An Avid Investor Information To Cryptocurrency (2021), Cash Information

The cryptocurrency has its day in the sun as investors take advantage of the dynamics of the market. Here is everything you need to know about this virtual currency before you buy your first coin.

For more than a year, you would have been bombarded with cryptocurrency news. It’s also safe to say that this digital asset would have crept into conversations with your friends and family. And who could blame them?

Cryptocurrency prices have been on a warpath since early 2020, and the bull run is not slowing down anytime soon.

For example, it took Bitcoin just two months to double in value after hitting a low of $ 4106.98 (S $ 5,500) on March 8, 2020. Add another 10 and it would continue trading at a high of $ 61,683. And that’s only worth a coin.

If Papa John’s Pizza received the 10,000 as payment for two cakes in 2010, she can reduce her current debt in one fell swoop.

Ironically, it’s easier than ever to invest in cryptocurrency, with more secure wallets and a greater number of exchanges around the world. Even DBS has joined the fight and set up a cryptocurrency exchange for institutional and accredited investors.

Retail investors can breathe a sigh of relief as this isn’t the only option available in Singapore.

Everything you need to know about investing in cryptocurrency is here, from A (ave) to Z (illiqa).

What is a cryptocurrency?

As the name suggests, a cryptocurrency is a digital currency. In contrast to traditional currencies such as the US dollar or the Japanese yen, most cryptocurrencies are decentralized. First, it means that no single entity can control them.

Second, transparency and security are much greater because you can see the exact amount that has been produced and is currently in circulation.

Cryptocurrencies were originally created as a medium of exchange to securely pay for goods and services, but they now serve a different purpose as a store of value. Bitcoin is considered good by many because it is inherently limited and its supply is dwindling every year.

If you employ other cryptocurrencies that are either of a similar nature or aim to strengthen their position as a medium of exchange, you have an emerging market for investors of your own.

How do I start investing?

Despite the dizzying heights Bitcoin and its brothers have reached, there really isn’t a better time to invest in cryptocurrency. Only 1.3 percent of the world’s population are cryptocurrency users, indicating that the market is still in its infancy.

Although investing in cryptocurrency is a lot easier now, you still need a few tools before you start hodling.

First and foremost, you need an account with a cryptocurrency exchange. The king of the hill here would be Binance, which has by far the highest daily trading volume and supports over 300 cryptocurrencies. Unfortunately the exchange does not support SGD deposits.

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On the plus side, you can get around this by using your multi-currency bank account to make a USD transfer.

If you want to avoid the hassle, you’re in luck. The Singapore exchange Coinhako enables local bank transfers and supports over 20 cryptocurrencies.

The same goes for Gemini from New York, whose American and Singaporean platforms have the added benefit of allowing you to earn interest on your holdings.

Second, you might want a cryptocurrency wallet. Cryptocurrency exchanges are very secure these days, and cryptocurrencies themselves are designed to prevent counterfeiting, but it doesn’t hurt to have an extra layer of security.

The best option would be a cold wallet that allows you to store your cryptocurrency offline using a special USB device or a piece of paper (seriously).

Here are some to consider:

Best cryptocurrency cold wallets

In which cryptocurrencies can I invest?

Choice overload is a gross understatement when it comes to cryptocurrency as there were over 4,000 in circulation as of January 2021. However, it is not possible to invest in most of these as they do not gain a sufficient foothold in the market.

Below are some of the more lucrative coins to invest in. However, do your due diligence before you take the plunge.

1. Bitcoin

You can’t talk about cryptocurrency without mentioning Bitcoin. The grandfather of all coins first came to life in 2008 and is currently considered digital gold.

In fact, it is mined like real gold and is currently just as rare. Almost 19 million of the 21 million possible Bitcoins have been “mined”, and each subsequent coin will take longer to hit the market.

Key financial indicators include a current market capitalization of over $ 1.3 trillion, an all-time high of nearly $ 86,000, and daily trading volume of around $ 60 billion.

