In the winter of 2017, I plunged into the cryptocurrency world with 50,000 yuan in my pocket. My first trade was an altcoin called Qtum. Watching the price rise from 3 yuan to 10 yuan, I thought I was the chosen one. A week later, it plummeted back to 1 yuan. The night my position was liquidated, I ate three bags of instant noodles in my rental apartment. This was my first lesson for newcomers: The cryptocurrency world isn't a casino, it's a battlefield where you need to wear a bulletproof vest.
Over the past eight years, I've seen margin calls at 3 a.m., and bought the dip when SOL dipped to $8. I've witnessed people turn $100,000 into $100 million, and I've seen 90% of people lose even their initial capital after the bull market frenzy. The veterans who managed to survive have quietly installed four firewalls. Today, I'm breaking them down for the newcomers, so they can avoid five years of detours.
1. Cognitive moat: Don’t just stare at the K-line, where are the roots of blockchain?
The stupidest mistake I ever made was speculating on a "fantasy coin" in 2018. The project's white paper was entirely in English, and I didn't even understand "smart contracts." Just because someone in the group chat was saying "a 100x coin," I jumped in and lost 30,000 yuan. Only later did I realize: investing without understanding the underlying logic is like crossing the street blindly.
The first lesson I teach new team members is to teach them three basic skills:
1. Understanding Bitcoin’s “Ledger”
Bitcoin isn't just a string of numbers; it's a global ledger that records data 24/7. The Proof of Work (PoW) mechanism is like the aunt at the market keeping accounts—whoever can calculate faster gets to keep the records, ensuring no one can falsify the data. When Musk called for Dogecoin in 2021, I didn't follow suit because I knew it didn't have PoW, allowing market makers to pump or dump the price at will—this is the immunity that comes with knowledge.
2. Ethereum’s “Wet Market” Logic
ETH's smart contracts are like market stalls; developers can rent a stall and sell goods (and issue tokens). During the DeFi boom in 2020, I invested heavily in ETH not because of the attractive candlestick charts, but because I saw 500 new contract addresses added daily. The more stalls rented, the more valuable ETH became. This is 100 times more reliable than just watching the MACD.
3. Don’t believe the “one coin, one villa” myth
Newcomers love to ask, "Which coin will increase 100x?" But veterans tend to ask, "What problem does this project solve?" Last year, a certain AI coin went viral. After reading the white paper, I knew it was a scam—with no data points or real-world applications, no matter how much it rose, it was still a bubble.
Cognitive avoidance guide:
Before buying a coin, ask yourself these three questions: What is it used for? Who uses it? What are its advantages over similar coins?
Set the "blockchain browser" (such as etherscan) as your homepage. It is more useful to understand the transfer records than to look at the K-line.
Spend 2 hours a week reading white papers, and three months later you will find that 90% of the coins are not worth buying.
2. Trading System: Don’t rely on market sentiment; install a “fuse” in your strategy
On the day LUNA crashed in 2022, the group was filled with cries of grief, yet my account only experienced a 15% drawdown. It wasn't luck, but rather a "double-open circuit breaker" mechanism in my trading system: if a long position gains 5%, I open a short position of the same size; if it drops 10%, the short position is automatically closed to protect profits.
A good trading system should be as versatile as a Swiss Army knife:
1. Stop-loss is not a multiple-choice question, it is a required question
My ironclad rule for new traders: If a single coin loses more than 5%, you must sell it, no matter how reluctant you are. In 2019, I was trading EOS on a swing trade and couldn't bear to sell even after a 6% drop, ultimately losing 30%. Later, I set my stop-loss to an exchange's "conditional order," which automatically closes at that point, even if I tried to sell.
2. Long and short positions to prevent black swans
My current portfolio is always 10% long and 10% short. When FTX crashed last year, BTC plummeted 20%, but my short positions netted a 15% profit, offsetting the losses from my long positions. This strategy is perfect for those "buy or sell" dilemmas, especially during market turmoil.
3. Make safe money with “grid trading”
A great tool for beginners: Place buy orders (e.g., BTC at $30,000) and sell orders (at $32,000) during a range of fluctuations. Automatically buy when the price drops and sell when it rises. In 2023, when BTC was sideways between $20,000 and $30,000, I made a 12% profit using a grid trading system—much better than blind trading.
System construction steps:
Use Excel to record every transaction: opening reason, stop loss point, target price (weekly review)
Run the simulation for 3 months first, and then use the real market when you have stable profits.
Install a "fuse" in your system: Stop trading after 3 consecutive losses and check what went wrong
3. Fund Management: Kelly Formula is the "money bag" of veterans
The most common mistake newbies make is throwing everything they have into a single coin. The worst case I've seen: someone invested 200,000 yuan in a single altcoin, only to be left with only 1,200 yuan after the project owner absconded. Experienced traders understand the essence of the Kelly Criterion: bet no more than 5% of your initial investment on each trade; there's always a chance of making a comeback.
