Preface: Why you must understand the cryptocurrency space
When U.S. President Trump proclaimed at a campaign rally that 'Bitcoin is the currency of freedom,' when the world's largest asset management company BlackRock (managing assets up to $11.6 trillion) included its Bitcoin ETF in pension allocation manuals, and when the sovereign nation of El Salvador designated BTC as legal tender and built the 'Bitcoin Bond City' next to a volcano— the world has voted with its feet: Cryptocurrency is not just a geek's toy, but the last ticket for ordinary people in the 21st century to rewrite their destiny!
Looking around us— Hong Kong has opened up virtual asset trading licenses, allowing compliant cryptocurrency exchanges to establish; even traditional brokerages like Futu Securities have launched BTC, ETH, and USDT deposit functions. Traditional finance and the crypto world are connecting, and a bridge from Crypto to TradFi has quietly opened.
Many people think that only stock trading and mutual funds are the 'right path' for investment. But look at the examples around you, how many times can a fund multiply? Can stocks elevate your social status? The reality is: Bitcoin, born 15 years ago, has increased by over 80 million times, outperforming all traditional asset classes!
In 2024, there are only 562 million global cryptocurrency users, with a penetration rate of less than 7% (over 5 billion internet users, 370 million A-share users). The daily trading volume of Bitcoin spot ETFs in the U.S. has already surpassed that of gold ETFs, but its market value is only 1/30 of the latter. The cryptocurrency space is the biggest dark horse that changed fate in the past decade, with its profit opportunities hidden in the daily on-chain fluctuations.
Of course, high profits mean high risks. This circle is not short of miracles, but also not short of scams. From 'going all in and losing everything' to 'being cut like leeks,' how many newcomers jump into the cryptocurrency space only to lose their principal before even getting onto the chain.
So the village chief has arrived. The village chief will show you the blockchain in the simplest way, helping you avoid detours and big pitfalls. Starting from recognizing trends and understanding risks, even newcomers can navigate the cryptocurrency space!
1. Legal risks in the cryptocurrency space
Many newcomers are most worried about: Is trading coins illegal? Will banks freeze my account? Will I be arrested? Today, I will clarify the most common legal risks in the cryptocurrency space, especially regarding deposits and withdrawals, as 90% of 'incidents' are related to it!
1. Is trading coins illegal?
Trading coins itself is not illegal. There are no clear regulations in the country that classify 'trading coins' as a criminal act. The 924 policy targets virtual currency fraud, illegal fundraising, and pyramid schemes; mainstream media will not promote trading coins positively, but normal trading does not constitute a criminal offense. Only when it involves illegal fundraising, fraud, money laundering, etc., will it constitute a real legal issue.
2. Are trading profits legal?
If you earn profits through regular platforms, such as buying and selling BTC/ETH, then those profits are legal; however, if your coins are earned through unclear channels, such as joining a pyramid scheme or earning commissions from referrals, then they are considered property of unknown origin, which poses legal risks.
3. The real minefield is in 'deposits and withdrawals'!
Trading coins won't get you arrested, but improper handling of deposits and withdrawals can easily lead to problems!
1. Selling USDT on exchanges is not illegal, but be careful whether the RMB you receive comes from 'black U' (fraud, money laundering) funds! Once you receive black U, the consequences can be severe:
Your bank card is likely to be frozen
Possible suspect in a scam chain
Usually requires cooperation with the police and the possibility of unfreezing funds only after returning them
If you are a 'C2C merchant' on the platform, the risk is even greater. Engaging in arbitrage for profit, daily transactions may involve illegal operations, money laundering, or even fraud! Some currency traders have already been convicted and sentenced in several regions!
Reminder: Newbies should never easily engage in OTC or C2C trading, don’t risk everything for a small profit!
4. Domestic regulatory attitude: Not prohibition, but 'risk control'
Mainland China does not allow the establishment of virtual currency exchanges, but Hong Kong has been allowed to set up compliant platforms as a 'policy pilot' approved by the state; most legitimate exchanges will also actively cooperate with the police to avoid legal risks. In summary: Cryptocurrency is not a lawless land.
II. Asset allocation - Don't put all your eggs in one basket
Many newcomers want to 'ALL IN on a coin' as soon as they enter the cryptocurrency space, but seasoned traders understand that allocation is more important than prediction. Let's discuss the common types of assets in the cryptocurrency space and how to allocate properly to avoid liquidation and losses.
1. You must understand the types of cryptocurrencies
I. Bitcoin (BTC)
The 'gold' of the crypto world, accounting for over half of the market value. It has the lowest risk and highest liquidity, serving as the 'core asset' in cryptocurrency allocation
II. Mainstream coins (ETH, etc.)
Leading coins in various sectors, such as ETH, SOL, etc.
Stablecoins, such as USDT, USDC, etc.
Cryptocurrencies that rank high in the market, are highly active in trading, suitable for short-term or long-term holding
III. Altcoins
Non-core blockchain tokens, mostly 'concept coins' issued by various projects
Prices are highly volatile; some can multiply dozens of times, while others can drop to zero
Be careful to identify 'air coins' and 'scam coins'; 99.9% of altcoins are harvesting tools for speculators!
2. Warehouse allocation principle: The key to controlling risk
I. Don't go ALL IN on one coin/exchange
Exchange collapse or coin price crash can make you lose everything overnight
It is advisable to diversify to prevent single-point failures
II. Don't go ALL IN on a single coin: Diversify your allocation among BTC, mainstream coins, and some altcoins to reduce overall volatility
Conservative: 5 (Bitcoin): 3 (Mainstream coins): 2 (Altcoins)
Aggressive: 4 (Bitcoin): 3 (Mainstream coins): 3 (Altcoins)
III. Don't buy too many coins; with limited energy, control a few core assets
The cryptocurrency space changes rapidly; the more positions you hold, the harder it is to manage
It's recommended to limit to 3-5 core coins to keep track of and manage gains and losses in a timely manner
The core of cryptocurrency asset allocation is: Diversify risks + maintain flexibility
