Cryptocurrency, often perceived as complex, is an accessible investment avenue even for beginners. This guide explains its fundamentals, how to trade, and strategies to potentially generate profits. Start by understanding the basics and proceed with small, manageable investments.
What Is Cryptocurrency?
Cryptocurrency refers to digital assets traded online, with Bitcoin being the most prominent example. It can be used as payment for goods and services among unrestricted parties. Its value fluctuates based on supply, demand, and other market factors.
Definition of Cryptocurrency
According to Japan’s Payment Services Act, cryptocurrency must meet these criteria:
- Usable as payment to unspecified parties and exchangeable with legal tender (e.g., Japanese yen, US dollars)
- Electronically recorded and transferable
- Not legal currency or assets denominated in legal currency (e.g., prepaid cards)
Its groundbreaking aspect is enabling decentralized value exchange without central bank involvement.
Types of Cryptocurrency
While thousands of cryptocurrencies exist, those other than Bitcoin are collectively termed “altcoins”. In regulated markets like Japan, they are obtainable and convertible only through licensed exchanges approved by financial authorities.
How to Profit from Cryptocurrency Investment
Cryptocurrency’s volatility attracts traders seeking high returns. Profit generation primarily occurs through:
Capital Gains
Buy low and sell high—classic investment logic applies. Some cryptocurrencies have surged tens or hundreds of times in value historically, though past performance doesn’t guarantee future results.
Staking Rewards
Similar to earning interest on savings, staking allows holding specific cryptocurrencies to earn rewards. By participating in blockchain network validation, holders receive additional tokens as compensation.
How to Start with Cryptocurrency
Starting is simpler than many assume. Follow these four steps:
1. Prepare Required Documents
Open an account with a licensed cryptocurrency exchange. The process is entirely online and straightforward. Have identification ready, such as:
- Driver’s license
- My Number Card
- Health insurance card
- Passport
Check your chosen exchange’s website for specific requirements.
2. Open an Exchange Account
Apply via the exchange’s official website. Submit personal details—name, address, phone number—and upload identification documents. Account approval may take time, so begin early if eager to start trading.
3. Deposit Japanese Yen
After account activation, deposit funds. Options include bank transfers or convenience store cash deposits. Start with a small amount; some exchanges charge deposit fees. Remember, deposited yen can remain as cash without immediate investment.
4. Begin Trading
Once funded, exchange yen for cryptocurrencies. Note the spread—the difference between buy and sell prices—as wider spreads mean higher transaction costs.
Top 4 Recommended Cryptocurrency Exchanges
Selecting the right platform is crucial. Here are four reputable options:
1. Coincheck
- Supports 16 cryptocurrencies, the most domestically
- Minimum trade: ¥500
- Part of Monex Group, with robust security
- Account setup in as little as 5 minutes
Ideal for beginners due to its user-friendly app and extensive coin support.
2. bitFlyer
- Offers 13 cryptocurrencies; start with ¥100
- Top-tier security protocols
- Exchange T Points for Bitcoin
Boasts the largest Bitcoin trading volume in Japan (2020) and straightforward operations.
3. GMO Coin
- Zero fees for deposits/withdrawals
- Two trading platforms to choose from
- Multiple methods: spot trading, leverage trading, etc.
Won first place in the 2021 Oricon Customer Satisfaction Survey for crypto exchanges. Fee-free structure benefits newcomers.
4. DMM Bitcoin
- No trading or sales fees
- 19 leverage trading pairs, the most domestically
- LINE-based customer support
Praised for app usability and accessible support, making it beginner-friendly.
👉 Compare exchange features and start trading
Pros and Cons of Cryptocurrency
Understanding advantages and risks is essential before investing.
Advantages
- 24/7 Trading
Cryptocurrency markets operate continuously, including weekends and holidays—unlike stocks or forex limited to weekdays. Mobile apps enable convenient trading and portfolio monitoring on the go. - Global Usability
As a universal currency, crypto eliminates foreign exchange hassles and costs. Acceptance is expanding worldwide, enhancing its utility beyond mere investment.
Disadvantages
- Price Volatility
Sharp value fluctuations risk significant losses. Thus, crypto is unsuitable for essential funds like education or retirement savings. Only use disposable income. - High Tax Rates
Profits are classified as miscellaneous income, subject to 15–55% comprehensive taxation combined with other earnings. In contrast, stocks and forex enjoy a flat ~20% tax rate, making crypto less tax-efficient.
Precautions When Starting
Despite accessibility, exercise caution:
Use Only Surplus Funds
Given high risk-reward dynamics, never invest all assets. Allocate only funds you can afford to lose. Keep daily living expenses, emergency reserves, and long-term investments separate.
Gain Knowledge First
Avoid jumping in due to trends. Learn basics like Bitcoin and Ethereum’s characteristics and prospects. Regularly follow market updates via apps or news.
Open Multiple Exchange Accounts
Most exchanges offer free sign-ups. Having several accounts allows accessing different coins and trading methods, seizing opportunities when new assets launch.
Beware of Hacking and Theft
Despite strong security measures, breaches occur. Protect your assets proactively. Choose exchanges with robust safeguards and enable two-factor authentication (2FA).
Frequently Asked Questions
Q1: What exactly is cryptocurrency?
A: It’s a digital asset, like Bitcoin, representing value traded online. It functions as payment without central authority oversight.
Q2: How do I start trading cryptocurrency?
A: Open an account with a licensed exchange online. After verification and depositing funds, you can trade 24/7.
Q3: Are cryptocurrency profits taxable?
A: Yes, profits are considered miscellaneous income and taxed at 15–55% based on your total income bracket.
Q4: What’s the minimum amount to start?
A: Some exchanges allow starting with as little as ¥100 or ¥500, making it accessible for beginners.
Q5: How do I choose an exchange?
A: Consider factors like supported coins, fees, security, and ease of use. Comparing multiple platforms helps find the best fit.
Q6: Can I lose more than I invest?
A: In spot trading, losses are limited to your investment amount. However, leverage trading can magnify losses beyond initial deposits.
👉 Explore secure trading platforms today
Disclaimer: This content is for informational purposes only and does not constitute investment advice. Make final investment decisions independently based on your research. Information provided is from reliable sources but not guaranteed. Content may change without notice.