There are so many different cryptocurrencies available today, but it can be difficult trying to describe them all in one word. But in a broad sense, cryptocurrency can simply be defined as a digital currency that is encrypted and often decentralized. Bitcoin is by far the first and most popular cryptocurrency. And it is based on blockchain technology, a permanent, decentralized ledger system.
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While Bitcoin is the most popular and most valuable cryptocurrency out there, it's led to the creation of thousands of alternatives, or altcoins. There are all different kinds of altcoins. Some are close variations of Bitcoin, like Bitcoin Cash or Bitcoin Diamond. While there are others that focus on privacy, like Monero and ZCash. Some are named after Greek Gods, reptiles or even internet memes like Dogecoin.
Most people only have interest in holding on to Bitcoin or Ethereum or any other kind of cryptocurrency that is popular. And there are some speculators who try to engage in cryptocurrency trading by buying low and selling high on more obscure cryptocurrencies. The hope is to earn money and get rich quick by getting in early on the next Bitcoin.
Is It Safe to Invest in Cryptocurrency?
Every cryptocurrency investor wants to make money with cryptocurrency. Cryptocurrencies are usually built using blockchain technology. Blockchain describes the way transactions are recorded into "blocks" and time stamped. It is a fairly complex, technical process, but the result is a digital ledger of cryptocurrency transactions that's hard for hackers to tamper with.
In addition, transactions require a two-factor authentication process. For instance, you might be asked to enter a username and password to start a transaction. Then, you might have to enter an authentication code that's sent via text to your personal cell phone.
While securities are in place, that doesn't mean cryptocurrencies are un-hackable. In fact, several high-dollar hacks have cost cryptocurrency exchanges and startups heavily. Hackers hit Coincheck to the tune of $534 million and BitGrail for $195 million in 2018. That made them two of the biggest cryptocurrency hacks of 2018, according to Investopedia.
How to Invest in Cryptocurrency Singapore
There is a high chance that you may have heard of cryptocurrency, with the most popular one being Bitcoin (BTC, for short). Especially after a filing with the U.S. Securities and Exchange Commission (SEC) revealed that Tesla bought US$1.5 billion worth of Bitcoin, and announced that it expects to begin accepting bitcoins as a form of payment for its products in the near future.
Not to mention that Singapore's biggest bank, DBS (SGX: D05) announced that it will set up a Digital Exchange that will allow investors to trade in cryptocurrencies. You may have also been following the volatile virtual currency's price movements and have done your extensive due diligence on it. Now, you are ready to invest in some Bitcoin or other cryptocurrencies that you may have researched.
But you might be wondering: "how do I begin my journey into the crypto world?" As usual, we got you! Although the whole investing process may seem a bit complicated for those who are new to Bitcoin and other cryptocurrencies, the whole process is actually not too complex if you break it down. As such, here is our guide to buying Bitcoin and other cryptocurrencies in Singapore!
Why It is Good to Invest in Cryptocurrency Now
It is no news that cryptocurrency has been around for years, but it has increased exponentially over the past 12 months. Even before Tesla's big investment in Bitcoin, Musk himself has been credited with increasing the price of cryptocurrencies by simply voicing his support online.
Because of its soaring price, Bitcoin may seem like an attractive investment. But is it the right time to put a few thousand dollars into a crypto exchange?
Weighing Risk and Reward
When you are considering any investment, it is important to look past the dollar signs and consider the risk involved. Bitcoin is an incredibly volatile investment, so it is not for the faint hearted. While it has seen an impressive upward trend over the past several months, nobody knows how long that will last.
Cryptocurrency has experienced wild price fluctuations in the past, sometimes losing up to 80% of its value. Between 2017 and 2019, for instance, Bitcoin jumped from around $1,000 to more than $17,000, before it plummeted back to around $3,000.
How to Invest Cryptocurrency Safely in Singapore
Bitcoin is mostly considered a risky investment that may or may not pay off, so you have to really understand how the crypto investment works, before bringing out your credit card to subscribe to a crypto investment plan. it is probably not the best fit for most people. If you are eager to invest in the cryptocurrency however, it is important to do so safely.
Once you have a good place to store your cryptocurrency (whether hardware wallet or software cryptocurrency wallet, the next thing to do is to ensure you have a well-diversified portfolio. The last thing you want to do is invest all your money in Bitcoin, because if it drops in value (and there is a good chance it will at some point), you could experience devastating losses.
Aim to invest in at least 10 to 15 different companies from multiple industries, or opt for index funds or mutual funds to further limit your risk. Because Bitcoin is so volatile, it's crucial to make sure the rest of your investments are as stable as possible. Next, only invest money you can afford to lose. This is a good rule of thumb to remember with all investments, but especially the riskier ones. You may not lose money investing in Bitcoin, but it's a good idea to be prepared for the worst just in case.
Bitcoin may be gaining popularity right now, but that alone doesn't make it a smart investment. Before you invest any money, think about your tolerance for risk. If you have money to burn and are willing to risk it, it may be worth the gamble. But for most investors, it's best to steer clear of Bitcoin for right now.