Can virtual currency be used for asset management in money trading online: Since cryptocurrencies are a relatively new type of business, many people will say, “I do not know what to do.” In this blog, we will explain how to trade virtual currencies, what you need to be careful about when trading, and the pros and cons of working virtual currency.
Is virtual money recognized as a management asset?
First, I will explain why virtual results are recognized as a means of managing assets.
It Can be purchased from a small amount in Money Trading Online
In Money trading, online Cryptocurrency can be purchased for as little as 1,000 INR. From pre-start to low start and you can invest in a large amount of monthly income, you can start managing the asset without any waiting.
Easy to get started even for beginners
One of the reasons why cryptocurrencies are recognized as a way of managing assets is that even beginners can access them easily.
Cryptocurrency investments include “short-term investments” that make a profit in the short term and “long-term investments” that hold the virtual currency for long periods over many months to years. . Short-term investments can cause big losses if you delay the time between buying and selling, so you need to examine the market a lot. It also requires a business analysis to make money in the short term.
On the other hand, long-term trading can be profitable as long as the price increases in the future, so there is no need to check the charts and so on. It takes longer to make more money than short-term investments, but the risk is not high, so it is still recommended for beginners.
Recommended to increase the effect of a diversified investment
Investing in cryptocurrencies has also been successful in maximizing the benefits of diversified trading by integrating with other assets. Diversifying assets with similar prices do not make sense as it is not a risky investment.
Financial functions such as investments and real assets such as real estate and virtual money have a small and unique impact. Therefore, it will be possible to improve efficiency by managing the assets in the mix.
What are the major cryptocurrency brands?
There are so many brands of cryptocurrencies that you may be wondering which one to buy. From among the many brands, we would like to introduce three recommended brands with future potential.
Bitcoin started operation in 2009 and is known as the world’s first virtual currency. It is handled by all cryptocurrency exchanges in India and has the highest market capitalization (as of February 2021).
The biggest feature is that it realizes a decentralized electronic payment system managed by participants without going through a public third party such as a central bank that issues currency.
In addition, if it is issued indiscriminately, there is a risk that it will be put on the market too much. Therefore, the upper limit of the number of issued sheets is set to 21 million so that the value does not decrease.
Ripple is managed and operated by the US-based technology company Ripple. Officially launched in 2013, it is a virtual currency developed to make international remittances cheap and fast.
Current international remittances go through banks, etc., so fees are high and it takes time. But with Ripple’s financial system, international money transfers, which used to take days, can now be done in just a few seconds.
Ethereum is a major stock on most exchanges and has the largest market capitalization of any altcoin (as of February 2021). Strictly speaking, the currency means “Ethernet”, and Ethereum means a decentralized management platform that introduces smart contracts, but the expression Ethereum is widespread in both cases.
Like Bitcoin, Ethereum has currency transaction information registered on the blockchain. In addition, Ethereum can record and execute application programs. This is called a smart contract, and it automatically executes the set requirements without human intervention.
Introducing how to trade virtual currencies
There are the following types of virtual currency trading methods.
“Spot trading” is a transaction to buy and sell virtual currency. As soon as the deal is closed, you can buy and sell at the current rate. You can purchase in-kind transactions in virtual currency within the range of funds you have.
For example, if you have 100,000 INR, the maximum amount of virtual currency you can purchase is 100,000 INR. Therefore, there will be no loss beyond the cash on hand.
A “futures contract” is a contract that promises futures contracts at this time. You decide the quantity and price to buy and sell, and it will be settled automatically on the promised date.
The advantage of futures trading is that you do not have to worry about the risk of price fluctuations. However, you need to deposit a margin (like collateral) on the exchange.
“Leverage” means “leverage principle”, and leverage trading is a mechanism that allows you to trade several times the amount of margin with the margin deposited in your account as collateral.
For example, if you deposit 100,000 INR as a margin, you can trade 200,000 INR if you double the leverage, and 400,000 INR if you quadruple the leverage.
In addition, unlike physical trading, leveraged trading is also characterized by being able to aim for profits even in a declining market. In leveraged trading, you can sell cryptocurrencies in the hope that the price will drop in the future and buy them back when the price drops, so you may be able to make a profit even if the price drops.
Points to watch out for in cryptocurrency trading
To avoid the result of “I intended to start with asset management, but I had a big loss …”, please be aware of the following in cryptocurrency trading.
Use a well-known exchange
To prevent unexpected troubles, use a well-known exchange. Cryptocurrency exchanges cannot be operated without the approval of the Financial Services Agency. You can check the crypto asset registration company on the website of the Financial Services Agency, so be sure to check in advance when using a lesser-known exchange.
Invest with surplus funds
It is not limited to virtual currency, but the investment is made within the range of surplus funds excluding living expenses. Cryptocurrencies have large price movements, so it is recommended to start with a small number of surplus funds.
The minimum unit of the transaction depends on each cryptocurrency exchange. Let’s do it within a reasonable range without spending living expenses.
Benefits of operating virtual currency
Let’s take a look at the benefits of managing assets with virtual currencies.
Easy to make a profit in a short period of time
Compared to other financial products such as stocks and investment trusts, the advantage is that it is easy to make a profit in a short period. Unlike the price movement of the Nikkei Stock Average, it is common for the cryptocurrency market to move 10% a day. Large price fluctuations are a disadvantage, but aiming for a large return in a short period can be said to be an advantage unique to virtual currencies.
You can trade according to your lifestyle
It is also an advantage that you can operate it according to your lifestyle regardless of the time of day. Stock investment can be traded only 24 hours on weekdays from 9:00 to 15:00 when the stock market is open.
On the other hand, in the case of virtual currency, you can trade 24 hours a day, 365 days a year, so even if you work on weekdays, you can trade according to your lifestyle without being bothered by trading hours.
Disadvantages of operating virtual currency
Managing assets with virtual currency have the following disadvantages as well as advantages.
Leverage trading can be costly
Leverage trading can be a big profit, but it can be a big loss.
For example, in the case of physical trading, if you buy 1 million INR worth of Bitcoin for 1 million INR and the price of Bitcoin drops by 10%, the loss will be 100,000 INR. On the other hand, if you trade 1 million INR with 4 times the leverage, the loss will be 400,000 INR.
Since the price of virtual currencies fluctuates greatly, the price may rise at once, or it may fall at once, and it is easy for losses to increase compared to physical transactions, so be careful. In some cases, you may incur more losses than you have deposited.
High tax rate
When operating virtual currencies, you should also consider final tax returns. Profit earned from the virtual currency is treated as “miscellaneous income”. Progressive taxation, which increases the tax rate as income increases, is applied to miscellaneous income, and the tax rate is 5 to 45%. If you add 10% of residence tax to this, it can be up to 55%.
On the other hand, profits earned from stocks and FX trading are subject to separate taxation, and the tax rate is 20% (income tax 15% + inhabitant tax 5%). You can also carry forward the loss for 3 years, so you can reduce your income tax by deducting the loss from the profits from the following year onwards.
In this way, the tax system of virtual currencies is disadvantageous compared to stocks and Forex trading, and the disadvantage is that the profits that remain on hand are reduced.
Efficiently manage assets by trading virtual currencies
In addition to being able to trade virtual currencies 24 hours a day, 365 days a year, it is attractive to start with a small amount of about 1,000 INR. There is also a reserve virtual currency that automatically reserves the specified brand and amount, so you can operate with less risk. Let’s manage your assets with the trading method that suits you.
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