It is currently not only the most valuable cryptocurrency, but also the most widely used. Whether you are buying a self-driving electric car or paying taxes in Switzerland – Bitcoin has it all for you.

2. Ethereum

Ethereum, on the other hand, is a completely different animal. Regarded as the most versatile cryptocurrency currently, it was launched in July 2015 to give individuals the ability to create decentralized applications and is now used for a variety of other purposes.

Yes, you can also create NFTs from the Ethereum blockchain. And unlike Bitcoin, Ethereum does not have a maximum supply, which throws scarcity and comparisons with gold out the window.

Key financial indicators for Ethereum include a current market capitalization of over $ 400 billion, an all-time high of more than $ 3,600 and a daily trading volume of over $ 43 billion.

Ethereum will also be getting an upgrade soon, changing the model to a Proof of Stake model. This is a win-win move as it will be more energy efficient and fairer for miners.

3. Cardano

Cardano may seem tiny compared to Bitcoin and Ethereum, but this cryptocurrency was created with an ambitious goal. The founders wanted to develop technologies that improve security, transparency and fairness.

Among other things, this results in a simple verification of the authenticity of a product and a person’s certificates of education.

From a financial perspective, Cardano’s current market cap is more than $ 50 billion. The all-time high reached $ 2.06 in mid-April 2021. After all, the average daily trading volume is over $ 3 billion.

The maximum supply of this cryptocurrency is 45 billion coins, and so far a little more than 70 percent has been mined.

Then is cryptocurrency trading the only way to invest?

Similar to stocks, you don’t have to go through the hassle of actually trading cryptocurrencies to invest in them.

For Bitcoin, the Grayscale Bitcoin Trust (GBTC) and the Osprey Bitcoin Trust (OBTC) can be purchased via an online brokerage platform. There is no need to sign up for a cryptocurrency exchange as the funds themselves manage the bitcoins.

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Alternatively, you can invest in cryptocurrency or blockchain companies. The American cryptocurrency exchange Coinbase debuted on the Nasdaq in April 2021 via a direct listing at $ 381.

The Nasdaq-listed leader in electronic signatures, DocuSign, has been involved in blockchain technology since 2015 and has been trading for over $ 200 since August 2020.

Finally, you can mine cryptocurrencies to generate coins. However, the environmental costs are high depending on the cryptocurrency you choose. And because you compete with other miners, you need a bespoke computer.

Unfortunately, the main component costs over $ 1,000 and is not immediately available as gamers and miners demand it.

What are the risks of investing in cryptocurrency?

It is common knowledge that there are no risk-free investments anywhere in the world, even for assets in safe havens. Remember when gold was trading at just $ 34,000 per kilogram in 2015?

Cryptocurrency is no different as it is a very volatile commodity due to its relative youth. Strong price movements within a day are still a matter of course.

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Then there is the problem of realizing the profits that you have made. In order to sell your now valuable coin, you have to go through a multi-step process, similar to buying it. From there, you are subject to transaction fees and exchange rates (possible).

Finally, there is the perennial problem that cryptocurrency faces: its inherent value. In the case of stocks, they largely reflect a company’s performance. They are a daily requirement for goods and have been traded for centuries.

Real-world applications may grow in cryptocurrency if more established companies accept, but they can also delete them immediately.

Meanwhile, if you have a conservative risk appetite and need more time before investing in this new asset, you can consider safer vehicles like robo-advisors in the meantime.

Finally

Cryptocurrency was the buzzword for investors in 2020 and 2021. Despite questions that still concern the company’s value, experts recently cleared the worries by leading its market cap of $ 2 trillion. It’s hard to imagine an asset this size disappearing in an instant.

And with the dominant payment network companies Visa and Mastercard coming on board, there are many more options for real-world usage. This is great news as it highlights the growing stability of the cryptocurrency.

And now that you know how to start investing in them, you may not want to spend your virtual coins on junk food and computer parts just yet.

This article was first published on SingSaver.com.sg. All content is displayed for general informational purposes only and does not constitute professional financial advice.