February 5, 2023
Strictly speaking, in order to be a "currency", it should be widely accepted and used as a "currency", but for the time being, the self-proclaimed "Cryptocurrency"


Not only Bitcoin, but also new virtual currencies are being born at a dizzying pace. Strictly speaking, in order to be a “currency”, it should be widely accepted and used as a “currency”, but for the time being, the self-proclaimed “Cryptocurrency” is used by loosening the standard. If you count, dozens of new cryptocurrencies were born in a week, and there are now hundreds of types. You can see news articles here and there that the price suddenly rises with the voice of a celebrity, and those who take risks and “invest” get big capital gains and become very rich. Now, should we put this cryptocurrency in the long-term investment portfolio of the index? Think about what you think about it.

Difference from stock

Most of the articles about cryptocurrency investment say, “Cryptocurrencies are very risky and you should invest only to the extent that you can laugh if you lose them.” Stocks are also an investment medium with a lot of ups and downs, but cryptocurrencies have a lot of price movements. As I wrote at the beginning, if you think that it has soared on Twitter, a celebrity, it will be a roller coaster state.

Of course, stocks can also be destroyed unexpectedly, such as sudden misconduct of a company, but if there is one difference between virtual currency and stocks, stocks will contribute to the financial soundness and growth of the company. In most cases, the realities of cryptocurrencies cannot be measured, although it is possible to examine the actual situation such as expectations and analyze how much value is placed on the stock. I think that there are few people who make an analysis such as whether the virtual currency is sound and how they see the future, and then decide to buy 〇〇 coins. However, it’s more like gambling than investment, just because it’s up, down, and so on. I can’t read the destination at all, but if I’m lucky I’ll be a big hit, but maybe I’ll lose everything … It’s more like gambling than it’s close to gambling.

Is it potential value?

Cryptocurrencies are sometimes referred to as “digital gold”. Even if many people own gold, they rarely actually use it, and I think it makes sense to just hold it as a potentially valuable asset. The idea is that it is more meaningful to hold a virtual currency as an asset that is valuable in itself, rather than whether it is actually used as a currency. But is cryptocurrency really a potential value like gold … this is an important question. Many cryptocurrencies are said to be {memed into existence}. I’m an aunt, so this meme doesn’t seem to come to my mind, and I ask my daughter many times, but she says, “It’s like a funny image or video, and everyone copies it and spreads more and more!” I don’t know what to explain. Apparently, meme means “to imitate, imitate”, but the wording such as images and videos that attracted attention on social media is becoming more and more famous as people imitate, copy, and make parody. It seems that it means becoming, or the wording itself, such as the image or video.

Originally made with “joke”, Dodgecoin became famous on Twitter of Elon Musk and the price soared. Now, more people may believe that “No, Dogecoin is a real thing!” Than “Dodgecoin is a joke (originally it’s really a joke)”. Is this something called {memed into existence}? The question is, “Do I see Dodgecoin as potential as gold?”

What guarantees virtual currency?

Cryptocurrencies and the technologies that make them possible will probably continue to grow and become widely accepted in the future. Perhaps that is definitely the flow. Here, I think one point is that expectations for “technology that enables cryptocurrencies” should not be confused with “the value of cryptocurrencies themselves.” Money exchanges by Paypal and Venmo are widely accepted and used in everyday life, but if they become more widespread and successful, it will raise the stock of the parent company Paypal, which enables and operates technology. The value of the dollar currency (or yen or whatever currency) used in Paypal and Venmo does not increase. They are different.

If you “invest” in the dollar or yen that has been established as a national currency, the value of the currency itself will not be zero no matter how much the dollar or yen depreciates, but in the case of emerging virtual currencies, ” Most of them are not so widely accepted as “currencies”, so it is quite possible that their value will be zero. There is nothing to guarantee the value of cryptocurrencies. It’s kind of encouraging to say that the world’s decentralized computer systems are behind cryptocurrencies, but there is no central bank manipulating the stability of their value and no FDIC (Federal Deposit Insurance Corporation) deposit protection.

Same as roulette …

So, I think buying cryptocurrencies is the same as spending money on roulette in Las Vegas. It is not an “investment” that makes money in the hope that the substance will grow in the future, but a “speculation = gambling” that has a high probability of hitting or losing a lot. The question of “which cryptocurrency is likely to be profitable” is the same as “which number should be chosen with roulette”.

Speculative ones are long-term (hold for long-term growth), passive (do not sell or buy, buy once and hold), index investment (do not bet on one or two, have the entire market) It is incompatible with the (risk diversification) style. Therefore, we answer NO to the question “Should we add cryptocurrencies to our portfolio?”

But that doesn’t mean you shouldn’t gamble. Sometimes it may be good to dream of getting rich in Las Vegas. It is the person’s taste and way of thinking. And if you’re gambling, you should keep your money to the extent that you can laugh and say, “Oh, it was fun!” Maybe you can become a billionaire, but it may not be a bad idea to enjoy cryptocurrencies at the level of no regrets even if all of them are gone.

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