Date
22 January 2018
Jason Leung (inset, left), chief executive of Blockchain Solutions, said that after crossing the US$10,000 mark, the current bitcoin market is bubbly, Photo: Bloomberg/HKEJ
Jason Leung (inset, left), chief executive of Blockchain Solutions, said that after crossing the US$10,000 mark, the current bitcoin market is bubbly, Photo: Bloomberg/HKEJ

Bitcoin investing: The ABCs and the risks you need to know

The Chinese government has banned all fundraising activities through initial coin offerings as well as ordered a shutdown of bitcoin exchanges, leading to a sharp drop in bitcoin prices at one point. Yet, bitcoin prices recovered soon after and surpassed US$19,000 at one point on Thursday.

Jason Leung, chief executive of Blockchain Solutions, a Hong Kong-based firm offering blockchain consulting services, shares his views on investing in bitcoin.

Here are some edited excerpts from an interview Leung gave to the Hong Kong Economic Journal’s StartUpBeat:

HKEJ: Is the bitcoin wave a bubble?

Leung: The real value of bitcoin is indeed US$5,000. Those who bought it above that price are speculative investors. I’ve got quite a number of friends who hardly know anything about the cryptocurrency but are still willing to buy at whatever price the market is asking. Such phenomenon is in fact quite common in Hong Kong.

Mainland China is determined to wage war on cryptocurrencies, rapidly dragging down its value at one point, which precisely shows bitcoin trading is largely driven by speculators.

After crossing the US$10,000 mark, the current bitcoin market is indeed bubbly.

HKEJ: What is bitcoin mainly used in everyday life?

Leung: The main use of bitcoin in daily life is money transfer. Money transfer through banks are usually more expensive and takes longer.

That said, soaring bitcoin prices have somewhat stifled payment activities via bitcoin.

HKEJ: How do we keep bitcoins?

Leung: The first step is to own a digital wallet, just like opening a bank account. Currently, it’s in Google Play Store in Android-supported smartphone or App Store in iPhone. One can have many options of e-wallet mobile apps to choose from, after typing in “bitcoin wallet”.

As bitcoin is a decentralized currency, no one will keep your passcode for you. So when you get your own e-wallet, you should first copy the passcode, as a back-up. The passcode usually consists of a group of 12 or 26 English letters.

All the digital wallets carry two sets of passcode: one is public, which is for collecting payment; the other is private, which is a user’s signature and needs to be kept secure like a bank passcode.

HKEJ: How do we buy or sell bitcoins?

Leung: There are three ways to do it. The first one, also the most direct one, is to schedule an appointment with a seller through the internet. The risk is that, as you don’t know the seller’s identity, there is a possibility that the seller may run away with your money.

Another option is through a bitcoin automated teller machine. Bitcoin ATMs are currently available in places such as Central, Mong Kok and Kwun Tong. The great thing is you can complete the transaction on the spot, but the downside is such ATMs charge a higher fee.

The third option is through third-party trading platforms. Currently, more credible trading platforms require authentication of the customers’ identity to prevent money laundering, but there are no relevant laws in Hong Kong to monitor and regulate this. After authentication, a customer can deposit cash into the trading platforms via banks or other means, and begin buying and selling, much like how a stock trading account works.

One can also check the price of bitcoin through an order book. Customers don’t have to buy a complete bitcoin in a single transaction, the minimum unit can be down to a hundredth of a bitcoin or even less.

Note: The views expressed in this interview are personal opinions of the industry professional and do not necessarily reflect those of HKEJ.

The full article appeared in the Hong Kong Economic Journal on Dec. 8

Translation by Jonathan Chong

[Chinese version 中文版]

For the complete video interview, please visit http://startupbeat.hkej.com/?p=53365

JC/RT/RA

HKEJ writer

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