My capital allocation chart (used for 5 years and never changed):
1. 30% long-term position (savings)
I bought all my BTC and ETH, stored them in a cold wallet, and didn't touch them unless I needed them urgently. During the March 12, 2020, crash, this position suffered a 40% loss, but I knew Bitcoin's underlying logic was intact, so I held on—and now it's up fivefold.
2. 40% swing trading position (earning living expenses)
Divide the shares into 5 shares, each worth 8% of the principal, and invest in mainstream cryptocurrencies by buying low and selling high. For example, if SOL drops to $20, buy one share, sell it when it rises to $30, and buy again when it drops back to $25. Don't be greedy; a 5%-10% profit each time is enough.
3. 20% cash equivalents (fire brigade)
Buy USDT or stablecoins and keep them in a current account on an exchange. When FTX crashed last year, I used this money to buy BTC at the bottom of $16,000 and made an 80% profit. Cash is always a valuable asset in a bear market; don't be fooled by its low interest rate.
4. 10% High-risk speculation (play money)
Invest in new or smaller coins, and even if you lose it all, it won't affect your life. Last year, I used this money to buy a Layer 2 project, which saw a 10x increase in value, but more often than not, I lose money. Remember: only invest in speculative money that you can afford to lose.
The Iron Law of Money Management:
Adjust the position once a month to ensure the 30-40-20-10 ratio remains unchanged
When you make money, replenish your cash position first, then consider adding more positions
Never use credit cards or mortgages to speculate in cryptocurrencies. This is the bottom line.
4. Mindfulness Training: Don’t Get Drifted in a Bull Market, Don’t Run Away in a Bear Market
The most brutal thing about the cryptocurrency world isn't the market, but the mentality that drives even the smartest people crazy. At the peak of the 2021 bull market, the analysts on my team kept shouting, "BTC will break $100,000," wanting to leverage their positions. I shut down my trading software and took them hiking. When we came back, I only said one thing: "When you're experiencing FOMO (fear of missing out) you're closest to getting liquidated."
Lao Pao's mentality management skills:
1. Pour cold water on yourself in a bull market
Every time my account doubled, I'd withdraw 30% and put it in a bank deposit. In 2021, I made 5 million yuan and saved 1.5 million yuan. Then, when the bear market hit, that 1.5 million yuan became my team's salaries, helping us get through the toughest six months.
2. Become a "data detective" in a bear market
Last year, when FTX crashed, SOL plummeted to $8, and everyone in the group was shouting, "Back to zero!" I led my team through three days of data: SOL on-chain transactions hadn't decreased, developers were still submitting code, and the collateralization rate was 90%—those signals were more reliable than candlestick charts. We decisively increased our position by 20%, and it's now tripled.
3. Set aside 1 hour of offline time every day
No matter how exciting the market gets, I always close my software at 8 p.m. Watching the market for more than 12 hours a day can reduce your judgment by 50%. Last year, I watched the market for 20 hours straight and impulsively traded against it, losing 100,000 yuan. This became my new rule.
Checklist for character cultivation:
Set "Others are greedy, I am fearful" as your phone wallpaper
If you lose money, don’t review it until late at night, get enough sleep for 8 hours before reviewing it
Join an "anti-anxiety group" to remind each other not to operate recklessly
The last three words of truth for newcomers
After eight years in the cryptocurrency world, what I want to tell newcomers the most is:
Learn to walk first, then learn to run: Start by investing 1,000 BTC every month, don’t touch contracts, and talk about other things after half a year.
The speed of making money is proportional to your cognition: when you can understand why Ethereum's gas fee fluctuates, then consider doing short-term trading - this is more reliable than listening to market calls.
Only if you survive can you have a chance: Earning 1 million in a bull market is not considered impressive, but keeping 800,000 in a bear market is a real skill.
Now that the bull market signals are becoming clearer, I'm actually more cautious. I'm doing a "stress test" for the team: If BTC pulls back 30%, can our positions withstand it? Where should I draw the stop-loss line for each target coin?
If you are also preparing for the bull market, why not start today:
Make a "must-learn list": understand the Bitcoin white paper this week, and smart contracts next week
Use 1000 yuan to open a demo account and practice grid trading
Divide the funds into 4 parts, take photos and save them on your phone
Look back in three months, and you'll find you've already left 90% of the newbies behind. Experience isn't innate; it's the result of repeating simple tasks and avoiding pitfalls. See you at the top of the mountain, if we all make it there alive.
If you'd like to work with me on polishing your trading system, follow me on @bit多多 . From understanding to practical application, I'll guide new traders and slowly build a "moat." Remember: you can always make money in the cryptocurrency world, but your capital can be lost at any time—protecting yourself is more important than anything else.
