questions to Ask Before Choosing Your First Crypto

No wonder you’ve decided to explore crypto these days. Everyone around us talks about Bitcoin, Ethereum, or some other digital asset. Crypto often pops up in financial news and makes people curious about how it could work in their investment portfolios. So, here you are: you just opened an exchange, started scrolling through coins, and are facing the question: where on earth should I start?

Before searching how to buy cryptocurrency, take a step back because choosing the first crypto shouldn’t be about picking the coin currently trending on social media or promising the most spectacular gains. The first step in the journey is to understand your goals, establish the level of risk you’re comfortable with, and set the goals for your investment plan.

We won’t ask you to become a blockchain expert, but you should answer some questions before entering your first trade so you can narrow down your options and avoid making beginner mistakes.

Why do you want to buy crypto?

You might say that the reason is obvious, but the answer to this question will guide every decision you make.

• Are you interested in holding a digital asset for several years?
• Do you want to learn how blockchain technology works?
• Are you curious about using decentralized applications, or are you hoping to trade price movements over shorter periods?

The answers to these questions matter because different projects have different purposes.

Bitcoin, for example, was created to enable peer-to-peer digital payments and is considered a scarce asset because its supply is capped at 21 million coins. This is also the reason it’s often compared to digital gold.

Ethereum is a project meant to support a blockchain ecosystem where developers can build decentralized applications and smart contracts. You can use its native cryptocurrency, ETH, to pay transaction fees or take part in the network’s economic system.

How much risk are you comfortable with?

We also find crypto exciting because the prices move dramatically and can provide us with great profit opportunities. Unfortunately, these same movements can also make it challenging for a beginner.

Imagine investing €100 in a cryptocurrency and watching its value fall to €70 in a matter of days.

• Would you remain calm, review the situation, and stick to a carefully considered plan?
• Or would the loss keep you awake at night and make you desperate to sell before things get worse?

Don’t be ashamed of your reaction, whatever it might be, because the answer to these questions will tell you something important about the level of risk you’re comfortable with. For example, Bitcoin and Ethereum are listed among the most popular digital assets in the sector, but neither of them can be named a safe investment in the conventional sense because they both can register substantial declines. Altcoins can be even more volatile, with less established infrastructure, thinner liquidity, and greater exposure to speculation, so they bring a higher level of risk to your portfolio.

Do you understand what the project you’re interested in does?

If one of your friends asked you over coffee to explain why you picked this particular project, could you give them a clear answer without repeating what influencers are promoting on social media?

We find this test extremely useful.

Before you put money into any token, investigate the problem the project behind it aims to solve, how the blockchain works, what the token can be used for, and if the project has meaningful adoption. We won’t say that you have to understand every little technical detail, but you need to be able to explain the basics of the project in your own words.

For instance, Solana is known for its focus on high-throughput blockchain transactions and supports applications involving decentralized finance, digital assets, and other on-chain activities. Its native token, SOL, is used for transaction fees and network participation.

Do you just want to trade the token, or are you prepared to hold it in the long run?

The timeframe you choose for your trades can change which projects you investigate and how you approach investing in them. If you are a long-term investor, it would be best to focus on an asset’s underlying role, supply mechanics, adoption, and resilience across market cycles. If you prefer short-term trading, you may want to focus more on trading volume, volatility, liquidity, and technical indicators.

We advise you to be honest with yourself and decide if you’re genuinely interested in actively trading digital currencies or if only the idea of holding crypto in your portfolio sounds exciting.

Keep in mind that short-term trading requires more than spotting a coin that has the potential to rise. You need to invest resources into building a strategy for entries and exits, finding the best way to manage losses, and building the discipline to avoid making impulsive decisions.

Would you still pick this crypto if its price might fall in the near future?

This is the final question, and maybe one of the most revealing ones. Let’s say that the crypto you’re considering drops 30% shortly after you buy it. Would your reasons for picking it be enough to motivate you to keep it in your portfolio in the long run? Or do you want to buy a token because you want to make a quick profit?

This is a thought experiment that will help you understand what’s behind your decision and if you act due to excitement or based on research.

Choosing your first cryptocurrency is a challenging decision, but it still should be a decision, not a guess

You don’t have to find the next breakout star before all the other investors do. You need to understand your goals, assess your tolerance for risk, research the project, and decide how you will manage your investment portfolio. Bitcoin, Ethereum, Solana, and all the other projects based on blockchain technology have their unique uses, characteristics, and risks. We cannot identify one that would be universally suitable for a beginner’s portfolio. But based on your personal context, you can find one that makes better sense for you.