Investing in Cryptocurrency: Risks & Rewards

Cryptocurrency has taken the world by storm, and Singapore is no exception. Although the worldwide cryptocurrency ownership rates were around 4.2% in 2022, Singapore and Thailand are leading the way in Southeast Asia with significantly higher adoption rates of 11.05% and 6.47%, respectively. These numbers are mainly attributed to the digital savviness of their populations and the supportive regulatory environment in both countries. While investing in cryptocurrencies can be attractive and lucrative, it is also not without risks.

Firstly, let’s discuss the rewards. Cryptocurrency is decentralized, meaning it is not controlled by any government or financial institution. This makes it a popular investment option for those looking to diversify their portfolio and reduce their reliance on traditional banking systems. Cryptocurrencies can also provide quick and easy access to liquidity, making it an attractive option for those looking to make quick profits. For example, digital artists can easily sell their artwork using cryptocurrencies and still own its copyrights.

Furthermore, the Monetary Authority of Singapore (MAS) has issued guidelines for the trading and exchange of cryptocurrencies, making it easier for investors to enter the market. To address money laundering and illegal activities, MAS issued Notice PSN02, also known as the detailed Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines for Digital Payment Token service providers.

However, investing in cryptocurrency also comes with its own set of risks. One of the biggest risks is volatility. Despite Singapore’s ambitions to become a global crypto hub, it has been cracking down on the industry after many retail investors lost their life savings to crypto trading. The country has repeatedly warned that cryptocurrency trading is “highly risky and not suitable for the general public” due to its volatile and speculative nature.

The general public must know that cryptocurrencies are subject to unpredictable price fluctuations. As they are less regulated, their value is influenced by other factors, such as psychological hype. For example, in 2017, Bitcoin’s price reached an all-time high of nearly $20,000, only to crash to $3,000 the following year. Another example is the rise of the first meme coin called Dogecoin.

Image Credits: unsplash.com

Another risk is security. Cryptocurrencies are stored in digital wallets, which can be vulnerable to hacking and cyber-attacks. If a hacker gains access to an investor’s wallet, they can steal their digital assets, resulting in significant losses. Can you imagine betting your life savings on cryptocurrencies and losing it all in a day?

Lastly, to thrive in the cryptocurrency scene, a certain level of technical knowledge is required. Don’t fall victim to frauds and scams by lacking technical knowledge. Investors need to understand how the blockchain works, how to manage digital wallets, and how to navigate cryptocurrency exchanges.

Despite the risks, the interest in cryptocurrency investment remains high among investors in Singapore. To minimize these risks, it is essential for investors to conduct comprehensive research before investing, keep their digital assets in secure wallets, and only invest a reasonable amount they can afford to lose. With prudence and caution, investing in cryptocurrency can be a fulfilling experience for Singaporean investors.

Sources: 1, 2, 3 & 4

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MAS Says Dealing in Any Cryptocurrency is Hazardous

To clarify some questions and misconceptions surrounding the collapse of FTX.com, the Monetary Authority of Singapore (MAS) has recently issued a statement. The Bahamas-based crypto exchange company filed for bankruptcy in the US on Nov 11, 2022 and is said to owe about US$3.1 billion (S$4.26 billion) to its top fifty creditors. Its short reign started last 2019.

In the statement released by MAS last Nov 21, MAS highlighted three key points.

#1: IT IS NOT POSSIBLE TO PROTECT LOCAL USERS FROM FTX.COM

Since the company is not licensed under MAS and operates offshore, it is not possible to protect the local users who dealt with the bankruptcy of FTX.com. “MAS has consistently warned about the dangers of dealing with unregulated entities,” the central bank said.

#2: THERE WAS A CLEAR DIFFERENCE BETWEEN BINANCE.COM AND FTX.COM

To the central bank, there was a clear difference between fellow crypto exchange companies Binance.com and FTX.com. While both companies are not licensed in Singapore, Binance.com was actively soliciting users in Singapore while FTX was not.

“Binance.com in fact went to the extent of offering listings in Singapore dollars and accepted Singapore-specific payment modes such as PayNow and PayLah,” according to the statement released by MAS. Thus, it was placed on the Investor Alert List (IAL).

#3: IT IS IMPOSSIBLE TO LIST ALL CRYPTO EXCHANGES ON IAL

Hundreds of such exchanges and thousands of other entities offshore exist so, MAS says that it is not possible to create an exhaustive list of all offshore crypto exchanges in the world on the IAL. The purpose of the IAL is to “warn the public of entities that may be wrongly perceived as being MAS-regulated, especially those which solicit Singapore customers for financial business without the requisite MAS license.”

