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Cryptocurrency: Guide To Understand

Key Points

  1. Cryptocurrency is a digital or virtual currency that uses blockchain technology.
  2. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.
  3. Do research to control the risks of losses when investing in cryptocurrency.

The development of the digital age has brought about many changes in the way we live and work. The internet has made it possible for us to connect with people all over the world, and online tools have made it easier for us to collaborate on projects. The digital age has also made it easier for us to access information, and new technologies have allowed us to create and share content more easily than ever before.

Nowadays, we are living in a society between the pre-digital and post-digital age. We are advancing from getting a handphone to a smartphone; lead fuel vehicles to electric vehicles. This showed that our society is progressing towards the post-digital age.

Nowadays, different types of transactions are available throughout the market. From cash to eWallet transfer, many places are now preferring cashless rather than cash in Malaysia. The current situation is applicable to investment. Many investors nowadays choose to invest in digital related assets rather than property due to lesser initial payment needed. Cryptocurrency is one of them.

In this article, we are going to give you more insight about what cryptocurrency is, and how it works in terms of investment.

What Is Cryptocurrency?

Cryptocurrency is a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. The use of encryption technologies means that cryptocurrencies function both as a currency and as a virtual accounting system. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.

Cryptocurrency goes under many names. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Some other popular crypto you might have heard of are Litecoin, and Ethereum.

However, before converting your money into cryptocurrency, you should understand what cryptocurrencies are, the risks for using cryptocurrencies, and how to earn money through investing in crypto.

Why is Cryptocurrency Popular?

Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Paying through cryptocurrencies are an attractive option for online payments, as they can be used without fear of censorship or seizure.

It is a peer-to-peer system which allows users to receive or send payments anywhere around the world. Just need to make sure the wallet details given are correct.

How Does Cryptocurrency Works

Cryptocurrencies run on a distributed public ledger called blockchain. Currency holders hold all recorded transactions and all are updated.

Any units of cryptocurrencies are created through mining. Not like you need a pickaxe to mine it, but involves using computer power to solve mathematical problems and generate coins. When you own a crypto currency, you own a key rather than a ‘coin’. It is a key for you to move a record or unit to another person without the interference of any trusted third party.

Pros

Decentralized

The blockchain technology underlying cryptocurrency is inherently secure. One of the main advantages is they are mainly decentralized. Decentralization provides a more trustless environment, and improves data reconciliation

Easy To Purchase

There are many platforms that allow users or investors to purchase different types of cryptocurrencies in Malaysia, such as Crypto.com and Luno.

Moreover, cryptocurrencies can be bought using many currencies rather than US Dollar. There are many cryptocurrency wallets that help convert into local currency rate when purchasing one.

Currency Exchange Easily

When we talk about currency exchange, we are not talking about US Dollar to Bitcoin, we are talking about the exchange rate within different crypto currencies. The variety of cryptocurrency wallets and exchanges allow you to trade in different currencies, across various platforms with low transaction fees.

You can easily convert your Bitcoin to other currencies (coins) such as Ethereum, easily. Therefore, transactions can be made easier compared to real life money transactions.

Secure And Transparent

Cryptocurrencies are a more secure and transparent form of money than fiat. The crypto markets never close, which means you can always sell your coins when the time comes for them to go up in value! The blockchain relies on tricky mathematical puzzles to keep its records safe and hard to decode.

Cons

Hard To Trace

With the rise of cryptocurrencies and blockchain technology, it is now possible for anyone to have an encrypted wallet without being identified. This means that there’s no way for governments or other third parties like banks to trace your transactions or keep tabs on what you do online!

Bitcoin is also being used on many different illegal activities such as the dark web. It works as an easy way of exchanging money without any hassle or detection from law enforcement agencies.

High Risk

Some investors might see this as a good opportunity, but some might have a heart attack investing in cryptocurrencies. Cryptocurrencies are often volatile assets. Their value can vary significantly over short periods of time, and they’re not immune to large fluctuations that might happen quickly or unexpectedly.

However, higher risk brings in higher rewards. If you can accept the risk, cryptocurrency might be one of the investments that suits you much.

No Refund Or Cancellation

If you accidentally send your cryptocurrency to the wrong wallet address, there is no refund or cancellation from any parties. The fact that there are no refunds means it is able to create one for any transaction where the product or service never arrived.

Risk Of Investing In Cryptocurrency

Not long ago when Elon Musk, the CEO of Tesla shared a tweet of Shiba Inu’s puppy pictures. Many investors assume that this is the hint of Elon Musk owning Shiba Inu coin, resulting in price increasing. A few months after the announcement, the price dropped by more than 40% since the start of the month and has lost 65% since the start of 2022.

Another crypto, Squid Coin, inspired by Korean Netflix series Squid Game 2021, became one of the most popular tokens as the price pumped up to $2,861 (RM12,027 at that time) per coin. On 1st November 2021, $3.38 million invested in Squid coin was gone and yanked off by the developer. Investors lose all their investment that they put in this coin. Similar to this, another token SushiSwap, their developer, rugged off with $13 million in September 2020, although they returned the money to their investor later on.

As the news we read earlier, it is clear that the price of cryptocurrency can be heavily affected by the hype of that moment. Cryptocurrencies such as Shiba coin and Squid coin do not have any physical products nor background to support them, which make them very fragile.

Therefore, if you are into investing in cryptocurrency, make sure that you did sufficient research and gather enough information and data on the crypto market you are going to invest in.

List Of Crypto Exchange Platforms In Malaysia

There are various platforms in Malaysia that are suitable for Malaysians to invest in cryptocurrencies.

  • Luno
  • Tokenize
  • Sinegy
  • Kucoin
  • Huobi
  • Kraken

A bonus platform that is good for investors is Crypto.com, however, they did not accept Malaysian Ringgit, so you might need to convert it to USD before starting to invest.

Conclusion

New investors should be aware of the risks associated with cryptocurrencies. From unfamiliar terminology and complex technology, it’s not an easy topic to understand for everyone right away.

Consider discussing with your friends or gain advice from professionals before starting to invest in cryptocurrencies. Doing research and gaining sufficient datas will minimize the risks of losing a lot of money.

Last but not least, DO NOT follow the hype when investing in cryptocurrency, because you won’t know when the ‘coins’ will be gone in any minutes. If you feel this is not the one for you, click here to understand other types of investment in Malaysia.

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