The pandemic has positioned cryptocurrency as a viable investment opportunity and income source among Filipinos. There is a growing awareness on this unique digital currency as quarantine got many of us learning new things and exploring possibilities that sit within the digital domain.
In the first installment of this crypto blog series, I shared the beginnings of my humble venture – how I was a noob who blindly took the risk, and how I am now much more knowledgeable and happily making some earnings off it.
Nevertheless, I did not end that article with “Ask me how!” Instead, I advised curious friends to educate themselves on the basics of cryptocurrency – what it is and what one can do with it. Here are ten questions answered by yours truly.
1. What is cryptocurrency?
The term is from the words “crypto” which is short for cryptography or the art of writing and solving codes, and “currency” which is a system of money. Put together, cryptocurrency refers to currency that uses codes as a security feature. In addition, it is a form of digital money that purely exists in digital form.
The term used to sound too complex to me, a sophisticated currency of the future, like superman and kryptonite lol. I guess that’s also the reason why some people look at it as too good to be true. But really, the term is very straight forward.
2. What is digital money?
Whenever you transfer money from bank to e-wallets, or when you pay for shopping and utility bills using your smart phone or credit cards, or when you receive payments online, you work with digital moolah.
All money in the electronic form is considered digital money. Except for crypto, all digital money transactions are regulated by a governing body. Practically, there is a “middle party” that monitors and approves every exchange.
3. How is crypto different from any other digital money?
Cryptocurrency is a form of digital money created with some unique features including data encryption and blockchain technology. Because of these features, cryptocurrency transactions are perceived to be more secure, almost unhackable and decentralized. Unlike other digital money, there is no one governing body. Instead, all transactions are approved through peer-to-peer authentication process.
This results in faster, less expensive exchange.
image from pxfuel.com
4. What is cryptocurrency used for?
Wondering if you can pay with bitcoin? Yes! Since bitcoin was introduced to the world in 2009, people have been using it and other cryptocurrencies for investment purposes and for online purchases.
5. How is the value of bitcoin or any cryptocurrency determined?
This I think is one of the most interesting thing to know about crypto and has a lot to do with its potential as an investment. Unlike traditional assets (stocks, bonds), the rise and fall of their prices are not directly connected with the economy.
Instead, the value of a particular token lies on the supply and demand of the token itself. The users, the frequency of sales and exchange obviously affect this dynamic. How users trust a crypto affects its worth over time.
6. Where do I buy?
The most convenient and secure way to buy is through a cryptocurrency exchange. Choose a reputable one, ask friends about their experiences. I’ve tried other exchange platforms, but now has settled on OKEx which is easy to use and very straight-forward. I don’t even need to get on the desktop, I can do all my transactions straight on the OKEx app on my smartphone. Here’s a quick link.
You simply download the app, make an account and you can instantly buy using your preferred online payment method. I use GCash usually, and Union Bank for bigger transactions. PayMaya is also accepted.
Since it’s an exchange platform, it’s a one-stop shop. Here you can decide to hold your crypto, or start trading when you are ready.
image from pxfuel.com
7. Investment and crypto, how does that work?
The basic principle of investment – buy low, hold, and sell when the value appreciates. Hodling, trading, and mining are the three ways you can make profit. I’m young to this, but so far have tried hodling, trading and buying mining packages as part of my crypto investment journey. Have I made money? So far, the Php equivalent of my crypto holdings (BTC and ETH, in particular) have grown. Likewise, every transactions I’ve made while trading have rendered me profit. So yes!!
8. How is crypto exchange different from Forex?
The foreign currency exchange or Forex is a global market where all the currencies in the world are traded. This refers to fiat currencies or the regular money such as U.S. dollars and all other currencies governed by central banks and national governments. Forex is separate from cryptocurrency exchange.
Forex involves exchange of regular money aka traditional currencies, while crypto exchange involves exchange of, well, cryptocurrencies.
9. In terms of investment, how is it different from stocks?
When you buy cryptocurrency, you own a certain amount of digital currency that you may use to purchase or make profit from via hodling or trading.
When you buy a stock on the other hand, you own a piece of that company. If the company goes up in value, the stock also increases in value which you can then sell to generate profit.
The difference is essentially the product you end up owning.
10. Is it legal in the Philippines?
Yes, trading of bitcoin and other cryptocurrencies in the Philippines has been legalized by the Bangko Central ng Pilipinas (BPS), and is regulated by the Security Exchange Commission. However, even when more and more establishments are now open to accepting bitcoins as payment, cryptocurrencies are not officially recognized by the BSP as currency as “it is neither issued nor guaranteed by a central bank nor back by any commodity.”
Crypto is In.
Now that I have outlined for you some of the essentials, I hope that you have a great start with your crypto journey! Just remember the basic principles of investment. The risk, potentials and timing are important factors regardless of what type of assets you’re playing with, be it crypto or the more traditional assets such as stocks, bonds and Forex.
Cryptocurrency is the newest field in the investment scene. Its vast virtual world run by a blockchain can be intimidating to many, but its appeal has been undeniable since the world witnessed how at one point Bitcoin’s value skyrocketed and trickled down to benefit the physical market we are all much more familiar with.
In my next article, let’s take it up a notch as I share with you how I do P2P trading – that’s free and the most common way to trade!
Crypto Jargon of the Week: FORK
Fork is what happens when a blockchain diverges into two potential paths forward;” or “a change in protocol” or a situation that “occurs when two or more blocks have the same block height” – Wikipedia