All credits to: Buro
With JPMorgan soon offering a Bitcoin fund to wealthy clients, and Tesla making a cool US$101 million profit from selling 10 per cent of its Bitcoin stash, you may be thinking about investing in cryptocurrency. That said, you’ve probably heard of the risks—or may not even know where (and how) to start.
As with anything, a strong foundation in the basics is crucial to success. “Before you start investing in cryptocurrency, it is important to learn about cryptocurrency as much as possible,” says Scarlett Chai, Marketing and Partnerships Lead at Luno Malaysia. Luno is the country’s first digital asset exchange approved by the Securities Commission(SC). A digital asset exchange is where you can buy, sell, store and trade various cryptocurrencies.
Cryptocurrency is decentralised digital money, based on blockchain technology. While Bitcoin is the most well known, there are more than 5,000 different cryptocurrencies in circulation.
A blockchain is an open, distributed ledger that records transactions in code. You could liken it to a checkbook that’s distributed across countless computers around the world. Transactions are recorded in “blocks” that are then linked together on a “chain” of previous cryptocurrency transactions.
It can take some time (and lots of brain juice) to wrap your head around the technical jargon. So here’s the good news: No, you do not need blockchain and coding knowledge to start investing. As Chai puts it, “You do not need to understand how the internet works to send an email to your friends.” She does, however, strongly recommends finding a regulated exchange like Luno to safely buy cryptocurrency. This is sound advice—and not just because she works for Luno.
SC-approved exchanges have to comply with regulations that help ensure the safety of users and their assets. So while you could lose money investing in cryptocurrency, it would be due to market volatility rather than fraud.
How does Bitcoin get and hold its value? What sort of returns can be expected?
“Fundamentally, Bitcoin’s price is largely affected by supply and demand. This works the same way as any other asset – the more demand there is, the more people are willing to pay for it. If there was no demand for Bitcoin, people would be looking to sell it for a lower price.
“If we look over the past decade, Bitcoin has become the best performing asset class. Nevertheless, returns are not guaranteed, so we encourage people to always do their own research and start with a small amount they’re comfortable with.”
What’s the difference between Bitcoin, Ethereum, XRP, LTC and all the other cryptocurrencies?
“Not all cryptocurrencies are created equally. Each has its own unique features and utilities. For example, Ethereum and Bitcoin share many similarities. The biggest difference is the purposes or ultimate goals of these projects.
“Bitcoin aims to be a store of wealth, a digital gold if you will, and eventually become a globally adopted currency which could improve or replace conventional money to some extent. The purpose of Ethereum is to become a platform upon which smart contracts and decentralised apps can run.”
“Another important difference is the supply. The number of Bitcoin is capped at 21 million ever to be produced whereas Ethereum is not capped to any specific quantity. Both Bitcoin and Ethereum are produced in a process called mining.
“There are several technical differences in the technologies that underpin the Bitcoin and Ethereum platforms but at this early stage of these projects, they may seem very much alike. As these projects grow and mature, however, the differences may become much more apparent and could affect their trajectories quite differently.”
Cryptocurrencies are still not recognised as legal tender in Malaysia. Why should someone invest in it rather than other assets?
“Note that only the Malaysian ringgit is legal tender in Malaysia. Foreign currencies such as US dollars, Japanese Yen, and the Euro are also not legal tender in Malaysia. Similarly, assets like unit trusts, bonds and stocks are also not legal tender. This does not mean investors and traders cannot deal with them. There are regulations (like the SC’s regulations on digital assets) that cover all these.
“Investing in cryptocurrency has its own advantages over other assets. For example, Bitcoin is being compared to digital gold. It has all of these same characteristics as gold, and more. It has limited supply in which only a specific amount of Bitcoin exists and will ever be produced, 21 million. It can be made into smaller units without losing unit value. Its technology makes it very stable, it won’t degrade, and it’s impossible to counterfeit.
Unlike gold, you can move Bitcoin to any place on earth within minutes, no matter how big or small the amount. That’s why many people say that Bitcoin is not just digital gold, but a better version of gold.
“On top of this, Bitcoin has become the best performing asset class for over the past decade, making it an attractive investment asset for many investors to consider including as part of their portfolio.”
In what ways do cryptocurrencies empower traditionally underserved communities, such as women?
