Investment in cryptocurrency has attracted many due to its perception of being more profitable compared to other investments in the same asset class.
However, due to its high volatility, investing in cryptocurrency is also considered high-risk and can lead to significant losses for investors.
Therefore, if you are interested in getting involved in this type of investment, it is important to understand the fundamentals of cryptocurrency, along with its benefits and associated risks.
As with investments in other instruments, be sure to carefully consider your investment objectives, investment duration, financial capability, and risk profile.
In addition, ensure that the investment platform you choose is legitimate and secure, and not just an online scam, which is increasingly widespread nowadays.
1. What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography for security and operates without oversight from a central authority or government.
Unlike fiat currencies that we commonly use, which are issued by individual governments, digital currencies use blockchain technology to achieve decentralization, transparency, and immutability.
Today, cryptocurrency can be used to make online purchases without going through intermediaries such as banks, or it can also be held as an investment.
2. Key Features of Cryptocurrency.
Decentralization: Most cryptocurrencies operate in a decentralized manner, where they are not controlled by a central authority but function within a peer-to-peer network without oversight from any specific party.
Security: Cryptocurrencies use cryptographic techniques to control transactions, the creation of new units, and to securely verify the transfer of assets.
Transparency: All transactions are recorded on a public ledger to ensure transparency, thereby reducing the risk of fraud.
Immutability: Once a transaction is recorded on the blockchain, it cannot be altered or deleted, ensuring the continued integrity of the data.
3. Popular Cryptocurrencies
Bitcoin (BTC): As the first and most well-known cryptocurrency, Bitcoin is often referred to as “digital gold.” Created in 2009 by Satoshi Nakamoto, Bitcoin is the original cryptocurrency. In May 2016, one Bitcoin could be purchased for around $500. However, by July 23, 2024, the price of one Bitcoin had surged to approximately $66,506, marking a 13,201% increase.
Ethereum (ETH): Ethereum is a cryptocurrency that operates on a decentralized blockchain network with support for smart contracts and applications.
terdesentralisasi (dApps). Dari April 2016 hingga akhir Julai 2024, harganya meningkatbdaripada kira-kira $11 kepada sekitar $3,501, mencatatkan kenaikan sebanyak 31,730%.
Tether (USDT): Tether (USDT) is a stablecoin backed by fiat currencies such as the US Dollar and Euro, and is designed to maintain a value close to those fiat currencies.
Binance Coin (BNB): Binance Coin is a cryptocurrency used for trading on Binance, one of the largest crypto exchanges in the world.
The price of BNB was only $0.10 in 2017, but by the end of July 2024, it had surged to around $584, marking an increase of 584,301%.
Ripple (XRP): Ripple focuses on facilitating real-time cross-border payments for financial institutions. In early 2017, the price of Ripple was around $0.006, but by July 2024, the price of XRP had risen to $0.60, marking an increase of 9,825%.
4. Benefits of Investing in Cryptocurrency
High Potential Returns: Cryptocurrencies have proven capable of delivering significant returns due to the rapid increase in coin prices over a short period of time.
Portfolio Diversification:
By including cryptocurrencies in your investment portfolio, you can diversify your assets and reduce the risk of losses, while also opening up opportunities to generate additional income.
Unlimited Access Time: Unlike traditional investment platforms that are only accessible during specific hours, cryptocurrency can be traded 24 hours a day, 7 days a week, allowing you to monitor and make decisions at any time.
Protection Against Inflation: Many investors view cryptocurrency, especially Bitcoin, as a tool to preserve value against inflation, helping to ensure
the stability of currency value in the long term.
Investment Risks in Cryptocurrency:
High Volatility: Cryptocurrencies are known for their extremely high price fluctuations, where the value of a unit can change rapidly and drastically, increasing the risk of loss.
Regulatory Uncertainty: The world of cryptocurrency still lacks clear regulation, with rules that are continuously evolving. This uncertainty can negatively impact investments and market stability.
Security Risks: Although blockchain technology is considered secure, online exchange platforms and digital wallets remain vulnerable to hacking threats and fraud, which can compromise your investment.
Market Manipulation: Some less liquid cryptocurrencies can be susceptible to price manipulation by large traders, which can affect market stability and the value of the coins.
Lack of Intrinsic Value: Unlike traditional assets that generate cash flow or income, cryptocurrencies do not have a clear intrinsic value,
making them difficult to accurately evaluate.
5. Steps to Start Investing in Cryptocurrency
Research and Education: Enhance your knowledge of blockchain technology and cryptocurrency fundamentals, especially for the currencies you’re interested in. Always stay updated with the latest news and market analysis to understand price fluctuations. For example, in 2021, the cryptocurrency market saw a major downturn when Bitcoin dropped 30% from its peak to $47,686.81, and Ethereum fell by 23% to $3,769.70.
Choose a Trusted Platform: Select a cryptocurrency platform that is recognized by the government to ensure investment security and high liquidity. In Malaysia, an example of a legitimate and recognized platform is Luno.
Create a Secure Wallet: Use a secure wallet to store your cryptocurrency and to carry out transactions safely. Each wallet has a public and private key used to send and receive cryptocurrency.
Develop the Right Investment Strategy: Before investing, determine your goals, the amount you can invest based on your financial capability, and whether you want to take an aggressive or passive approach. Do not invest just because others are doing so or because you are tempted by the potential for high returns. Avoid borrowing money to invest, as this is a high-risk investment.
Start Small: Begin with a small investment to familiarize yourself with market dynamics before committing larger amounts. This also gives you the opportunity to understand the intricacies of the cryptocurrency market.
Diversify Your Portfolio: Avoid putting all your money into a single type of cryptocurrency. Diversify your investments to reduce the risk of losses.
Monitor and Review Investment Performance: Regularly check the performance of your investments and stay updated on developments related to the cryptocurrencies you’ve chosen. Be prepared to adjust your investment strategy if necessary, taking into account market trends and relevant regulatory updates.
Conclusion
Investing in cryptocurrency offers exciting opportunities, but it also carries high risks. Therefore, if you are interested in investing in this market, it is important to have a deep understanding of how the crypto market works. Additionally, you need to have a suitable investment strategy and ensure that you have the financial capability to withstand the uncertainties in this market.
Before starting to invest in cryptocurrency or other high-risk investment instruments, it is wise to ensure that you have an emergency fund. It is recommended that this emergency fund represent at least six months of your salary and be kept in more stable investment instruments such as fixed deposits or Amanah Saham Bumiputera (ASB).
With this emergency fund in place, you can protect your finances from any potential losses that may occur in cryptocurrency investments, while
ensuring the security of your personal finances.
Adapted from the original source:
https://www.asnbacademy.com.my/ms/posts/pelaburan-kripto–5-perkara-anda-perlu-tahu
