Prerequisites for understanding Bitcoin

Tips for newcomers

Getting your first bitcoins

Tips for newcomers

Common mistakes to avoid
Defining an investment strategy
Understanding BTC's volatility
Managing and securing your Bitcoin wallet
Confidentiality and discretion
Tax implications
The Difference Between Trading, Investing, and Holding
Keep Learning
Golden Rules to Keep in Mind

Getting into Bitcoin can be exciting; but it also comes with its fair share of risks. The world of crypto is unlike any other; wild price swings, unfamiliar technology, and the very real possibility of losing your funds for good due to simple mistakes or poor investment choices are all pitfalls that new users should be aware of.

In this chapter, I'll share some practical advice and general guidance for anyone who is taking their first steps, especially those making their first purchase or exploring the broader world of financial investment.

Here are the key points that we will go over together:

Beware of Shitcoins and other useless cryptocurrencies;
Only invest money you can afford to lose;
Know the difference between trading and investing;
Be aware of the tax implications of your investments;
Protect your recovery phrase carefully;
Stay humble and keep a low profile (discretion is part of security);
Think long term, zoom out and be patient (think of it as a marathon, not a sprint).

Common mistakes to avoid

Bitcoin is open to everyone, but that doesn't mean you should dive in unprepared. Here are some of the classic mistakes made by newcomers:

Technological mistakes:

Losing your seed phrase: Your recovery phrase (usually 12 or 24 words) is the only way to access your bitcoin if something happens to your wallet. If you lose it, your funds are gone permanently;
Storing your bitcoins on a third-party platform: If your coins are on a centralized platform, you don't really own them. You're exposed to risks like hacks, platform failures, or even fund seizures;
Neglecting privacy: Protecting your privacy is a core part of securing your assets. Publicly revealing how much bitcoin you hold could make you a target;
Insufficient online security: Failing to secure your devices with basic protections (like updates, strong passwords, or 2FA) makes you an easy mark for attackers; and could cost you everything.

Financial mistakes:

Investing more than you can afford to lose: Never go into debt or put your rent money into bitcoin. Your basic financial stability should always come first.
Not knowing the difference between trading and investing: Trading requires time, skill, and serious emotional discipline. Long-term investing is far more beginner-friendly.
Forgetting about taxes: Every country has its own tax rules for crypto. Ignoring them can lead to painful surprises down the road.
Falling for FOMO: Buying impulsively out of fear of missing out usually leads to bad timing and bad decisions. Patience is your best ally.

Defining an investment strategy

Before buying your first satoshi, it's crucial to understand why you're investing in Bitcoin and how. This means having a clear financial plan tailored to your personal situation and long-term goals.

Start by defining your budget with precision. Don't just pick a random number. Take the time to calculate your monthly income, subtract your fixed expenses (like rent, loans, taxes, utilities), as well as your day-to-day living costs (food, transport, leisure, etc.). Whatever remains is your savings margin and it's only from this portion that you should consider investing. Approaching it this way ensures that you're not putting your financial well-being at risk, especially in the event of a market downturn. A thoughtful strategy is the foundation of long-term resilience.

Once your budget is defined, think about how you want to invest. One of the most beginner-friendly and widely recommended methods is Dollar Cost Averaging (DCA), buying a fixed amount of bitcoin at regular intervals (weekly, monthly, etc.). This strategy helps smooth out your average entry price over time and reduces the emotional impact of price swings. It's a smart approach for most people, especially newcomers.

Then, ask yourself: What's my time horizon? Are you looking to make quick moves in and out of the market (trading)? Or are you more aligned with the long-term mindset of holding Bitcoin over several years (hodler)? If you're a hodler, you're probably less concerned with daily price swings and more focused on long-term security and self-custody. If you're trading, you'll be more exposed to short-term market noise, higher risk, and the stress that often comes with rapid decision-making. There's no one-size-fits-all answer, but knowing your own approach will help guide your decisions.

Most importantly, don't make investment decisions based on emotion or fear. Set a strategy in advance, write it down, and stick to it.