Image Credits: pixabay.com

Users looking to refer to all the MAS-regulated entities should refer to the Financial Institutions Directory. This directory keeps an exhaustive list of such entities. It is important to remember that crypto exchanges can and do fail.

“Even if a crypto exchange is licensed in Singapore, it would be currently only regulated to address money-laundering risks, not to protect investors,” says MAS.

Sources: 1 & 2

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Why use a VPN to trade cryptocurrency?

Trading cryptocurrencies is a growing business, but it is not safe from hackers and malicious groups. These entities can inflict severe damages, such as investment scams, email phishing, fake apps, and blackmail.

To protect yourself against these threats, a VPN is your best bet. In this article, we’ll count down seven reasons—and a bonus reason—why you should be using VPN to trade crypto.

What is a VPN, and What Does It Do?

Cybercriminals carry out crimes like scams and phishing by tracking your digital footprints. In other words, whenever you connect to an unsecured internet connection, you leave a trail behind that hackers, your ISP, and even your government can view.

On the other hand, a VPN (Virtual Private Network) is a tool that can encrypt an unsafe internet connection making it secure from any unwarranted threats and attacks.

Reasons You Should Use VPN for Crypto Transactions

Here are some benefits crypto traders can enjoy by using a VPN.

1. VPN Helps Bypass Firewalls

There are many instances where your ISP provider might set up different firewalls to stop users from connecting to crypto-related websites using their network. Several reasons could be behind it, including your ISP not wanting to associate with crypto trading.

But a VPN allows you to bypass all of these firewalls easily without getting detected by your ISP, meaning you can carry on your business without anyone putting limitations on it.

2. Makes Internet Traffic More Secure

Whether you’re using a home or a public internet connection to carry out your transactions, likely, it will only use WPA2 for security purposes. Although this might seem secure, it isn’t and always puts you at risk of being exposed to cyberattacks.

But when you connect a VPN to your internet connection, it automatically encrypts every bit of data going to and from your computer, making it safe and secure.

3. Hides IP Address

When you visit any trading platform, including your blockchain explorer, they can view your IP address. Therefore, they might also get a hold of your crucial information, such as your country, city, zip code, and ISP.

On the other hand, connecting your internet via a VPN masks your original IP address with a remote one, effectively making you untraceable on the internet.

4. Security from Phishing Attacks

Phishing attacks are among the most go-to methods for hackers to steal cryptocurrencies — these attacks are conducted using various ways, including spoofing and fake giveaways.

To tackle this problem, some VPNs provide a blocklist service that stops users from landing on a phishing website.

Must-Have Features for VPN to Trade Crypto

In addition to the regular benefits, a VPN can provide some extra features, especially for crypto trading.

Kill Switch

A Kill Switch is one of the new and vital features of premium VPNs. It acts as a line breaker and shuts down your internet when you get disconnected from a VPN, so you can easily surf the web without worrying about your identity being exposed.

No-log Policy

When installing a VPN for your crypto trading, ensure it’s a no-log one. Because if even the VPN starts to track your movements on the internet, then there is no purpose of being invisible in the first place.

Split Tunneling

Split tunneling creates an additional route for the user that they can use for all of their activities that don’t need encryption. It gives users freedom and helps in cases where the VPN connection is bottling their internet speed.

How to use a VPN for cryptocurrency transactions?

You can follow these simple steps to use VPN as an additional barrier to crypto transaction security.

  1. Register for a VPN service.
  2. Download and install a VPN app for your devices.
  3. Connect to one of the servers.
  4. Browse any crypto exchange website or app you want and start trading securely.

 

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Your Concise Guide To Cryptocurrency Terms

DEFINING CRYPTOCURRENCY

The cryptocurrency is a virtual or digital currency that is secured by cryptography, which makes it nearly impossible to double-spend or counterfeit. Many cryptocurrencies are decentralized networks based on blockchain technology. This technology consists of a distributed ledger enforced by a disparate network of computers. A distinct feature of cryptocurrencies is that they are generally not issued by any central authority. Thus, these are theoretically immune to government manipulation or interference.

1. ADDRESS

Cryptocurrency coins are identified on the blockchain using the unique addresses. The value of your wallet is updated based on your address every time a transaction is confirmed. Addresses may appear in diverse formats. Simply put, no coin is stored without a proper wallet address.

2. BITCOIN

Bitcoin is a term you usually hear. It is a digital currency that came into circulation last 2009. Around 18.636 million Bitcoins have been mined and there are only 21 million currently in existence. These can be traded anonymously or sold for cash. It is important to note that the circulation is not controlled by banks or governments.

While Bitcoin is the most popular, there are other cryptocurrencies in circulation such as Cardano, Litecoin, Ethereum, Ripple, and Dogecoin.

