Lately, you’d be struggling to scroll through most social media platforms without seeing the words “Cryptocurrency”, “Bitcoins”, “Ethereum”, “Litecoin”, “XRP”, or even “Dogecoin”. What was a rather niche topic just a few years ago has now become the talk of the town, and you can’t help but wonder why all the hype.
Cryptocurrencies are basically digital assets that can be used as a medium of exchange. These digital assets are âencrypted,â or secured, through a technology called blockchain, which is a decentralized digital ledger that anyone can view, but no one can modify or destroy.
The technological applications of cryptocurrencies and blockchain technology are a disruptive force in many industries, from banking to app design. However, apart from the technological impact of cryptocurrencies, many are turning to them as a form of investment.
This is hardly surprising considering the massive gains that the biggest cryptocurrencies have amassed in recent years. As an example, Bitcoin, the most popular cryptocurrency, has gone from a price of around $ 11,000 for a single Bitcoin to levels of $ 60,000 in a single year.
This begs the question: Are cryptocurrencies suitable as an investment medium? Is it indeed wise to have coins like Bitcoin and Ethereum in your investment portfolio?
ARE CRYPTO-CURRENCIES SECURE?
Before we delve deeper into the investment aspect of cryptocurrencies, let’s first take a look at the general security of cryptocurrencies. There are several risks inherent in investing in cryptocurrencies.
For example, cryptocurrency exchanges are sometimes prone to cyber attacks. However, there are some best practices you can adopt to ensure that your crypto holdings are as secure as possible.
First, we recommend that you only use digital asset exchanges (DAX) registered as Luno, MX Global, Sinergy or Tokenize. These exchanges are recognized by the Securities Commission of Malaysia (SC), which means that they meet a certain cybersecurity standard.
As long as you protect your personal information (e.g. email and passwords) and follow best security practices, exchanges like Luno can help protect your coins. In Malaysia, there are currently 5 cryptocurrencies approved for investment namely Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC) and Bitcoin Cash (BCH).
Cryptocurrency holders are also known to be attractive targets for cybercrime such as phishing attacks. Phishing can be committed by criminals using fake websites that appear legitimate to trick you into giving out valuable information such as your password.
Phishing can also be carried out through emails or social engineering, whereby criminals attempt to impersonate trustworthy figures such as bank officials or representatives of cryptocurrency exchanges. in order to get your vital information.
Similar to protecting your banking information, these cybercrime attacks can be avoided by taking precautions such as double checking your browser’s address bar to make sure you are at the correct URL. You should also use two-factor authentication whenever possible to create an additional layer of security. If in doubt, take a step back and analyze the situation to make sure you are taking the right action.
As long as you remain wary, you should be safe from these cybercrime attempts.
INVESTING IN CRYPTO-CURRENCIES
Like all other forms of investing, there are pros and cons to investing in crypto. It’s time to pull out the old yellow notepad because it’s time for the pros and cons!
Still relatively early
Cryptocurrencies are still relatively new, Bitcoin was first featured in a white paper by the pseudonym Satoshi Nakamoto in January 2009. Compared to most other forms of investing, this means that Bitcoin and crypto Currencies as a whole are a considerably young industry. This means that it has a lot of time to mature and stabilize. While this can lead to inherent volatility, it also means there could be huge upside potential.
This is particularly interesting, given that the adoption of cryptocurrency continues to grow. In fact, as of 2021, global crypto ownership is estimated at 3.9%, with over 300 million crypto users worldwide. While this may seem like a large number, it also means that if you are a cryptocurrency holder you are a small minority of the world’s population. On top of that, there is great potential for technological breakthroughs in this space. Disruptions such as the introduction of new coins and regulatory changes could also be very exciting for crypto investors.
Potential for diversification
The development of cryptocurrency as an asset could mean greater diversification opportunities for investors. In addition to more âtraditionalâ forms of investing like stocks or bonds, cryptocurrency could mean a new frontier for investors who opt for more variety in their portfolios. Many investors today already view crypto as an alternative store of value, and many even prefer Bitcoin to gold.
Increase in the number of institutional investors
Institutional adoption of cryptocurrency is also increasing every year, with large organizations like Tesla and Microstrategy holding significant amounts of Bitcoin. Even social media platforms like Twitter have taken a major step in cryptocurrency adoption by recently announcing a new feature by which the creators of content on the social network could seek advice in Bitcoin. The confidence of institutional investors could be a positive sign that the cryptocurrency is here to stay for the long term.
Since the cryptocurrency industry still has a long way to go to reach maturity, it can be extremely volatile. Even the most established coins can be subject to huge drops depending on a variety of factors. For example, Bitcoin has gone from a price of around $ 55,000 to $ 35,000 just during the month of May 2021. The price of Bitcoin could rise and fall depending on public opinion, for example when China announced that it was banning Bitcoin mining. This volatility is not something everyone can handle, which is why you should only start investing in cryptocurrency with an amount that you are willing to lose.
As it stands, cryptocurrencies like Bitcoin are not considered generally accepted means of payment. Although the acceptance rate of crypto is increasing, it is still considered very limited. In other words, you can’t walk into most restaurants and use your Bitcoin or Ethereum to pay for your meal, at least for now. This is in part due to the inherent volatility of crypto as well as crypto regulations in many countries.
All in all, cryptocurrency is undeniably a “higher risk, higher reward” investment. As such, you should definitely consider your own financial situation before deciding whether or not to invest in crypto. If you have enough funds, are already invested in low risk assets like stocks or bonds, have sufficient knowledge of the cryptocurrency and the underlying fundamentals, then the crypto investment is worth it. worth considering. You should also always remember not to invest what you cannot afford to lose.
If you are ready to invest in cryptocurrency, head to https://www.luno.com/fr/mon and create an account today! We wish you all the best in your crypto journey!
This article is brought to you by Luno.