“Cryptocurrencies have the potential to enable economic growth of developing countries by offering a seamless financial service. Cryptocurrencies and Bitcoin in particular have a highly utilitarian, yet also disrupting the way the traditional financial system works. For example, cryptocurrency could enable seamless banking services to people who live in areas where it’s hard to access financial services, such as in rural areas.
The use of technology will facilitate a financial revolution that will leave everyone more financially connected, empowered and enabled.
“Another factor is the low cost of cryptocurrency transactions. This in turn encourages more people to trust these new financial tools, allowing for the global economy to be more connected. All in all, cryptocurrency adoption will go a long way in enabling financial inclusivity that will benefit everyone, regardless of their background.
“It will only be a matter of time until these cryptocurrencies definitively find a way into our lives, shaping them for the better, with economic growth and inclusion in mind. Millions of people will now have the opportunity to invest, save money and start a business in the new digital age.”
When and how were you introduced to cryptocurrency?
“I was introduced to cryptocurrency in late 2017. However, I did not immediately start investing in it as I was still sceptical of the whole industry at that time and was overwhelmed by all the technical jargons.
“I only started to invest seriously when Luno was relaunched in Malaysia in late 2019. Being the first digital asset exchange in Malaysia that was approved by the SC, I felt confident in venturing into cryptocurrency. Plus, the Luno website is a great resource center that has helped me understand cryptocurrency in great detail. This is a great feature that can help any beginner.”
Could you share some advice about investing in cryptocurrency?
“I invest through the dollar cost averaging strategy to stay invested for the long term. I like this strategy because it helps me to ride out Bitcoin’s price fluctuations.
Dollar-cost averaging (DCA)
An investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase.
“One of the ways that has helped me to invest consistently is using the Repeat Buy feature on Luno. It allows me to set an amount I want to invest in a periodic frequency whether it's daily, weekly or even monthly.”
On being a woman in the "cryptoverse":
Have you encountered discrimination from being a woman in STEM? Are people surprised when they learn about your career path?
“I am fortunate enough to have bosses that empower me to make decisions and provide opinions. In my experience, people are generally surprised when I tell them that I work for a cryptocurrency company. However, they do recognize the trend and vast opportunities this new industry brings.”
What soft skills do you think are needed to excel in a STEM career?
“Similar with all other careers out there, you would definitely need to be a good communicator and be willing to adapt to any situation. In the technology world, things move very fast. We need to be agile enough to adapt to changes and pivot when things are not working as intended.”
On Luno Malaysia
What investor protection measures are in place at Luno?
“Being an approved digital asset exchange in Malaysia means that our policies and infrastructures have been vetted thoroughly by the regulators.”
We implement strict protection measures for our users. The first is deep freeze storage in which multi-signature wallets with private keys are stored in different bank vaults. This means that no single person in Luno ever has access to more than one key, and accessing Bitcoins from our deep freeze storage involves multiple layers of encryption and security checks. Only a small amount of cryptocurrencies are connected online which are used to facilitate daily transactions. The rest are stored offline in military grade security.
“The second is an appointment of an independent third party trustee. All investors funds are deposited into a trust account and this exists as a regulatory requirement to ensure investors’ ringgit funds are always protected.
“As for staff requirements. Every employee has to pass a background check, receive security training and adhere to Luno’s security policy.”
What is Luno doing to ensure women’s voices are represented within the workforce and management, which would influence innovation and the services offered?
“Female participation in the cryptocurrency industry is growing in Malaysia. At Luno Malaysia, we are proud to have 38 per cent of our team consisting of inspiring women. This shows that women are open to joining these exciting and fast growing industries and playing an important role in developing them.
“Moving forward, we are planning to host more women-focused talks on cryptocurrency and personal finance by working with personal finance groups and independent content creators. Our goal is to encourage more women to take part in this exciting technology as we believe it has the potential to make meaningful and long-term positive impacts on all members of society, no matter who they are or where they are from. To achieve that, we need to not only include but also leverage perspectives of all members of society especially women.”
What are some of the partnerships Luno has embarked upon to raise awareness of crypto investment and to make it more accessible?
“We have partnered with ecommerce sites such as Shopee, Fave and recently, Lazada, to offer Bitcoin vouchers to encourage mass consumers participation.
“At the same time, we want to raise awareness of cryptocurrency investment in regulated digital asset exchanges like Luno. Mass consumers are now aware that there is a safe and easy platform for them to get started with their cryptocurrency investment and also have additional reward when they use the vouchers.”