Cryptocurrencies — The Future Currency or Another Asset Class?

A cryptocurrency is a type of digital asset, which is a medium of exchange in different types of transaction using cryptography (a method of protecting information through the use of codes where only the sender and receiver can process to read it). Unlike the US dollar or Malaysian Ringgit, there is no central authority that manages and maintains the value of the cryptocurrency.

When central banks print too much money, the value of its currency drops. This would cause inflation to skyrocket and consequently affect people to be unable to afford everyday goods and services 😕

As opposed to cryptocurrencies, they have a limited, set amount of ‘coins’ available. When all those coins are in circulation, it would be difficult if not impossible to simply create more coins or add on to its supply 😎

“What are the popular cryptocurrencies that we have today?”

Bitcoin (BTC)
The oldest and most popular cryptocurrency in the world. Bitcoin was created back in 2009 and the first decentralized cryptocurrency that facilitated transactions using its own blockchain technology. At the time of writing, Bitcoin was priced at roughly US$45,200.

Ethereum (ETH)
Ethereum is a cryptocurrency network that uses blockchain technology to facilitate smart contracts (just a program stored in the blockchain which is intended to automatically execute an agreement when predetermined conditions are met). Ether is a token used to enable transactions on the Ethereum network and currently priced at roughly *US$3,406.

Dogecoin (DOGE)
Created as a joke back in 2013 based on the Doge meme, this cryptocurrency is no longer a joke now ever since Tesla CEO Elon Musk tweeted that it’s his favourite cryptocurrency. Recently, he tweeted about his new pet Floki, a Shiba Inu dog and the DOGE price increased by 0.36%. Dogecoin is currently priced at *US$0.25.

Solana (SOL)
Just like Ethereum, SOL runs on blockchain technology that can also facilitate smart contracts but FASTER. Solana boasts that they can handle up to 710,000 transactions per second (compared to Ethereum at only 15 transactions per second). NASDAQ notes that some industry watchers have speculated that Solana might be removing a certain number of coins from supply, making the remaining ones more scarce and valuable. SOL is roughly priced at US$159.42 at the time of writing.

So what does the future hold for cryptocurrencies?

Pros:

Fast and inexpensive with no geographical limitation
Most cryptocurrencies take only a few minutes to transact any amount of money, regardless of the amount and location. Transferring money to another part of the world through the bank can be extremely expensive. When done in crypto, the cost is lesser.

Decentralization
As mentioned earlier in this blog, cryptocurrencies cannot be regulated, valued or distributed by the government or central bank because they are created by the people. So there’s no third-party interference that can cause your money to be seized in any condition.

Strong security
If you’ve read our previous blog, you’ll know how secured the blockchain is as it is difficult to decode and tamper with.

Cons:

High volatility
Although cryptocurrencies have outperformed stocks over the long term, the market moves on speculation. People would hope the price to go up or down to profit. These speculations cause a sudden influx of money and sudden cash out, leading to high volatility. It’s possible to make a high profit but that’ll mean you can face huge losses too.

Poor acceptance (for now 🙈)
Sure cryptocurrencies are now accepted as a payment solution but not a lot of businesses are willing to exchange it for goods and services due to its high volatility. You don’t think that friendly chap that sells kebabs at his food stall is going to accept 0.000042 BTC for now, right?

As cryptocurrency is still in its early stages, it is still too soon to predict the possibility of cryptocurrency being the future currency (even though El Salvador has legalized Bitcoin as legal tender 🤓) due to its high volatility and the uncertainty of the disruption it may cause. Still, many corporations see a huge potential in cryptocurrency and some major companies are already accepting payments in Bitcoin.

DYOR (Do-Your-Own-Research) is regarded as one of the most important aspects of being a crypto investor. So before getting involved in crypto investment, understanding your risk profile and availability of your financial goal as well as beginning with small amounts of investment will be a good starting point.

The important thing is TO NOT look at cryptocurrency as a get rich quick scheme opportunity and definitely don’t invest more than you can afford to lose.

What do you think the future of cryptocurrency will look like? Let us know in the comments section!

*at the time of writing