It is safe to avoid investing in low-value coins. Although virtual currency has become popular as a new investment destination in recent years, there are many people who think that “virtual currency is bitcoin”.
But it’s half correct and half wrong. This is because, as of July 2018, there are more than 1,600 types of “virtual currency” other than bitcoin.
Virtual currencies other than Bitcoin are called “Altcoin” from “Alternative-Alternative-Coin”. Is there a nuance like “an alternative or alternative currency to Bitcoin”?
Altcoin is not just a copy of Bitcoin, but often has features that Bitcoin does not have, such as transfer speed and anonymity. Several types of altcoins are listed on the virtual currency exchanges in Japan, including “Ethereum” and “litecoin”, which have the highest market capitalization of virtual currency, but many altcoins are traded only on overseas exchanges.
This time, I will explain the risks involved in investing in such altcoins.
Excluding altcoins, such as Ethereum, which digs into the single-digit market capitalization rankings, altcoins generally have less trading volume than Bitcoin, which people around the world are always trading.
Therefore compared to Bitcoin, the price moves with less money, so it is easy to cause a sudden price movement. It’s nice if the price goes up at once, but if you get caught up in a plunge, you could lose a lot of assets.
Also, if you have a large amount of altcoins with low volume, you may not be able to sell at the price you want to sell because the buying board is thin. Especially in the case of Altcoin, which has a small transaction volume, it may be delisted from the exchange. It would be nice if they were listed on multiple exchanges, but if the only listed exchange is delisted, the altcoin will no longer be available for sale or buy anywhere. In this case, when the delisting is announced, there will be a flood of sales from the holders and the price will fall sharply.
To avoid the above risks, it is better to pay attention to daily trading volume and trading volume and avoid investing in altcoins that have too little trading volume. Know more about bitcoin billionaires to get more detail about it.
Beware of large price fluctuations due to future regulations
Since there are many legally undeveloped parts of virtual currencies internationally, there is a risk that prices will change significantly due to future regulations. As mentioned above, altcoin in particular has many issues that have characteristics that bitcoin does not have, so let’s be prepared for risks by assuming that those characteristics are subject to regulation.
For example, there are some types of highly anonymous altcoins such as “Monero” that do not allow third parties to know the remittance records, etc. Prices can fall sharply if laws that prohibit their use are enforced.
Although the above is just one possibility, let’s pay attention to the movements on the regulatory side more than Bitcoin and raise the antenna so that it can react immediately if there is any movement.
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Some people wonder if other virtual currencies or stateless currencies will be the infrastructure because this is a bitcoin story, but I don’t think so. When it comes to currency, what guarantees its value is a joint illusion. The reason people think money is money is because they can buy things and hire people. It means that money is valid because there is an understanding that money is “because it is money”. You can spend money because there is an economy of people who all agree that this is money.
It is thanks to the state that the economy is maintained. And the nation accepts stateless currencies and never accepts that tax will not be taken. Japan is a country that is relatively friendly to virtual currencies, but in Europe and the United States, it is moving towards regulation rather. If it grows really big and poses a threat to your monetary system, it won’t become a pun. The tax revenue and monetary system are the foundation of the nation. It’s a different story to say that the country will disappear.