The Double-Sided Cryptocoin
Written by Josephyne King. This article will go over the investment opportunities and risks of cryptocurrency. If you would like to see an explanation of cryptocurrency and blockchain, read more here.
Cryptocurrency first appeared in 2009 when Bitcoin was publicly released. It took until 2011 for other cryptocoins to enter the market, but now there are more than 1,000 public cryptocurrencies available worldwide. Japan is the largest trader of cryptocurrency, and is responsible for 62% of worldwide bitcoin trading. This is despite Japanese investors historically being more conservative than their European counterparts. In part, the reason cryptocurrency is so popular here is because it was legalized by the FSA, or the Financial Services Agency. Since then, cryptocurrency trading in Japan has boomed.
As of right now, 14% of young Japanese men own cryptocurrency, 25% of whom had never invested in anything else beforehand. When asked why they purchased it, 92% of the respondents said they were motivated by the investment opportunity. Using cryptocurrency as an investment is both a risk and an opportunity. While it can be profitable, the youth and lack of security of the market is something to be considered.
THE GOOD
The major draw to cryptocurrency is its ease of understanding. Unlike investing in stocks or bonds, purchasing cryptocurrency is a straightforward process that requires minimal knowledge to start investing. Because of this, it can actually encourage younger people, who may not have enough knowledge or capital to invest in bonds and stocks, to start investing. It can also inspire its users to keep investing. Of the young men who own cryptocurrency, 47% said they’d be interested in continuing to invest.
The youth of the cryptocurrency, which can be a drawback, also means that there is still a growth opportunity. Gumi, a mobile gaming company, just announced that it would be investing ¥3 billion in crypto-technology around the globe. Even Mitsubishi UFJ Financial Group is considering creating its own cryptocurrency. Both of these cases, on top of the multitudes of companies around the globe investing in the new technology, shows that many people still see opportunity in the market. They believe that not only will cryptocurrency grow, but also the technology around it which can possibly be used in other industries. Getting into the game early can mean realizing large profits down the road. Already, 331 Japanese investors had reported earnings of ¥108 million from cryptocurrency in one year.
THE BAD
Of course, the cryptocurrency market still holds a lot of risks, despite it becoming more mainstream in the last couple of years. A major concern within the market is the secrecy, one of the original draws of the currency. When it first started, cryptocurrency attracted a lot of criminal activity. Even now, it’s hard to track profits in the markets. Even though 331 investors divulged their cryptocurrency earnings, it’s suspected that the number should be much larger, meaning many current users still abide by the original secrecy of the market.
The biggest worry within the market now is its lack of regulation. Hacks and scams are still prevalent, and falling victim to either can sometimes be out of the investor’s control. While starting to invest in cryptocurrencies is fairly easy, trading posts are still largely unregulated, meaning it takes a lot of research beforehand to know whether trading on a site is actually secure. The largest hack was the Mt. Gox hack of 2014 which resulted in the loss of bitcoin valued at ¥50 billion. While this has led to call for more regulation, there is still a lack within the industry.
REGULATIONS
The good news for the future is that the FSA is considering imposing regulations on the market, making it an even more viable investment opportunity. While the exact rules that will be imposed have not been announced, some experts have suggested measures that should be taken: trading post management should be standardized, site managers should be responsible for monitoring suspicious activity, multiple passwords should be required for all transactions, and there should no longer be any legal cryptocurrency that allows a “high level” of anonymity. Once these measures are implemented, if they are, investors will have much less to worry about. Just like the legalization of cryptocurrency led to an investment boom, so will the imposing of investor safeguards, so while there are risks with investing in any cryptocoin, there is still a large opportunity for return on investment.
Sources:
Coin Telegraph
https://cointelegraph.com/news/14-percent-of-japans-young-male-workforce-invest-in-cryptocurrencies-study-shows
Coin Telegraph
https://cointelegraph.com/news/why-investors-are-going-all-in-on-bitcoin-major-japanese-crypto-exchange-ceo
Tech in Asia
https://www.techinasia.com/japanese-gumi-30m-crypto-fund
Coin Geek
https://coingeek.com/japanese-bank-mufg-trial-cryptocurrency-2019/
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