If you're still unsure, start by learning. Spend a few hours exploring Bitcoin, check out the free resources on Plan ₿ Academy, read a couple of books, throw in five euros just to try it out, and watch some quality content online. Stay curious. The more comfortable you get, the easier it'll be to revisit your strategy, tweak your approach, and move forward with confidence.

Understanding BTC's volatility

Bitcoin is known for its dramatic price swings. Moves of 10%, 20%, or even 50% over just a few days aren't unusual. For newcomers, this kind of volatility can be disorienting. It's easy to get swept up in the hype during bull runs or panic during downturns; both of which often lead to poor decisions, like selling at a loss.

That's why it's crucial to understand and accept Bitcoin's volatility before you invest. These price swings aren't a bug, they're a feature of a still-maturing asset. If sudden ups and downs are keeping you up at night or pushing you into emotional decisions, chances are you've put in more than you're comfortable risking. In that case, take a step back and reassess your strategy and risk tolerance. Don't hesitate to scale down your position until you feel more at ease.

Above all, never invest more than you can afford to lose. Avoid borrowing money to buy bitcoin (especially if you're still learning the fundamentals). A solid foundation starts with measured steps, not reckless bets.

Managing and securing your Bitcoin wallet

One of Bitcoin's most powerful (and often underestimated) features is self-custody. With a self-hosted wallet, you alone are responsible for your funds. These wallets are typically generated from a recovery phrase (also known as a seed phrase), a series of 12 or 24 words that grants full access to your BTC. If you lose this phrase (or if someone else gets hold of it) your bitcoins are gone for good. No customer support. No reset button.

That's why the golden rule in Bitcoin is: "Not your keys, not your coins". If you don't personally control your private keys, you don't truly own your bitcoin. While exchanges can be convenient (especially when starting out) they hold your keys for you. That means your funds are at risk if the platform gets hacked, freezes your account, or goes bankrupt.

To avoid this risk, it's strongly recommended to set up your own wallet, where only you have access to the recovery phrase. This phrase should always be written down by hand and stored offline in a safe location. Some users even maintain multiple backups, stored in separate geographic locations for added security.

Never store your recovery phrase on an internet-connected device or in the cloud. A single hack or data breach could lead to irreversible loss.

If you're ready to take ownership of your bitcoin and want to dive deeper into best practices for securing your recovery phrase, I highly recommend checking out this article:

Back up your mnemonic phraseDiscover best practices for safeguarding your Bitcoin wallet

Confidentiality and discretion

In today's digital world, discretion is often overlooked; yet it's a crucial part of staying safe, especially when it comes to Bitcoin. The more openly you talk about your holdings, the more likely you are to become a target for scammers, cybercriminals, or even more traditional threats like extortion or blackmail. There have been numerous cases across the world where individuals known to hold large amounts of BTC were kidnapped or attacked.

Avoid bragging about your bitcoin stash; whether on social media or even in casual conversations. There's no upside to revealing sensitive financial information, and the risks are real.

It's also wise to compartmentalize your online activity. For example:

Use a separate email address for anything Bitcoin-related, distinct from your personal or work accounts.
Be cautious of phishing attempts, suspicious links, and fake websites that mimic trusted platforms.
Stay alert! discretion and vigilance are often your best defense.

If you're ready to go deeper into the topic of Bitcoin privacy, we recommend continuing with our Year 2 Privacy Course, where you'll learn more advanced techniques to keep your identity and activity secure:

Privacy on Bitcoin

Intermediate

4.7(140)

Understand and master the principles of privacy protection when using Bitcoin

4.7(140)

Privacy on Bitcoin

Understand and master the principles of privacy protection when using Bitcoin

Tax implications

Despite being a decentralized currency, Bitcoin is not exempt from the tax laws and regulations of your country. Every jurisdiction has its own approach to how gains from cryptocurrencies are taxed. In some places, profits are taxed as capital gains upon selling. Others may require you to declare every trade, and some apply less common rules, such as wealth taxes or social contributions.

Before making any significant transactions, it's strongly recommended to consult a tax professional or review your government's official guidance. Taking time to understand your tax obligations in advance can save you from unexpected issues later (like fines, audits, or penalties) especially if you're planning large sales or portfolio reallocations.

