(1) Cryptocurrency — A wave of the era or a fleeting bubble?
"Bitcoin", "Ethereum", "DeFi", "NFTs"... these terms have flooded financial news in recent years. Cryptocurrencies, digital assets based on blockchain technology, have attracted global attention. Are they a disruptive technological revolution that harbors enormous investment opportunities, or a high-risk gamble filled with bubbles?
As of May 13, 2025, the cryptocurrency market continues to exhibit its high volatility characteristics. After the Bitcoin halving event at the end of 2024, the market experienced another round of severe turbulence. Bitcoin's price has experienced a 30% fluctuation range over the past three months, while some smaller cryptocurrencies have even seen single-day price fluctuations exceeding 40%. This extreme instability attracts investors seeking high returns, but also warns that this is not a market suitable for everyone.
This article aims to outline the main investment logic and participation methods in the cryptocurrency field, focusing on the enormous risks involved, striving to provide a rational and objective cognitive framework.
(2) Cryptocurrency basics review: What exactly are they?
Cryptocurrencies are essentially decentralized (or partially decentralized) digital/virtual currencies that rely on cryptography for security and record transactions through blockchain technology. Unlike traditional fiat currencies issued by central banks, most cryptocurrencies are not controlled by a single entity and operate on distributed ledgers.
Major representatives include:
Bitcoin (BTC): "Digital gold," its core narrative is as a tool for value storage, with a fixed total supply of 21 million coins, which cannot be increased.
Ethereum (ETH): "World computer," it is a smart contract platform supporting a large number of application ecosystems like DeFi and NFTs. The "Merge" upgrade completed in 2022 transitioned its consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS).
Altcoins: Other cryptocurrencies besides Bitcoin, varying widely in risks and potential. This includes various public chain tokens, application tokens, governance tokens, etc.
Stablecoins: Pegged to fiat currencies (such as the US dollar), used as a medium of exchange and value storage (like USDT, USDC). Stablecoins play a "safe haven" role in the crypto ecosystem but also face regulatory and trust challenges.
(3) Potential investment "story": Where is the value proposition of cryptocurrencies?
1. Store of value narrative
Especially Bitcoin, which some investors view as an inflation hedge similar to gold. Supporters argue that its scarcity (limited supply) and decentralized nature make it "digital gold." However, its volatility far exceeds that of gold, making this narrative highly controversial. Nonetheless, by 2025, many institutional investors have included Bitcoin as part of their asset allocation.
2. The value of smart contract platforms and application ecosystems
Ethereum and its competitors (like Solana, Cardano, Avalanche, etc.) serve as underlying public chains, with their token values closely related to network activity, the number of applications, and transaction fees (Gas Fees). Investing in platform tokens essentially means investing in their ecological development prospects. As of 2025, the competition between Layer 2 solutions (such as Arbitrum, Optimism) and the next generation of high-performance public chains is still ongoing.
3. Decentralized Finance (DeFi - Decentralized Finance)
DeFi attempts to reconstruct traditional financial services on the blockchain, including lending, trading, and wealth management. It offers opportunities for yield farming, lending, staking, and more. By 2025, the DeFi ecosystem is becoming more mature but still carries extremely high risks. Participation in DeFi projects requires a full understanding of smart contract risks and liquidity risks.
4. Web 3.0 and the Metaverse
Web 3.0 is defined as the next generation of the internet, emphasizing user ownership and control over data. The metaverse is a digitally created virtual reality world. Investment opportunities include building infrastructure project tokens, virtual land, in-game assets, etc., in these areas that are highly speculative but may represent the future development direction of the digital economy.
5. NFTs (Non-Fungible Tokens)
NFTs represent ownership of unique digital assets (artworks, collectibles, memberships, etc.). Investing in the NFT market requires attention to projects with scarcity, community consensus, or potential application value. After the frenzy of 2021-2022, the NFT market has calmed down, and by 2025, more practical NFT applications are expected to emerge, but overall liquidity remains poor, and bubble risks are high.
6. Payment and settlement networks
Some cryptocurrencies aim to provide more efficient and low-cost cross-border payment solutions. Projects like Ripple (XRP), Stellar (XLM), and Lightning Network (the second-layer solution for Bitcoin) may derive their value from improvements and efficiency gains in existing financial infrastructure.
(4) How to "enter"? Main ways to participate in crypto investments
1. Direct purchase and holding
The most common way to participate is to purchase cryptocurrencies through centralized exchanges (such as Binance, Coinbase; local exchanges in Japan like bitFlyer, Coincheck, etc.) and then store them in exchange accounts or personal wallets (hot wallets/cold wallets).
Points to consider: Choose compliant and secure exchanges; understand the responsibilities and risks of self-custody wallets (once the private key is lost, assets cannot be recovered). By 2025, more countries are requiring exchanges to implement strict KYC (Know Your Customer) and AML (Anti-Money Laundering) measures.
2. Cryptocurrency ETF/ETP
Cryptocurrency ETFs (Exchange-Traded Funds) or ETPs (Exchange-Traded Products) are funds traded on traditional securities exchanges that track the price of cryptocurrencies or a basket of cryptocurrencies. The U.S. has approved spot ETFs for Bitcoin and Ethereum since 2024, providing traditional investors with a more convenient way to participate.
Advantages: Low investment threshold, regulated, no need to manage private keys. (Need to confirm availability in your region)
3. Invest in stocks of crypto-related companies
An indirect way to participate in the crypto market is to invest in listed cryptocurrency mining companies, exchanges (like Coinbase), or companies holding large amounts of Bitcoin (like MicroStrategy). The stock prices of these companies often correlate strongly with the performance of the cryptocurrency market but are also influenced by their own operational conditions.
