Cryptocurrency is becoming rapidly popular among the younger and tech-savvy investors of Singapore. You’ve definitely read about it.
Your first impressions feel like it’s definitely worth trying provided it gives good yields and information shows that there is relatively low risk thanks to public confidence in the currencies.
However, if you’re misinformed, you might end up making bad investments and losing more than you initially invested. To make sure this doesn’t happen, here are seven important things you should know about cryptocurrency before you begin your journey.
1. What is cryptocurrency?
Cryptology is the study of deciphering codes in ancient and even modern languages. It uses sets of “key” symbols to unlock a pattern of symbols that intend to express something.
In the case of cryptocurrency, it stores financial data in a pattern of symbols called a blockchain. Each blockchain has a single “key” that only its account owner possesses. It is only when the key is used to unlock the blockchain pattern can the user access the cryptocurrency they currently own.
Many modern applications use blockchain to guarantee secure peer-to-peer messaging and transactions without outside surveillance such as modern chat messengers and text applications.
2. How many different types of cryptocurrency are there?
In truth, there are over 2,200 different cryptocurrencies in existence nowadays. The reason that some prevail and some end up forgotten or inactive depends on the number of active users and owners of the currency.
Therefore, the best cryptocurrency investments are ones that are currently popular and are highly valued by many investors.
Here are some of them.
The currency that started it all is the one that still has great fame (and infamy) over the last decade. Bitcoin started in 2009, and anyone can purchase it from legitimate Bitcoin marketplaces or from individuals who peddle it in exchange for items of value. Over time, its value has begun to rise,
However, investors are still wary of its fluctuating nature. In December 2017, Bitcoin rose to a whopping $19,783 in value. On the other hand, it fell down to $13,800 just six days after its highest market capIn December 2018, it sits evenly at $3,300, which is a 76% drop from the previous year’s high.
While still a newcomer (and now a toddler) in cryptocurrency being founded in 2015, Ethereum is slowly gaining traction as becoming a popular cryptocurrency in the market.
Similar to Bitcoin, it is a blockchain-based computing platform that use numerous machines and has a public-access ledger that only users with the proper blockchain keys can access when needed.
Ethereum’s advantage over Bitcoin is speed. Ethereum can take 15 seconds to complete a transaction while it might take 10 unnerving minutes for Bitcoin users to consider a transaction to have pushed through.
While it wasn’t the most popular alternative to Bitcoin, Litecoin has been around for quite a while. It found its roots with most online poker and gambling websites.
It began in 2011 after former Google employee Charles Lee posted it on GitHub. He introduced it as an alternative to Bitcoin, which was slowly emerging during the time.
Similar to Bitcoin, it uses the same public-viewed ledger and secured by mathematical protocols that only keys can solve. It also outdid Bitcoin’s transaction speed by overtaking it a fourth faster than the older cryptocurrency.
Right after Bitcoin and Litecoin launched their respective currencies, Ripple emerged as a real-time currency by Ripple Labs. It was first meant to become a secure payment option for online transactions.
Then, it evolved into a cryptocurrency after the company merged operations with global payments service Earthport. Ripple or XRP became one of the largest currencies in the US with a market cap of $73 billion on December 30, 2017.
Originally, Stellar was a project of Ripple co-founder Jed McCaleb in 2014. He and a former lawyer friend, Joyce Kim, launched the cryptocurrency during the year under the name “Secret Bitcoin Project.”
It birthed the Stellar Development Foundation. It functions similarly to Bitcoin, but the SDF partners with many budding startups and renowned brands to exclusively use its cryptocurrency, such as Deloitte, Coins.ph, ICICI Bank, and other global brands.
Now known as “Antshares,” founders Da Hong Fei and Erik Zhang released NEO in 2014 with the goal of creating a “smart economy” that exclusively uses blockchain technology.
In doing so, they promise to create “smart” contracts that allow decentralised digitised asset management. It now has offices across Shanghai and Seattle.
3. What caused the cryptocurrency boom out of the blue?
It’s always great to have different types of banknotes so you can profit off of them when money markets move positively. Cryptocurrencies are not so different from bank-regulated banknotes.
However, their true appeal lies in crypto being the future’s currency of choice. Many anticipate that one cryptocurrency is most likely to reach a high market cap in the future — which is why it makes sense to own one as early as possible during launch.
Some Singaporeans and users abroad find the idea of removing banks and governments from regulating currencies appealing, which is something Bitcoin and cryptocurrencies make possible.
Because popular activity dictates the overall value movement of cryptocurrencies, there is a lower risk of devaluing the money due to inflation.
Blockchain technologies at the core of cryptocurrency introduce the next level of privacy when it comes to financial transactions online.
The decentralised processing, recording, and management of cryptocurrencies is something that users find more appealing and effective than the established traditional system.
4. Is cryptocurrency legal?
Cryptocurrencies are unregulated, decentralised, and completely anonymous monetary systems where only end-to-end users can confirm whether a transaction has already occurred through publicly-viewable ledgers.
True enough, this leaves it open for possible exploitation by unsavory forces, which might make it legal or illegal in some countries.
In the United States, it’s legal to use any kind of cryptocurrency. However, the government has advised investors to always be wary of the consequences when it comes to using cryptocurrency.
True enough, there is no insurance about losing money when transactions fail to pull through. In addition, there is always a risk of hackers infiltrating the system.
For Singaporeans, the government of Singapore does not recognise crypto as a legal tender similar to traditional currencies. However, Singapore’s Tax Authority legally terms Bitcoins and other cryptocurrencies as “goods.”
Therefore, all transactions using cryptocurrency locally or internationally will receive an applied Goods and Services Tax.
