Must-read before entering the cryptocurrency world: A knowledge map from 0 to 1 and 7 hidden pitfalls

What is Cryptocurrency? Understanding this New World

If you’re new to cryptocurrencies, the simplest way to understand it is: think of it as a brand-new, code-built “parallel financial system.”

Within this system, three fundamental changes have occurred:

• No traditional authorities: No central bank decides how much money to print, no bank holds your funds
• Open and transparent rules: All transaction data is recorded on the “blockchain,” a globally shared ledger maintained by thousands of computers worldwide
• Assets are fully autonomous: Your money corresponds to a string of “private keys” known only to you, physically stored in your own wallet, not on a bank server

Here, two often-confused concepts need to be distinguished. Cryptocurrencies (like Bitcoin, Ethereum) are digital assets issued by companies or communities with decentralization features. Digital currencies (like China’s Digital Renminbi, Japan’s DCJPY) are fiat currencies issued by central banks, still centrally managed.

Is Cryptocurrency Truly Valuable? Three Historical Turning Points Tell You

The best answer to this question isn’t in theory but in over a decade of development history. How did the value of cryptocurrencies “grow” from zero?

First Milestone: From Code to Cash — Proof of Payment Value

On May 22, 2010, programmer Laszlo Hanyecz exchanged 10,000 Bitcoins for two pizzas, worth about $25 at the time. This seemingly trivial event was crucial: it was the first time digital code was priced in the real world.

This proved that blockchain records could facilitate real transactions; Bitcoin was no longer just code — it had the basic “currency” function. Although today no one would use billions of dollars worth of Bitcoin to buy pizza, this starting point established the technical feasibility of peer-to-peer payments.

Second Milestone: The Smart Contract Revolution — Unlocking Financing Value

Fast forward to 2017. After Ethereum introduced smart contracts, “Initial Coin Offerings” (ICOs) emerged. Startup teams only needed to publish whitepapers to raise funds directly from global investors, far more efficient than traditional venture capital.

Projects like EOS raised about $4 billion through ICOs in a year. This stage demonstrated the second layer of value for cryptocurrencies: becoming a global, intermediary-free financing tool. Anyone with internet access could participate in early investments at almost zero cost. Although scams and bubbles followed, it proved blockchain’s potential to reshape the financing ecosystem.

Third Milestone: Asset Recognition — Establishing Store of Value

Today, the perception has matured. After several bull and bear cycles, mainstream consensus is becoming clear:

Bitcoin as “Digital Gold”: MicroStrategy, Tesla, and even some sovereign states have included it on their balance sheets. Its scarcity and cross-border transfer convenience make it a non-sovereign store of value against inflation. According to latest data, BTC is priced at $93.73K, with a circulating market cap of $1,872.02B.

Ethereum as an “Application Platform”: Its decentralized finance, digital art, automated organizations, and other applications have formed a large economic ecosystem. It’s not just currency but also a settlement layer and innovation foundation.

Conclusion: The value of cryptocurrencies is real, but this doesn’t mean every token has value. There are over ten thousand tokens on the market, most lacking practical demand and economic models, ultimately going to zero. Only a few have stood the test and formed network effects.

The Dual Nature of Cryptocurrency: Pros and Cons at a Glance

Cryptocurrencies have many features, but “advantages and disadvantages” vary by person. Privacy is an advantage for ordinary users but a concern for regulators. Here are some less controversial features:

7 Common Pitfalls for Beginners

Pitfall 1: Losing private keys means permanent loss

Bank passwords can be canceled, but if you lose your crypto private keys or seed phrase, no one can help you recover. About 20% of Bitcoin (around 4 million BTC) is forever stuck on the blockchain because owners forgot their keys — worth over NT$10 trillion now.

Top priority: Write your seed phrase on paper and store physically. Do not keep it on your phone, in the cloud, or in app notes.

Pitfall 2: Underestimating exchange risks

When FTX collapsed in 2022, hundreds of thousands lost their funds overnight. In 2024, smaller exchanges still shut down after hacks. Remember: Putting money on an exchange = the money isn’t truly yours; it’s just a debt the exchange owes you.

For long-term holdings, transfer purchased assets immediately to your own wallet. Exchanges are just trading venues, not banks for deposits.

Pitfall 3: Price swings far beyond your imagination

Daily fluctuations of 20%-30% are common in crypto. In May 2021, a single month saw a 50% drop; in March 2025, a sudden news event caused a 28% plunge. Before investing, ask yourself: can my mental resilience and funds withstand short-term drastic asset reductions?

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

Over a million new tokens are issued each year. In 2024 alone, 95% of new tokens are priced below $0.0001. Unless you’re a seasoned researcher, sticking to BTC and ETH is enough.

Pitfall 5: Scams are rampant and increasingly sophisticated

From fake airdrops, fake customer service, impersonated wallets to carefully staged investment groups, scams keep evolving. Basic rule: there’s no free lunch. Any opportunity promising easy gains, asking for seed phrases, or requesting authorization for unknown smart contracts is highly likely a scam.

Pitfall 6: Future regulations and taxes are uncertain

Global regulation of cryptocurrencies is still developing. Taiwan currently does not generally tax crypto, but authorities are working on frameworks. The US has included crypto in tax reporting. Before participating, keep all transaction records ready for possible compliance.

Pitfall 7: Trading is ultimately a psychological battle, not just a technical one

Market euphoria leads to chasing highs; panic causes selling during crashes — human nature. Many investors lose money not because they lack technical knowledge but because they can’t control emotions, making irrational decisions at wrong times. During the 2022 bear market, some bought at $60,000 and sold at $16,000, only to regret when prices later hit $100,000.

Discipline and patience are often more important than chasing short-term ups and downs.

Which Coins Should Beginners Choose? Start with Sector Awareness

According to market data, nearly 9,000 tokens are circulating globally. After market淘汰, most remaining projects are relatively stable.

These coins can be categorized into 11 major sectors based on “business ecosystem.” Identifying the sector first and then choosing leading projects is the safest strategy for beginners.

11 Major Sectors and Representative Projects

Top 10 Market Cap Overview

Tip for choosing coins: Prioritize higher market cap coins. Compared to small-cap coins, large-cap coins have:

• Passed multiple bear markets with low risk of going to zero
• Stronger resistance to manipulation, hard to be maliciously dumped
• Solid consensus foundation, better resilience
• Usually sector leaders with higher growth potential

Based on latest data (January 6, 2026):

Important reminder: Stablecoins like USDT, USDC, DAI have minimal volatility, mainly used to hedge high volatility risks, not suitable for investment growth.

Final Words: Four Sayings Summarizing Crypto Investment

1. Cryptocurrency is not a scam: It has proven its real value (payment, financing, digital gold). Even countries are researching blockchain.

2. But 99% of tokens will go to zero: Truly valuable ones are few. BTC and ETH account for about 70-80% of the market.

3. Making money has nothing to do with technical skills: It’s 100% about “can you control yourself and resist greed.”

4. Discipline is more valuable than knowledge: Emotional control, long-term holding, avoiding chasing highs and panic selling — these are the real investment moat.

The crypto market is still evolving. Continuous attention to market dynamics and ongoing learning are the correct attitude for beginners.