How to start virtual currency

Nature and type of virtual currency

Cryptocurrencies (formally crypto assets) are currencies that are basically exchanged only with electronic data, virtual currency and the history of value holding and transfer is recorded in a public ledger called a blockchain.

Some virtual currencies do not require such an issuer. In addition, when sending usd dollar, the bank records the transaction history, but it does not require a management entity for such transactions, and the history is managed on the Internet.

Bitcoin is the first virtual currency born in 2009. It is truly a representative of virtual currencies, and many virtual currencies are born from it. Virtual currencies other than Bitcoin are collectively called altcoin, and there are more than 4,000 types of coins, from famous ones such as Ethereum and Ripple to recently born coins.

Bitcoin is a breakthrough way to store value

Bitcoin, which is said to have an excellent value storage function, has two main characteristics.

Bitcoin assets are safe (cannot be tampered with)

It is said that it is impossible to tamper with the transaction history recorded on the blockchain. In other words, the fact that you own X Bitcoins.

The theft and spill accidents that have occurred so far have been caused by the lack of control of the exchange that temporarily holds the customer’s virtual currency. In addition, it does not deteriorate like gold, which is an excellent means of storing value.

There is a maximum number of issues

The maximum number of Bitcoins that can be issued is fixed. Only 21 million copies will be issued. In fact, about 18 million copies are already on the market and are traded all over the world. The annual number of copies issued is determined by the program, and the remaining 3 million copies are scheduled to be issued little by little by 2140.

Risk and return

Here, I will introduce two typical risks of virtual currencies.

Price fluctuation risk

The price of Bitcoin has risen significantly since last year, but there is a risk of a crash. Even this year, it has often fallen by about 20 to 30% in one day, and on March 12, the Nihon Keizai Shimbun reported that “Bitcoin has fallen by 20% and sold at risk-off.” In the worst case, the value can be zero.

Loss risk

Cryptocurrency management is, in principle, at your own risk, and most importantly, managing your private key (like a PIN in your bank account) itself. If you deposit your assets in an exchange account, you don’t have to manage your private key yourself, which makes asset management easier.

However, although there are no cases at Bitbank, there have been cases where the customer’s private key was leaked at a domestic or overseas trader and theft accident occurred, so check the details of the security measures of the exchange you are using. In addition, it is necessary to select an exchange with a high level of countermeasures.

On the other hand, you need to be careful when you manage your assets by yourself using a hardware wallet (an item that you manage your own private key).

This is because there is a risk of losing virtual currency not only because the hardware wallet itself is stolen or lost, but also because the passphrase (a type of password created by combining multiple words) that recovers the wallet is lost. Learn how to protect your assets by using different management methods according to your business needs.

There are two ways to make a profit with cryptocurrencies.

Capital gain

It is the trading margin obtained by selling virtual currency. Capital gains (trading profits) are the real thrill of cryptocurrency investment, as you can see from the fact that cryptocurrencies have generated a lot of millions of people (people who have built billions of assets with assets such as virtual currencies) due to the former surge. Yes, but the risks are also very high. You can buy and sell virtual currencies mainly on virtual currency exchanges.

Income gain

There are various income gains in virtual currencies, but the typical one is interest income from lending (virtual currency). An example is a service that allows a user to lend out virtual currency held on a virtual currency exchange, etc., and receive interest from the exchange, etc. according to the lending period and loan amount.

Isn’t it late to buy from now on?

What you can expect

Bitcoin is sometimes called “digital gold” by its nature. This is because it has the property of being rare and does not deteriorate like gold, and is expected as a value preservation function. The market capitalization of such Bitcoin is still only about one tenth of gold. If it works as an asset to save wealth at the same level as or better than gold, we can expect the market to grow even larger in the future.

Also, if we can expect the entry of US companies and the increase in cryptocurrency use cases in the future, it may not be too late to start investing. However, organize your investment objectives, weigh them against other financial products, and make sure you fully understand the risks before investing.

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