4. Participate in staking or DeFi projects
A deeper way to participate in the crypto ecosystem is to stake the cryptocurrencies you hold to the network or lending protocols to earn yields. For example, staking Ethereum can yield about 3-5% annually; some DeFi protocols offer higher yields (usually accompanied by higher risks).
Characteristics: Relatively complex operations, facing risks such as smart contract risks and platform risks. It is essential to fully understand the project mechanisms and potential risks before participating.
(5) [Key Point] Risk warning: The "dark forest" of crypto investment
1. Extreme volatility risk
The cryptocurrency market is known for its extreme volatility, with prices capable of soaring or plummeting within a short time. Daily fluctuations of +/- 20% or even higher are common, demanding a high level of psychological resilience from investors. Historically, Bitcoin has experienced multiple pullbacks of over 80%. Even in 2025, while the market is relatively mature, the volatility of the crypto market remains several times greater than that of traditional financial markets.
2. Regulatory uncertainty risk
Global cryptocurrency regulatory policies are inconsistent and changing rapidly, potentially introducing restrictions, prohibitions, or heavy taxation. Even in Japan, which has relatively clear regulations (such as FSA’s licensing system for exchanges), policies can be adjusted at any time. Between 2024 and 2025, multiple countries have strengthened regulatory efforts on the crypto market, including compliance requirements for exchanges and regulatory explorations of DeFi.
3. Security risks
Exchanges have been hacked: Historically, many well-known exchanges have been attacked by hackers, resulting in user asset losses (such as the Mt. Gox incident in 2014). Although the security of exchanges has improved in 2025, risks still exist.
Personal wallet theft: Loss or theft of private keys = permanent loss of assets. Phishing websites, trojan viruses, and social engineering scams are rampant.
Smart contract vulnerabilities: DeFi projects may be attacked due to code vulnerabilities, leading to financial losses. It is estimated that losses from hacker attacks and vulnerabilities in DeFi projects exceeded $3 billion between 2022 and 2024.
4. Project failure and fraud risks (Project Failure & Fraud)
Many altcoin projects lack real value and may go to zero during market corrections. Fraudulent projects such as "rug pulls" and Ponzi schemes are not uncommon. In 2025, despite stricter regulations, new types of fraud continue to emerge, especially in the emerging DeFi and GameFi sectors.
5. Valuation difficulties and information asymmetry
Cryptocurrency assets lack mature valuation models, and prices are easily influenced by market sentiment and manipulation by large holders ("whales"). Information spreads rapidly on social media, but it can be hard to distinguish between truth and falsehood, putting ordinary investors at a disadvantage.
6. Liquidity risks (Liquidity Risk)
Especially for small coins and NFTs, it may be challenging to find buyers or achieve expected sale prices when needing to sell. Liquidity issues become particularly severe during market downturns.
7. Technical risks
Blockchain networks may face issues such as congestion, forks, and upgrade failures. In recent years, several blockchain projects have encountered technical problems during significant upgrades, leading to network pauses or splits.
8. Tax complexity
The tax treatment of cryptocurrencies varies by country (e.g., in Japan, it may be considered miscellaneous income and subject to progressive tax rates, different from capital gains tax on stocks), and is complex and ever-changing. Failing to correctly report cryptocurrency gains may lead to tax penalties.
(6) Rational participation advice: Advice for "treasure hunters"
1. Investment premise: Only invest what you can afford to lose!
Treat cryptocurrencies as high-risk speculative assets, and the funds invested should not affect your basic living and main investment portfolio. It is generally recommended that the proportion of crypto assets in the overall investment portfolio should not exceed 5-10% (even less for investors with lower risk tolerance).
2. Do your own research (DYOR)
Do not blindly follow the investment advice of social media "influencers" or "big names." Deeply understand the project's fundamentals, technology, team background, tokenomics, and competitive landscape. Try to read the project's white paper and technical documents to understand the actual problems it addresses.
3. Security first
Learn the basics of wallet usage, private key security, and fraud prevention. Use strong passwords, enable two-factor authentication (2FA), and consider using hardware wallets (cold wallets) for large assets. Avoid accessing crypto accounts on public networks, and be cautious of phishing websites and fake apps.
4. Start with mainstream coins
Bitcoin and Ethereum are viewed as "blue-chip" assets in the crypto space, with relatively lower risks (within the crypto field). Beginners can start by familiarizing themselves with the market through these mainstream coins, and after accumulating experience, consider venturing into higher-risk smaller coins.
5. Small-scale trial, diversified investment
Do not invest a large amount of money at the beginning; it is recommended to start small and gradually familiarize yourself with market operations. Also, do not concentrate all funds in one project, especially in the same type of altcoins; appropriate diversification should be employed to reduce specific risks.
6. Understand local laws and taxes
Ensure that trading activities comply with local regulations and report taxes as required. As global regulations tighten, compliance issues are becoming increasingly important. Consider consulting a professional tax advisor, especially in cases of frequent trading or large amounts.
7. Maintain a long-term perspective (if choosing this strategy)
If you believe in the long-term value of blockchain technology and crypto assets, be prepared for psychological endurance and patience through bull and bear cycles. Avoid frequent trading and chasing highs and lows, and develop a reasonable investment plan and stick to it.
(7) Is it opportunity or bubble? Cognition determines height
Cryptocurrencies represent the forefront of fintech exploration, containing potential opportunities while also carrying unprecedented risks. Volatility, regulation, and security are the "three swords" hanging over them. The market has both innovators and visionaries, but is also filled with speculators and fraudsters.
Approach cryptocurrency investments with extreme caution, prioritizing learning and understanding, and placing risk control first. It is by no means an easy shortcut to wealth, but a field requiring professional knowledge, risk awareness, and self-discipline. It is crucial for both investors and bystanders to understand this.
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