5. Is cryptocurrency a low-risk investment?
Admittedly, Bitcoin and cryptocurrencies following its reputation aren’t the safest options for investors. If you’re willing to shoulder its risk, you can confidently invest in the currency.
Cryptocurrencies do not have stability because it lacks the tangible security traditional currencies have. Stability allows merchants to ascertain fair prices for all goods and services.
High-volatility in bursts of short periods make cryptocurrencies an unreliable legal tender, which is why it is correct for Singapore’s government to recognise only its transactions but not its existence as a legal form of currency.
6. What determines the price of the cryptocurrency?
In point 5, we’ve mentioned about cryptocurrencies lacking in stability because of its modern yet unbound nature. Without the presence of regulating bodies, it’s easy for currency users to drive the price too high or too low at any time based on market activity.
While there is no certainty that every element we list below can affect the market immediately, it pays to know about how they do so in worst-case scenarios.
#1 Crypto Exchanges
Traditional stock markets have companies go through hoops and lengths before they can launch an Initial Public Offer (IPO). However, cryptocurrency markets — also known as crypto exchanges — are managed by private groups with their respective number of users and followers.
If a giant crypto exchange adopts a cryptocurrency you’re using, there’s a huge chance its value will rise. On the other hand, if a giant crypto abandons an existing currency, then it’s most likely to devalue too.
#2 Software Upgrades
Bitcoin is still a software product with actual monetary value. Even if it has a slower speed than Ethereum and even Litecoin, it thrives because it was the first cryptocurrency available.
However, both latter cryptos became famous because of their fast transaction speed. If a cryptocurrency offers better performance, then it has higher value. A community-led upgrade in security, performance, or stability will likely result in more investors buying the currency and improving its value.
#3 Public Influence
Public-access and viewable information is useful, but it can also be a bane for many investors. For example, plenty of Initial Coin Offerings (ICO) from different shady Chinese organisations without any backgrounds but only had fancy white papers and concepts have deceived many social media and Internet users who had zero ideas about Bitcoin or cryptocurrencies.
However, this clearly demonstrates how hype and public influence in spreading cryptocurrency increases its respective value
#4 Wallet Upgrades
Part of reliable cryptocurrency technology is owning a wallet that has exceptional capabilities. If your cryptocurrency has exceptional security and performance when it comes to storage, then the better it is to use.
The number of wallet manufacturers and parties concerned with cryptocurrency safety can affect the cryptocurrency’s price effectively.
#5 Pseudo-Government Regulation
Cryptocurrencies are partly appealing because of its decentralised, people-power based economy and market movement.
However, government bans and anti-use mandates on cryptos can affect its value. With restrictions of use, some cryptocurrencies can simply phase out, and this might include the cryptocurrency you’re using.
6. How to invest in cryptocurrency?
Cryptocurrencies are similar to in-game money if you’ve played mobile games. Using your bank account or credit card, reliable exchanges will give you equivalent amounts of cryptocurrencies.
Therefore, before starting, make sure you’re working with reliable crypto exchanges. In addition, always have an offline wallet to ensure the safety and non-hackability of your cryptos. Here are four great huge and thriving exchanges you can work with today.
Founded in San Francisco, California, Coinbase maintains the exchange of Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, and other cryptocurrencies currently available in the market.
It’s a great place for beginners to start their crypto journey and they provide helpful content, too.
Started in Shanghai by Chang Peng Zhao as a high-frequency trading system developer, Binance evolved into a cryptocurrency exchange and moved out of China into Japan and Taiwan to further its operations.
While it has been subject to large-scale hacking during the time, it remains one of the biggest and most reliable service providers of cryptocurrency exchanges.
Founded in 2014 as a digital assets exchange in New York, Gemini is less popular than its counterparts because of its New York State Department of Financial Services regulation, which defeats part of cryptocurrency’s purposes.
However, it has a reliable crypto exchange that makes it an excellent platform with added security.
7. What precautions should I take before buying cryptocurrency?
Reading about cryptocurrencies, it feels like you’re stepping into a new world of opportunity. However, the dangers in using cryptocurrencies are as real as it can get. It’s important to know that every cryptocurrency — no matter how stable data or they claim to be — can fluctuate and devalue at any time. Here are a few precautions to remember before entering this brave new world.
#1 Make Sure You’re Providing Sensitive Information to Trustworthy Exchanges
Only use trusted exchanges. To exchange your money, they will ask for your personal and credit information. There are plenty of fake exchanges whose only goal is to steal your delicate information. Be vigilant!
#2 There is No Insurance If Loss Happens
Unregulated by banks, cryptocurrency exchanges are still the Wild West of modern, cutting-edge financial technology. If your exchange gets hacked and your cryptocurrencies are still in your digital wallet, you won’t get any recourse to claim back your lost money.
#3 Avoid Public Internet Connections
This is critical even if you’re not using cryptocurrencies and only accessing your finances using your bank app. Never use public Internet connections where anyone can exploit your public network settings and have access to your files and items you view on screen.
#4 Choose The Right Crypto Storage
True enough, there are still secure and affordable online cloud storage for your cryptos. However, it is much more practical to use offline wallets to keep your money safe from anyone. In addition, it allows you access to your cryptocurrencies at any time without an Internet connection.
Cryptocurrencies are an excellent, decentralised currency exchange that can help you achieve long-term investment potential if you choose the right currency, understand and accept all the risks involved investing in crypto, and keeping track of your chosen cryptocurrency potential.
As with any investment, make sure to always perform due diligence and a complete understanding of everything that affects the value of your currencies.
Bugis Credit as one of the leading licensed moneylender in Singapore is just a call away. Our honest and reliable financial experts are here to serve you, experience our excellent service by calling us today.