Can the relationship between Bitcoin and split coins become a trading strategy?

Hello everyone, discretionary trading! My eyes are getting tired recently@xi10jun1here.

The feeling is that 1 BTC may soon reach 1 million yen, but it hasn’t broken through yet.

Also, with splits planned for the future, transaction costs, mining electricity costs, quantum computers, exchange GOX risks, and other news popping up, I’m quite concerned.

※Continuing from the previous note, there is an important announcement for paid readers, so please read down to the bottom if you can.

※This column is designed so half of it is free to read. Of course, if you read up to the paid portion (updated weekly for 400 yen a month, about 80–100 yen per column), I would be very encouraged!

This Week’s Results (Nov 17, 2017 to Nov 23, 2017)

First, as usual, the results. I’ll present the gains and losses first.

Last week (up to 2017-11-16) assets: 56,391 yen
This week (up to 2017-11-23) assets: 56,022 yen
Change: -369 yen

Due to losses from trades on the 17th and a休憩 period, the number of trades was relatively low. Still, I managed to recover to near last week’s asset level, so from this week to next I’d like to bring my assets back up again.

However, Bitcoin has been weak today, while Bitcoin Cash has risen as a substitute.

So this time I’ll write about the relationship where Bitcoin tends to be cheap while Bitcoin Cash becomes expensive when splits occur.

Will the Price of Coins That Moved Through a Fund Transfer Rise?

In the stock world, you often see newer issues like Mothers or Jasdaq rise when the Nikkei index is struggling or falling. This happens because funds move from large-cap stocks included in the Nikkei average to smaller, emerging ones.

Is Bitcoin similar? Recently, when BTC’s price falls, the forked Bitcoin Cash has risen. Because of the belief that forks increase assets, Bitcoin’s big falls during forks have become less common.

Bitcoin Cash cannot trade on FX yet, so I’m basically watching, but I’m curious how this will play out in the future.

For example, it’s possible that after a split, when the forked currency is available and expected to rise in price, Bitcoin would be purchased, i.e., BTC’s price would rise.

Conversely, investors could anticipate demand and initiate selling or shorting just before the split when prices have already risen.

As a trader, it seems possible to profit by taking opposite positions if one goes down while the other goes up, so this could become a strategy to watch in the future.

But is this fork trend really all good news?

Free Summary: Bitcoin Has Surprisingly Opaque Risks Ahead

The topics of Bitcoin transaction costs and mining electricity are not to be underestimated. As I mentioned before, if the forked currency becomes superior, funds may flee from the main Bitcoin, causing a crash, while the forked currency soars.

And more forks are planned in the future. Will funds be dispersed, making prices harder to rise, or will more capable currencies attract the funds?

Honestly, Bitcoin’s future is still quite uncertain. Let’s trade without overconfidence.

So in this paid column I will discuss the future outlook.

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Endnote Corner 1: Latest Tax Information!

The National Tax Agency’s site has updated its legal views on Bitcoin.

Here it is →No.1524 Taxation on profits from using Bitcoin | Income Tax | National Tax Agency

According to this, profits from using Bitcoin are regarded as “miscellaneous income.”

So, profits from my kind of margin trading are, in principle, miscellaneous income. As I’ve noted in the Endnote Corner before, in the blog’s article (→Tax filing for Bitcoin margin trading (BTCFX)! Is it comprehensive taxation of miscellaneous income? Separate taxation? | Jun, Investor of the Yutori Generation), it seems loss offsets aren’t allowed. I wish this could be handled differently…

Also, according to NewsPicks comments by Hiroo Kanou, President of bitFlyer (No.1524 Taxation on profits from using Bitcoin - NewsPicks), if you bought Bitcoin for 100,000 yen and use it to purchase something worth 500,000 yen, the 400,000 yen difference is treated as profit.

When goods or services are paid with Bitcoin, if the price of Bitcoin at the time of payment is higher than the price at purchase, that excess is recognized as profit. So the same applies when shopping with Bitcoin at FANCY, so beware.

※Tax laws and interpretations may continue to change, affecting how you file taxes. Before filing, please confirm with your local tax office or a tax professional.

Endnote Corner 2: Let’s Try Shopping with Bitcoin!

Actually, the overseas e-commerce site “FANCY” lets you buy goods using Bitcoin! It may incur some shipping, but there are stylish items not commonly seen in Japan.

I’ve summarized how to use FANCY on this blog, so please refer to it.

→How to create an account, register, set up, and purchase on FANCY | Jun, Investor of the Yutori Generation
→Buying items on FANCY with Bitcoin (payment) | Jun, Investor of the Yutori Generation

※ Free ends here. The rest is detailed analysis and future outlook, so it’s paid. If you’d like to read more or would like to show support with a tip, please subscribe. Thank you for your continued support!