3. BLOCKCHAIN

The blockchain is the underlying technology that powers the cryptocurrencies. It is a database that is chained togethering using cryptography. Once data is entered into this ledger, it cannot be erased or altered. All transactions are permanently recorded too.

4. EXCHANGE

The digital currency exchange is a business that allows users to sell, trade, buy, and exchange their Bitcoins for cash or other cryptocurrencies. Exchanges are usually run by private companies that earn by getting a commission from the transactions.

5. MINING

Like precious gold, there is a finite number of Bitcoins that can be acquired when you purchase or mine it. To mine it, miners use computers to solve complicated Mathematical puzzles. The miners receive Bitcoins as a reward for solving the puzzles. Mining requires powerful machines and unwavering amounts of time and energy.

Image credits: pixabay.com

6. PRIVATE KEY

The private key is necessary to verify transactions when withdrawing or selling your cryptocurrencies. If someone gains access your private key, you can lose all your funds in a matter of seconds. You should not share this string of numbers and letters to anyone!

7. PUBLIC KEY

The public key is a string of characters used to buy cryptocurrency. Fans can easily send cryptocurrency using the creator’s public key.

8. SATOSHI NAKAMOTO

Satoshi Nakamoto is the individual or group of individuals credited with founding the world’s first cryptocurrency – the Bitcoin. The founder remains completely anonymous. If you see the term “satoshis” thrown in conversations, it refers to a fractional unit of Bitcoin. You can transact with the satoshis.

9. SEED

Seed is the foundation of your wallet’s digital existence. A recovery seed is a series of twelve or sixteen words that can be used to access your wallet in case something goes wrong. It is the equivalent of asking twelve security questions for a forgotten password. Do not share this to anyone!

10. WALLET

A wallet keeps a record of the user’s balance. It enables you to receive and send digital currencies. A crypto wallet is either a hardware device or a program that can access the computer software.

Sources: 1, 2, & 3

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Seeing cryptocurrency as a get-rich-quick investment can be a massive mistake

cryptocurrency symbols

The word “cryptocurrency” has been thrown around rather frequently these days. However, this precarious investment may not be for everyone.

In fact, please don’t take our word for it. The Monetary Authority of Singapore (MAS) has warned the public on its volatility, and that risky investment products are unsuitable for retail investors. To be honest, it’s not hard to understand why.

Do you know that between 2018 to 2020, there have been over 500 police reports of crypto-related cheating, fraud, or other crimes? Nearly 400 of them were made last year, and the news revealed that roughly S$29 million was the figure for investors’ losses.

Experts highlighted the main risks:

  • Falling for scams
  • Jumping into crypto projects that fail
  • Involving in bad investments of obscure coins
A closer look into the scam tactics

Choo Oi Yee, chief commercial officer for private capital platform ADDX, shared that scammers are tapping onto examples of people who have struck it rich in rousing the greed of investors.

Ms Choo added that there are two scams under the Ponzi scheme:

  • Money from new investors is used as returns for earlier investors.
  • Pump & dump: Scammers buy a coin to push its price up misleadingly and then dump it after others jump on the bandwagon.

Hong Qi Yu, the founder and chief executive of the digital trading platform Tokenize Xchange, also commented regarding this issue. He said that scammers might use third-party accounts to hide their mischief.

Common tactics include:

  • Hacking into accounts
  • Using undoubting individuals as money mules
  • Threatening vulnerable individuals to use their accounts

To counter the ever-evolving strategy of scammers, Mr Hong urged legitimate operators to enhance their surveillance of unusual activities. He also recommended ​​“hot” and “cold” crypto wallets to reduce the risk of being hijacked.

Do your homework before cryptocurrency dealings
a person using laptop while researching

Image Credits: unsplash.com

With all that said, Ms Choo encourages potential cryptocurrency investors to do their homework. Crypto is complex, and a sound investment strategy involving investing in a range of assets is crucial.

Ms Goh (who declined to give her full name), who lost about S$30,000 to cryptocurrency trading platform Torque, prompted the public to learn about what they’re buying.

“Learn how to use the (crypto) exchange because different exchanges have different fees. You can save a lot on fees if you’re using the right exchange for the right coins.”

Another investor, Andy (not his real name), who lost about S$38,500 as a scam victim, asks investors to do their due diligence.

“The entire blockchain and cryptocurrency space (are) highly volatile. And the technology behind it is very difficult to understand, so unless you’re highly passionate about this whole landscape, don’t see it as a get-rich-quick scheme,” he noted.

When investment opportunities sound too good to be true, they probably are. Don’t let your hard-earned money go to waste via hasty investment decisions.

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