In the past two to three years, cryptocurrencies such as Bitcoins, Ethereum, Ripple and many others have gone from complete unknowns to mainstream assets worth billions. Given the hype surrounding cryptocurrencies right now, people from all walks of life are starting to get in on the cryptocurrency bandwagon.
Many include students who may not even understand what investing means, first-jobbers who have never invested in a single stock or bond as well as “mom-and-pop” investors who have never heard of cryptocurrencies but may be very familiar with stock, bond and property investments.
In recent weeks, the slump of cryptocurrency prices has only intensified media coverage and heightened investor interest to get in at the right price. But what should we really be thinking about when it comes to buying cryptocurrencies right now?
DollarsAndSense spoke to three experts to find out what they thought were the biggest opportunities and risks in the world of digital tokens.
Val Yap is the CEO and founder and CEO of PolicyPal – a digital direct insurance broker that aims to be a one-stop solution for all insurance matters. It is also Singapore’s first graduate from the MAS fintech regulatory sandbox. PolicyPal also recently launched a Cashback scheme where users get cashback with every policy purchase. Val also launched PolicyPal Network – a platform built with a two-fold vision of addressing issues that overlap the fields of both insurance and crypto assets in the world today.
Ryan Lye is the founder of CryptoGrinders, a platform he uses to provide education about investing in cryptocurrencies, ICOs, blockchain technology and decentralised applications. CryptoGrinders also runs a YouTube Channel with more than 20,000 subscribers that you can join to get more information.
Fiona Dawn Cher is a financial blogger at BudgetBabe. She has been writing about finance for close to four years and started investing in cryptocurrencies in 2017. On her blog, she provides her ideas as well as cool guides and resources to get started investing in cryptocurrencies.
#1 Cryptocurrencies have become really popular in the past two to three years. Would you classify buying cryptocurrencies as investing?
Val Yap (VY): Yes, buying cryptocurrencies can be seen as an investment in the underlying network and technology.
As more people recognise that the Bitcoin network provides a valuable service, they may increasingly sell dollars to obtain bitcoins in order to join the network. As a result, the price of bitcoins would be expected to rise relative to dollars, and everyone holding bitcoins would see their investment gain in value. This same paradigm applies to other cryptocurrencies.
Cryptocurrencies trade at prices based on the perceived value of the platforms and projects associated with each coin. Hence, purchasing a cryptocurrency is less like an investment in a traditional currency and more like an equity investment in a company.
Ryan Lye (RL): Buying cryptocurrencies can be considered an investment with the right knowledge and fundamentals. However due to the current exponential growth this space is having, it attracts a lot of speculators as well.
Dawn Cher (DC): Other than mainstream media, (there’s a lot of) hype on social media + fear of missing out. Can it be considered an investment – yes and no. Investors (need to) do their due diligence and invest in fundamentally strong coins, which is my approach. But there are plenty of people who simply speculate and barely even know what the coins do, other than the fact that it is popular and many people are buying it / prices have gone up exponentially in recent times.
#2 What is the best way for someone new to cryptocurrencies to get started?
VY: Understand blockchain technology for starters. A lot of hype and focus have been centred on the coins but the real focus should be on the underlying technology and how the associated tech companies are making real impacts to the various industries.
After understanding this, the next step is to find a suitable exchange where you can convert your fiat to coins. It is important not to fall for the many scams out there.
RL: Start by setting up a Coinbase or Gemini account. Four to six weeks processing time due to high volume currently. (For those who don’t believe in cryptocurrencies, I can only say) the technology which is the blockchain is real. However, if you are not ready for this space, do more deep reading or look for the professionals in the space like CryptoGrinders to find out more.
DC: If you don’t believe in crypto, then you shouldn’t be investing in it at all. (If you want to get started,) read my blog. There’s too much information out there and too many people are falling for scams. For instance, many people followed YouTuber CryptoNick and his tutorials on how to get started, recommendations and what’s good, etc. He even has a course selling for close to USD 500 to teach people how to invest in crypto, when many people have pointed out that he doesn’t even know the difference between a private and public key. Read what happened to the people who followed him now (hint: it’s on my blog. Some lost their life savings. A class lawsuit has now been filed against him).
#3 What are the biggest risks to investing in cryptocurrencies?
VY: High fluctuations in the market and cyber security. Even large exchanges have gotten hacked thus, it is advised to hold your cryptocurrencies in a ledger wallet.
RL: It is high(ly) volatile and most of these companies are actually start ups. Start ups usually have a high failure rate but because of the ICO process, they are now able to be more well capitalized compared to seeking funds from the VCs.
DC: You could end up investing in s**tcoins OR vaporware (google my blog for the definitions of these cryptospeak)…
You could fall for scammy ICOs OR ponzi schemes (eg. bitconnect)…
You could get hacked and lose all your coins (eg. Etherdelta hack, Mt Gox)…
You could lose your coins (due to sending to wrong wallet addresses, etc)
#4 What are the biggest opportunities that exist for cryptocurrency investors?
VY: We are still in the early stages in terms of the crypto space so if you conduct your research and due diligence before investing in the tech, I believe there will be rewards and gains to come.
RL: The overall growth of this space is going to unfold in the next 5 to 10 years and we are still so early as there are still issues like scalability, regulation and security to be sorted out.
DC: The chance to get your hands on the next Google or Visa at dirt cheap prices. This is the new Internet revolution, and similar to the dot com era, many will go bust but there will be many HUGE winners if you pick (the) right (ones).
#5 What’s The One Thing You Would Tell A New Cryptocurrency Investor?
VY: Start small and set targets for each investment that you make. It is very difficult to swing trade in crypto and it is better to back a coin that you strongly believe in and hold with a target in mind.
RL: Be willing to invest what you can afford to lose and always DO YOUR OWN RESEARCH (DYOR). We will be offering seminars/workshops in March 2018.
DC: Only one? I’ve an article on this: INVEST ONLY MONEY YOU ARE WILLING TO LOSE.
Understand The World Of CryptoCurrencies
While cryptocurrency may hold awe and huge potential, the three experts share many of the views DollarsAndSense holds – which is to understand what you’re putting your money into before diving into it.
A common rhetoric they share is that investors need to understand what they’re really putting their money into. Dawn, from BudgetBabe, even suggested completely staying away if you’re unsure, while Val and Ryan repeated the need to build your knowledge on the subject.
If you have more questions about embarking on your cryptocurrency journey, you can ask these experts via the comments section.