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What are the Advantages and Disadvantages of Bitcoin Investment? Operation Method and Comparison with Stock/FX

Bitcoin is the world’s first virtual currency (cryptographic asset) announced in a paper by Satoshi Nakamoto whose identity is still unknown. From the latter half of 2017 to the beginning of 2018, it has soared to 1BTC = more than 2 million yen, and among the investors, several successful people called “billion people” who made more than 100 million yen have appeared.

After that, there was a movement due to regulations around the world such as the prohibition of virtual currency transactions in China, and there was a long stagnation period where it fell below the 400,000 level for a while, but as of May 8, 2020, it was about 1 million yen. It has become a vigorous price movement such as recovery to.

In addition, since Bitcoin manages transaction records using a technology called blockchain, it has the characteristics that transactions are highly transparent and it is difficult to tamper with the records. By using this blockchain technology, expectations are rising as a new payment method to replace conventional bank payments.

Bitcoin has the potential for these two aspects of investment and settlement, but it is easy to be shunned that “bitcoin investment is dangerous” because of its volatility. This time, I will explain the advantages and disadvantages of Bitcoin investment by comparing it with FX (Forex Margin Trading), which many people are familiar with in general. Click here to get more info

Bitcoin operation types

Bitcoin has multiple trading methods such as foreign exchange trading and stock trading.

Physical transaction

Strictly speaking, Bitcoin is not a “kind” because it is a currency of data only, but trading from regular buying is called “kind trading”. If the price at the time of sale is higher than the price at the time of purchase, the difference will be profit.

Virtual currency FX (margin trading)

Forex trading is an investment in which the declaration of buy/sell is repeated without actually trading Bitcoin. Unlike physical trading, it is possible to trade even from selling and it is possible to apply leverage. If you can use these well, it will lead to great profits.

Arbitrage (Arbitrage)

It is a method of making profits by selling and buying using the price difference generated between exchanges. The method is simple: buy Bitcoin on a cheap exchange and sell it on a high exchange. However, the price difference does not necessarily make money because it is necessary to consider the transfer fee and the time to complete the transfer.

Also, as another advanced arbitrage transaction, there is a transaction that focuses on the price difference between the spot and futures contracts.

Futures trading

A futures contract is a contract that promises to buy and sell at a fixed price on a fixed date in the future. In other words, for example, if there is a contract to buy 1 BTC for 10 million yen after 7 days, if the market price at that time is 1.05 million yen, you can buy it as cheap as 30,000 yen, and on the contrary if it is 1 million yen You will have to buy it for as much as 20,000 yen.

Since this futures trading can enter into trading from both buying and selling, it can be used for risk hedging of physical trading, and it is also possible to aim for a larger profit by leveraging it.

Advantages of Bitcoin investment

Below, let’s look at the merits of Bitcoin investment.

You can start with a small amount of 1,000 yen or less

Although the minimum purchase unit differs depending on the exchange, you can invest in Bitcoin from 1,000 yen or less. The smallest unit of Bitcoin is 1/100 million BTC, which is commonly called 1 satoshi. For bilateral transactions that do not go through an exchange, it is possible to send and sell money from a very small unit of about 0.01 yen in present value.

Available for trading 24 hours a day, 365 days a year (regardless of weekends and holidays) Unlike FX and stocks, Bitcoin can be traded 24 hours a day, 365 days a year. This is possible because users (more precisely, nodes) all over the world have a mechanism to jointly manage and operate the Bitcoin system.