The Complete Beginner’s Guide to Crypto Assets In Foreign Exchange Trading: Bitcoin is a “currency” that can be traded on the Internet. Bitcoin is the world’s first virtual currency and digital asset (Asset).
Currencies created following the idea of Bitcoin are collectively called virtual currencies (formally crypto assets).
Bitcoin was invented as “money,” as you can see from what is called a virtual “currency.” Compared to the INR and dollar, Bitcoin does not have a central administrator (central bank), it is a digital currency, and so on.
Bitcoin has a unit of currency such as INR and dollar, and is expressed as “1BTC”. In actual trading, you can trade from a small amount in units such as 0.001 BTC.
You can trade with anyone in the world 24 hours a day, 365 days a year, and Bitcoin may be cheaper than sending money at a bank, especially when sending money overseas.
In addition, it is extremely difficult to falsify transaction records due to the blockchain, which is a basic technology.
“Money” not controlled by the government or central banks in Foreign Exchange Trading
The first difference from traditional currencies such as INR and dollar is that Bitcoin does not have an issuer.
Generally, currencies are issued and managed by the government and central banks, but it is volunteers from all over the world who maintain Bitcoin.
They keep a complete record of their transactions on their personal computers.
In return, they (volunteers) can get Bitcoin as a reward by performing commissions paid by users and mining (work to approve transactions).
In this article, I will explain this by taking foreign exchange FX (hereinafter referred to as FX) as an example of diversified investment.
Diversified investment effect
If a crypto asset investor also performs FX in parallel with crypto assets, a “diversified investment effect” can be expected.
Diversified investment has various effects. It mainly has the following effects.
- Increased profit opportunities
- Reduce the risk of the entire portfolio
- Diversify profits and reduce the impact of progressive taxation
Increased revenue opportunities
The trading target is different between crypto-assets and FX. When trading in the crypto asset market is weak, trading in the FX market may be active.
If there is an environment where both parties can trade, flexible trading is possible according to the market environment.
Another advantage of FX is that it has income gains. When you buy a high-interest-rate currency with Forex, there are cases where you can receive the interest rate equivalent of that currency as a “swap point”. On the other hand, crypto-assets have no income gain except for some.
The typical merit of diversified investment is that it increases profit opportunities.
Reduce the risk of the entire portfolio
One of the typical merits of diversified investment is that the risk of the entire portfolio can be reduced.
A portfolio refers to a combination of financial products. Since FX invests in foreign currencies, you can combine crypto assets with foreign currencies to create one portfolio.
Diversification generally reduces the risk of the entire portfolio. Advocated by Harry Markowitz, who won the Nobel Prize in Economics in 1990, it is now one of the basic ideas in investment.
Diversify profits and reduce the impact of progressive taxation
Cryptocurrency assets are “progressive taxation” in which the tax rate rises as the profits obtained increase.
In other words, if you continue to make profits from crypto assets alone, the tax rate will continue to rise.
Since this profit is calculated by adding other income such as salary, the tax rate will increase further if the income is originally large.
On the other hand, FX profit is calculated separately from other income, and the tax rate is uniformly 20% (income tax 15%, inhabitant tax 5%. Special reconstruction tax is also added separately).
No matter how big the profit of Forex is, or how big other income such as salary is, the tax rate will not rise.
Therefore, if you want to get the same profit, there are cases where it is a lighter tax burden to divide into crypto assets and FX.
The trading mechanism is similar
For crypto asset investors, FX, which has a similar transaction form, is a trading target that is easy to diversify.
Forex, like crypto assets, the “2-way price method” that presents the buy rate and the sell rate at the same time is adopted.
The difference between the two rates is the actual cost (spread), which is a trading rule familiar to crypto investors.
It is also similar in that the “technical chart” is effective. For crypto assets with poor financial backing, analysis using “technical charts” is the mainstream.
In Forex, analysis using technical charts is the mainstream, and it is possible to measure stocks and investment timing using the same method as crypto assets.
Diversified investment effects can be expected in transactions other than FX, but transactions on completely different assets are burdensome because knowledge must be acquired from scratch.
FX, which has a similar transaction form to crypto-assets, can be said to be an easy target for crypto asset investors to start diversified investment.
Diversified investment in Forex etc. is also an option for crypto asset investors
The merit of crypto-asset investors to start trading other than crypto-assets is the “diversified investment effect”.
This time, we took FX as an example, but since the transaction form is similar to crypto-assets and there are many attractive campaigns, it may be good to consider it as a target for diversified investment.
It is not necessary to completely switch from crypto assets to FX, but for efficient asset management, why not consider a diversified investment by combining assets with attractiveness that crypto-assets do not have?
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