The Difference Between Trading, Investing, and Holding

Bitcoin is often surrounded by popular misconceptions; one of the most common being the idea that it's a fast track to getting rich through trading. But it's important to understand the clear distinction between trading, investing, and holding, as each approach comes with its own mindset, skillset, and level of risk.

Trading:

Let's be honest:you probably shouldn't be trading. Trading involves short-term speculation (sometimes with leverage) aiming to profit from Bitcoin's price swings. While it may sound appealing, successful trading requires advanced technical knowledge (like chart analysis and risk management), emotional discipline, and constant attention to the market. It's mentally taxing and time-consuming, and the hard truth is that most beginners lose money because they underestimate how demanding it really is. As Warren Buffett famously said: "If you're not willing to hold a stock for ten years, don't even think about holding it for ten minutes." Bitcoin isn't a get-rich-quick scheme.

Investment:

Investors take a medium to long-term view, buying bitcoin with the belief that its value will grow over time (months, years, or even decades). There's still risk, of course, since the price of bitcoin can fluctuate significantly. But this approach is generally calmer and far more practical for most people, especially those who don't want to spend hours glued to the charts every day.

Holding (HODL):

"HODL" started as a typo for "hold" and quickly became part of Bitcoin culture. Today, it's a badge of honor. Hodlers are in it for the very long game; sometimes ten years or more. They store their bitcoin safely and simply wait, driven by strong conviction in Bitcoin's long-term potential. They aren't fazed by daily price swings or bear markets. Their mindset is simple: accumulate, secure, and sit tight.

	Trading	Investment	Holding
Leverage	Yes	No	No
Timeframe	Short-term	Medium-term	Very long-term
Asset Type	Contracts	Actual BTC	Actual BTC
Risk Level	Very high	High	High
Difficulty	Very Hard	Hard	Hard
learning curve	Long learning curve	Long learning curve	Long learning curve
Potential Loss	UnLimited	Limited	Limited
Best For	A few experienced users	Most People	Long-term Believers

Keep Learning

It's never too early (or too late) to start educating yourself about money, investing, and how the financial system really works. You don't need to become an expert or dive into every technical detail; having a solid, big-picture understanding is enough to make informed decisions and avoid being misled by financial products that don't serve your interests (often promoted by banks or advisors).

A great starting point is the book Rich Dad, Poor Dad by Robert T. Kiyosaki. It's widely known for its approachable style and foundational lessons; like understanding the difference between assets and liabilities, and why financial education is key to long-term independence.

If you're ready to go deeper, podcasts like The Investors Podcast offer insightful discussions on investing, markets, and economic principles. They occasionally cover Bitcoin too, making it a solid next step for those curious to understand how Bitcoin fits into the broader financial landscape.

Golden Rules to Keep in Mind

To wrap things up, here are a few timeless principles that every Bitcoiner (especially beginners) should keep in mind:

Rule n°1: Never invest more than you can afford to lose. Bitcoin is a volatile asset. Don't risk your financial stability chasing gains. Your essential needs and peace of mind should always come first.
Rule n°2: Don't blindly follow the hype or trust miracle advice. Ignore trends and flashy promises. Instead focus on making well-informed, rational decisions. When in doubt, sleep on it; talk it through with people you trust. It's better to move slowly and thoughtfully than to rush into costly mistakes.
Rule n°3: Build a plan and stick to a long-term vision. Consistency, patience, and discipline will take you further than short-term excitement. Don't aim for moonshots; aim for sustainable growth. Avoid fatal mistakes and let small wins compound over time.

By following these principles, you'll be able to approach Bitcoin investing with more clarity and peace of mind. Yes, Bitcoin is volatile, and it can be intimidating at first; but when approached with caution, patience, and a grounded mindset, it holds undeniable potential. Take the time to build your knowledge, revisit your strategy when needed, and above all, remember: slow and steady progress will always serve you better than rushing in out of fear or impatience.

Quiz

btc1022.3

1/5

Why is it advised to invest only what you can afford to lose?