Cryptocurrency | Why I am getting into it and is it too late?

Today's topic will be on cryptocurrency. I have been wanting to do this video for awhile and after seeing videos from Andrei Jikh and Chicken Genius on Bitcoin, how can I also miss out on releasing one.

Cryptocurrency has been a hot topic the past few years and many says that it will be the currency used in the future as it is not like fiat currency, a government-issued currency that isn't backed by a commodity such as gold. Fiat money gives central banks greater control over the economy because they can control how much money is printed. Take for example the US dollar where the US Federal Reserve has been printing money to counter the effects of Covid-19.

This has raised concern on whether the value of the US dollar will drop because more money is printed. I didn't really study any finance modules in school as I studied social sciences but having a currency issued by the government and regulated by the central banks means that the value of it is really based on the country's economy and how the government is doing.

On the other hand, a cryptocurrency is a form of digital or virtual currency that can work as a medium of exchange. Being virtual in nature, they use cryptography technology to process, secure and verify transactions. Unlike Fiat currencies, cryptocurrencies are not controlled by any central authority such as a central bank. Instead, they are limited entries in a database such as a blockchain that no one can change or manipulate, unless certain conditions are met.

Many have termed cryptocurrency as the future currency as it's definition of value is like gold except that it is digital and in times of crisis, the value doesn't change due to printing of money because demand for it still remains. Covid-19 has strengthen the value of Bitcoin, the most popular cryptocurrency. Ether (ETH) which the second most popular digital token has also increased in value. Both of these tokens are decentralized, meaning that they are not issued or regulated by a central bank or other authority. Both make use of the distributed ledger technology known as blockchain.

Why I am getting into Bitcoin now?

I have definitely heard of Bitcoin for a few years, actually I first heard about it when I was in polytechnic in year 2015. At that time, Bitcoin was at a price of $200 plus and since then, it has seen tremendous growth to almost $18,000 as of 20 Nov 2020. I heard people mentioning that they bought Bitcoin and it risen in value in crazy amounts.

I was, to be honest skeptical of Bitcoin in the beginning because at that time, I wasn't sure what Bitcoin was and how it can be used. I even heard of the creator name, Satoshi Nakamoto and was like wow, he is anonymous. I thought that it was something of value to gamers as they could transact online easily. It was not until I watched Banking on Bitcoin from Netflix did I understand how Bitcoin work and how it come about.

At that time, being a student, it was a pretty huge amount and I was also buffered on how you can store Bitcoin as stories of hackers was on the rise. So I did not think of getting into Bitcoin. This year, as I see more institutions deciding to get into cryptocurrency, I decided to also put a small amount of money in. If it becomes more widely used, it's value will definitely increase as what we are seeing and with it being limited in value as well, people will know of it's value.

I have thus decided to also set aside a sum each month to buy Bitcoin in tranches using Binance. Hearing Andrei Jikh and Chicken Genius, I know that Bitcoin is now going to be widely accepted as even DBS is setting up a digital exchange for cryptocurrency.

Things to look out for

As I have mentioned, hackers like to target cryptocurrency companies/exchanges as the value is so crazy and if they do not have the proper infrastructure, they are very easily compromised. One example was Coincheck, a Bitcoin wallet and exchange service headquartered in Tokyo that was hacked in 2018 and had about $500 million in digital tokens taken away. What was unique was that because that Coincheck used a prominent star to advertise and this attracted many young Japanese to borrow money to buy cryptocurrencies.

Something closer to home was Kucoin which is a digital asset exchange headquartered in Singapore lost over $280 million as the hackers obtained keys to their hot wallet. Those in their cold wallets were safe. So, how can we improve the safety of cryptocurrencies? This is then dependent on how we store them.

Hot and Cold Wallet

Hot and Cold wallet are how you can keep your cryptocurrencies. There are many other different types of wallets but hot and cold are the 2 most frequent used ones. Hot wallets are digital cryptocurrency wallets, while cold wallets are physical devices that store cryptos inside of them.

• Hot Wallet

Hot wallets are digital currency wallets which mean they are online and desktop wallet. Hot wallets can store any cryptocurrencies and are free.

• Cold Wallet

Cold wallets are physical devices that store your cryptocurrencies and are offline devices. They have a very limited variety of cryptocurrencies they can store. Cold wallets are very secure when it comes to cryptocurrency storage. Definitely, I would think that as you accumulate more cryptocurrencies, you would want to slowly store some in a cold wallet while keep some in a hot wallet to allow both safety and easy access to transact.

Am I getting in too late?

There are many people who have got into cryptocurrency early on and have seen massive growth on it. Then is it too late for me to get in now especially so when it has hit $18,000 recently. I would say that with more institutions buying and accepting Bitcoin, the growth from here might be higher. I wouldn't blame myself for not getting in early because I know that I needed some kind of confirmation before getting into something. There are so many interesting concept and things nowadays and cryptocurrency is definitely something to look out for in the future. Whether or not is this a good time to get it, I believe having to own some Bitcoin will make me understand how it truly works and read up more on it.

Are any of you already invested in Bitcoin? If not, are you planning to buy some soon? Thanks for staying till the end of the video and do hit the like button and subscribe to my channel.

 

References: https://www.fxempire.com/education/article/the-difference-between-fiat-money-and-cryptocurrencies-520616
https://www.livemint.com/industry/banking/lessons-from-the-fed-s-3-trillion-money-printing-11592322603528.html
https://www.investopedia.com/terms/f/fiatmoney.asp
https://www.businesstimes.com.sg/companies-markets/dbs-creates-buzz-with-its-plans-for-crypto-currency-exchange
https://en.wikipedia.org/wiki/Coincheck
https://fortune.com/2018/01/31/coincheck-hack-how/
https://www.coindesk.com/hackers-drain-kucoin-crypto-exchanges-funds
https://www.bitdegree.org/crypto/cold-wallet