Author: Alertforalpha Compiler: Plain Language Blockchain
Let's face it: As a newbie, crypto investing can ruin you if you're not careful.
Most crypto-related content is either hype or technical jargon, and this guide is neither.
This is a survival guide for crypto newbies.
A harsh reality:
Bitcoin can plummet 50% in a few weeks. This has happened many times, and in 2022, Bitcoin fell from $69,000 to $15,000, a drop of 78%.
Altcoins can fall 90% or more. Some coins will never return to their previous highs.
You can lose all your money overnight. Click on the wrong link, choose the wrong investment, make the wrong investment at the wrong time - poof, money gone.
But here's the thing: there are still many people making life-changing fortunes in the cryptoasset market. The difference is knowing how to protect yourself.
Only invest what you can afford to lose
This is not just good advice, it's the key to survival.
“Can afford to lose” means:
“Not your rent.”
“Not your emergency fund.”
“Not the money you use to buy food, pay bills, or feed your kids.”
“Definitely not borrowed money.”
Simple test: If losing this money will change your lifestyle, don’t invest.
Real example: If you have $10,000 in savings, invest at most $1,000 in crypto assets. If you lose, you will be angry, but you will not be homeless.
Some people put their entire savings into crypto during a bull run. Don’t be that person. They usually end up broke.
Understand What Volatility Really Feels Like
Volatility is more than just a fancy word — it’s emotional torture.
Imagine this scenario:
Monday: Your $1,000 investment goes up to $1,200 (+20%).
Tuesday: It drops to $800 (down 33% from Monday).
Wednesday: It’s back to $1,100 (up 37% from Tuesday).
Thursday: Another drop to $700 (down 36% from Wednesday).
This is common in the crypto market. You will be on a roller coaster of emotions. You will think:
“Sell everything when it plummets.”
“Add to my position when it surges.”
“Check the price every 5 minutes.”
“Lose sleep.”
Psychological trap: Most people buy high when they are excited and sell low when they are panicked. This will lose money even if the overall market trend is up.
Start with Bitcoin, don’t touch random coins
Why choose Bitcoin first:
“It is least likely to return to zero.”
“It has the longest historical record.”
“Institutional investors choose it.”
“It is easier to understand.”
Avoid these beginner mistakes:
“Bitcoin is too expensive, I buy cheaper coins.”
“This new coin may increase 100 times.”
“My friend made money on [some altcoin].”
Reality: You can buy $50 of Bitcoin. You don’t need to buy a whole Bitcoin.
Leave the gambling mentality for later. Once you understand how Bitcoin behaves, consider exploring other coins.
But to start, choose the lowest-risk option.
Scheduling is your best friend
What is Scalping: Instead of investing $1,000 all at once, invest $100 a month for 10 months.
Why it works:
“Buy more when the price is low.”
“Buy less when the price is high.”
“No need to predict market timing.”
“Reduce emotional decision making.”
Real Case:
Month 1: Bitcoin is $80,000 and you buy $100 (0.00125 BTC).
Month 2: Bitcoin is $60,000 and you buy $100 (0.00167 BTC).
Month 3: Bitcoin is $90,000 and you buy $100 (0.00111 BTC).
Over the long term, your average purchase price will be better than trying to guess the best time.
Understand the different types of risk
Market risk: The entire market crashes together. Bitcoin, Ethereum, and nearly all altcoins are down 70-90% in 2022. There is nowhere to hide.
Individual coin risk: Even if the market performs well, your coins may fail. Remember Terra Luna? It went from $80 to almost zero in a few days.
Exchange risk: Your crypto platform could get hacked, go bankrupt, or freeze your account. FTX had millions of users until it collapsed overnight.
Technical risk: Smart contracts could be buggy, DeFi protocols could be attacked, new projects could be scams.
Regulatory risk: Governments could ban or heavily regulate crypto assets. Some countries have already done so.
Don’t fall for leveraged trading
Leverage means borrowing money to buy more crypto assets. It sounds tempting on the rise.
How it works: You have $1,000 and can buy $10,000 of Bitcoin with 10x leverage.
The Trap: If Bitcoin drops 10%, you lose all your $1,000. If it drops 15%, you still owe money.
The Reality: Leverage is for experienced traders who can afford a total loss. As a beginner, leverage is financial suicide.
The Promise vs. Reality:
The Promise: "Turn $1,000 into $10,000 faster!"
The Reality: Turn $1,000 into $0 faster.
Ignore the noise
You will see various information:
"Bitcoin will rise to $500,000 next week!"
"This altcoin is the next Bitcoin!"
"Crypto winter is over, buy all!"
"The government will ban Bitcoin tomorrow!"
The truth: No one can accurately predict short-term trends. Even experts often guess wrong.
Focus on the following:
“Learn the basics.”
“Build small positions gradually.”
“Understand the assets you hold.”
“Ignore daily price fluctuations.”
Stop paying attention to those:
“Accounts that promise guaranteed returns.”
“Accounts that use rocket emojis every day.”
“Accounts that claim to know when to buy and sell.”
“The account that makes you feel like you missed out.”
Protect your crypto
Exchange security: Don’t store large amounts on exchanges. Exchanges can get hacked or go bankrupt.
Wallet basics: If you have more than $1,000, use a hardware wallet (like Ledger or Trezor).
Back up your recovery phrase: Write your recovery phrase down on paper and keep it safe. This is how you can recover your crypto if you lose your wallet.
Never share your private keys or recovery phrase: Don’t share them with friends, online “help desks,” or anyone else.
Most common mistakes made by beginners
Investing more money than you can afford: often leads to panic selling at the worst possible time.
Chasing quick gains: jumping from one coin to another, often buying high and selling low.
Not understanding what you are buying: buying random altcoins without knowing what they do.
Emotional trading: making decisions based on fear or greed, not logic.
Blindly following influencers: taking financial advice from people who make money selling courses.
Not protecting crypto assets: keeping all your funds on exchanges, or losing your recovery phrase.
Simple beginner strategy
Months 1-3: Learn about Bitcoin. Buy small amounts ($50-100) to get familiar with wallets and exchanges.
Months 3-6: Start investing in Bitcoin. Invest $100-200 per month depending on your budget.
Months 6-12: Once you understand Bitcoin, consider adding Ethereum. Keep it simple.
Year 2 and Beyond: If you want to explore altcoins, limit them to 10-20% of your crypto portfolio.
Throughout: Keep learning, ignore the hype, and never invest more than you can afford to lose.
Summary
Crypto assets can make you money. It has made many people rich in the long run.
But it can also ruin you if you do it the wrong way.
The people who do well in the crypto asset market are not those who chase 100x returns, but those who first protect their principal and then try to increase its value.
Start small and learn as you go. Don't let greed overwhelm common sense.
Remember: The goal is not to get rich overnight, but to avoid bankruptcy while potentially accumulating wealth over the long term.
There will always be the next opportunity in the crypto asset market. But if you lose all your money the first time, you won't be able to participate next time.
Hui Xin
Brian
Joy
Jasper