I think the hardest part for newcomers is the first bull run followed by a hefty correction. It's hard to deal with the "I'm a genius" followed by the "shit I fucked up" roller coaster of emotions. Many of those newcomers sell and call it a loss. Some of the newcomers tough it out and live to see the next bull run with newfound confidence in the bitcorn.
This is a big reason to do the "don't invest what you can't afford to lose". Being down and in a shitty position can force you to do things that just make things worse.
This is very true. However, "what you can afford to lose" becomes a sliding scale for many people while facing losses they may not have expected. Maybe they initially thought "Shit, I can afford to throw $10,000 at this and lose it worst case scenario." Then suddenly they see $10,000 turning into $4,000 and start thinking "Well better to have $4,000 instead of $3,000 in my pocket".
There are many studied psychological theories such as Status Quo Bias and Risk Aversion Bias that greatly impact people and thier decision making abilities. Simply put, you may find yourself doubting the decision you made today even though you're currently 100% sure of it. Emotions are a very powerful and funny thing that many folks do not understand how to control or be self aware of.
A close friend of mine went to college for many years and studied investing and finance. While speaking to him during one of the bear markets he asked "How are you feeling with the current bear market?" I told him that it's just part of the cycle and I've been buying as much as I can on a weekly basis. I told him everything has cycles including the stock market. Now is the best time to buy. He told me that this strategy and mindset is one of the hardest things to overcome in the investing/finance world and something many (even expierenced) investors struggle with.
This is one of the reasons I used to worry about shitcoins. I think many have entered into the space and then tar bitcoin with the same brush once they get rekt. This then leaves a sour taste in their mouth and are twice as reluctant to get into the real btc when they have a chance. Still I guess everyone eventually buys bitcoin at the price they deserve. In this case, those that got burnt will probably be the laggards (last 10% of people) that finally enter the space and end up paying the highest prices possible for their poor decision making.
My father, who is still alive, got burned on an investment back in the 1980s.
To this day he refuses to discuss it with me, but it must have been a bad enough blow to his psyche and/or wallet, because he has never privately invested in anything since. He has become far too risk averse.
That is the real tragedy and lesson: not getting back into the game once burned.
He sat on the sidelines and missed so many investment opportunities from the 80's, 90's, 2000's and beyond...