A Beginner's Guide to Entering Cryptocurrency: What is Crypto Chinese Blockchain and the 7 Most Common Pitfalls You Might Encounter

What Exactly Is Cryptocurrency? One Sentence to Understand Instantly

Imagine a completely code-driven “parallel financial world.” In this world, there are no central banks making the rules; all regulations and transactions are recorded on a transparent, public “blockchain” ledger maintained by thousands of computers worldwide. Your assets are not stored in banks but controlled by a string of “private keys” known only to you.

Simply put, cryptocurrency = decentralization + code-based rules + personal asset autonomy.

And digital currency (like China’s Digital Renminbi) is a legal tender issued by the central bank in digital form. While they seem similar, their essence is different—one is a decentralized asset, the other is government-backed fiat currency.

7 Deadly Traps Beginners Must Know Before Entering

No matter how interested you are in cryptocurrencies, you must face these real risks before stepping in. Many people suffer losses not because they lack technical knowledge, but because they ignore these pitfalls.

Trap 1: Losing your private key = losing everything forever, no one can save you

Forget your bank card password, you can report it lost. But if you lose your crypto private key or seed phrase, that money is gone forever on the blockchain—no one can recover it. Data shows about 20% of all Bitcoin (around 4 million coins) are permanently locked on the chain because owners forgot their keys. At current prices, this amounts to trillions of TWD lost forever.

Newbie tip: Write your seed phrase on paper and store it physically. Whether you buy hardware wallets (Ledger, Trezor) or not, paper backup is the safest. Never store it on your phone, cloud, or notes app.

Trap 2: Exchange collapse or hacking can make your coins vanish overnight

When FTX collapsed in 2022, hundreds of thousands of people’s assets were wiped out overnight; news of small exchanges being hacked and drained still emerges in 2024. Remember: Storing coins on an exchange = your money is no longer truly yours, it’s just an account owed by the exchange.

Exchanges should be “convenience stores for buying coins,” not “banks for storing money.” For long-term holdings, always transfer your coins to your own wallet after purchase.

Trap 3: Crypto market volatility is beyond imagination; mental preparation is essential

Crypto markets fluctuate far more than traditional stocks. Daily swings over 10% are common, and 20%-30% volatility happens often. In May 2021, a single month saw a 50% drop; in 2025, a single Fed statement caused a 28% plunge.

Ask yourself before investing: Can you handle your assets halving in value in a short time? If not, don’t play.

Trap 4: 99.9% of new tokens will eventually go to zero

The market is flooded with countless new tokens, most lacking real utility and with extremely low liquidity. Data shows that in 2024 alone, over 1 million new tokens were issued, with 95% priced below $0.0001.

Unless you do deep research, sticking to BTC and ETH is enough.

Trap 5: Scams are becoming more sophisticated, hard to defend against

Fake airdrops, impersonating customer service, copying wallet apps, scam groups… scam methods evolve constantly. The only bottom line: there are no free lunches. Any opportunity that seems too good to be true, requests sharing your private key, or asks for permission to unknown contracts, is almost certainly a scam.

Trap 6: Regulations and tax policies are constantly changing, future is uncertain

Countries worldwide are still exploring crypto regulations. Taiwan currently has no general taxation but is drafting frameworks; the US requires reporting for tax purposes. Be mentally prepared: new compliance requirements may emerge, so keep all transaction records well.

Trap 7: Trading is a psychological battle, not just technical — emotions can kill you

Chasing highs during market euphoria, selling in fear during crashes—that’s human nature. Many investors lose not because they lack technical skills, but because they can’t control emotions and make irrational decisions at the wrong times. In the 2022 bear market, some bought at $60,000, sold at $16,000, then later saw prices rebound to $100,000 and regret not holding.

Long-term, discipline and patience are often more important than chasing short-term ups and downs.

Does Cryptocurrency Have Value? The History Tells All

The best answer isn’t just theory but its development story over the past decade. From nothing, it has become part of global asset allocation. Its value has grown gradually over time.

First Turning Point: The Bitcoin Pizza Event in 2010 — Proving “Exchangeability”

On May 22, 2010, programmer Laszlo Hanyecz exchanged 10,000 BTC for two pizzas, worth about $25 at the time. Though now considered a joke, this “Bitcoin Pizza Day” marked an important milestone: a digital code established a market price in the real world for the first time, proving blockchain records can facilitate actual value exchange. From then on, Bitcoin was no longer “useless code” but had the fundamental function of money—medium of exchange.

Second Turning Point: The 2017 ICO Revolution — Demonstrating “Fundraising” Financial Value

Ethereum’s smart contract capabilities led to the first token issuance (ICO). Startups could publish whitepapers and raise funds directly from global investors without traditional venture capital. EOS raised about $4 billion in a year through ICOs. This phase showed crypto’s second layer of value: a global, efficient platform for venture capital and innovative projects. Despite scams and bubbles later, it proved blockchain’s huge potential to reshape financing models.

Third Turning Point: Today — Establishing “Store of Value” Asset Status

After multiple bull and bear cycles, mainstream recognition has solidified:

Bitcoin as “Digital Gold”: Listed companies like MicroStrategy, Tesla, and even some countries hold it as a reserve asset on their balance sheets to hedge inflation. It’s scarce, easily transferable across borders, and seen as a non-sovereign store of value.

Ethereum as “Application Platform”: Decentralized finance, digital art, autonomous organizations—applications run on its chain, building a vast digital economy ecosystem. It’s not just currency but a settlement layer and application platform.

Conclusion: Does crypto have value? Yes, and that value is diverse and continuously evolving. But this doesn’t mean every token has value—out of over 9000 tokens, most lack sustainable practical demand and will eventually go to zero. Only a few have truly stood the test of time.

The Pros and Cons of Cryptocurrency, Objectively

Cryptocurrencies have many features, but what’s considered “good” or “bad” varies by person. For example, anonymity is seen as a privacy advantage by users but as a drawback by regulators. To be objective, here are some less controversial pros and cons:

Which Cryptocurrencies Should Beginners Invest In? Key Selection Logic

There are about 9,000 cryptocurrencies worldwide. After market reshuffling, the remaining projects are relatively stable. These coins can be categorized into 11 sectors, each with leading projects.

Safe coin selection rule for beginners: understand the sector first, then pick the leader.

Overview of the 11 Sectors

Top 10 Market Cap Cryptocurrencies — Beginner’s List

Based on real-time data as of January 2026, the highest market cap coins and beginner recommendations:

Note: USDT, USDC, DAI, BUSD are stablecoins with minimal volatility, used as “cash equivalents” for risk hedging, not for speculation.

Selection Tips: Prioritize high market cap coins

Compared to small-cap coins, large-cap coins have four main advantages:

1. Proven resilience through multiple bear markets → Less likely to go to zero
2. Harder to manipulate → Difficult for malicious pump-and-dump
3. Strong consensus → Better resistance to drops
4. Often sector leaders → Higher chance of leading market rallies

Final Advice: One Sentence Summary

Cryptocurrency is not a scam; it has proven its real value (payment function + financing tool + store of value), even countries are starting to use blockchain. But 99% of tokens will eventually go to zero; only a few have truly stood the test of time—BTC and ETH account for the majority of the market.

Whether you can make money in the crypto market has little to do with your technical knowledge; it entirely depends on whether you can control your hands and your greed.

Start by understanding Bitcoin and Ethereum, gradually build your investment system, and remember: discipline and patience are always the foundation of a winner.