Cryptocurrency Investment: Past and Future Developments To Look Out For

This article was contributed to us by Sherry Goh,Global Expansion Manager and Country Manager for Singapore, Luno.

Despite the recent macroeconomic conditions, the cryptocurrency market is now worth USD1.1 trillion, with 41% of it being Bitcoin. While there have been stories of individuals making a fortune off the market, there are also those who have lost it all. The most recent unpegging of TerraUSD (UST) an algorithmic stablecoin created by Terra Foundation, and multiple bankruptcy filings are definitely a memorable development that will go down in crypto history.

With all the news and price fluctuations, is it too late to enter the cryptocurrency game?

What can I invest in?

Mention investing in cryptocurrency and most people will think of coins as the likes of Bitcoin (BTC) and Ethereum (ETH), or the more “headlines-grabbing” ones such as Dogecoin (DOGE; all thanks to Elon Musk and his tweets), and, most recently, TerraUSD (UST; more about that below) – but did you know that these coins are just one aspect of a much larger cryptocurrency ecosystem you can invest in – including the very familiar non-fungible tokens (NFTs), play-to-earn games, the others being decentralised finance (DeFi) and more.

As the first and most renowned cryptocurrency, the Bitcoin network was launched in 2009 by Satoshi Nakamoto, and originally designed as a new kind of digital money. Bitcoin was introduced as a currency created on the blockchain, touted as a decentralised peer-to-peer (P2P) electronic exchange. By December 2017, the price of Bitcoin skyrocketed when it reached over USD19,000, following which the cryptocurrency industry started taking off – with thousands of altcoins minted. With that, discussions centering cryptocurrency regulation and mainstream adoption have picked up pace, which continue to this day.

Besides coins, there are also smart contract platforms where digitally-approved paper contracts run on the blockchain that are fulfilled automatically once the terms are met. The value in these investments is more like owning shares in a start-up creating a new operating system for mobile phones, where the value will depend on the system’s success. Coins such as Ethereum (ETH), Solana (SOL) and Cardano (ADA) fall under this category.

Then there are the dApps, which comprise thousands of new, decentralised applications – built on blockchain technology, each believed to solve a need or improve an existing service. Some of these dApps have their own native token such as Uniswap (UNI). These days, developers are focusing particularly in the areas of financial services, gaming, and art, but there is still plenty of room for growth.

What does the future hold for cryptocurrency?

In the past year, Bitcoin has experienced multiple all-time highs and big drops, while Ethereum has hit its own all-time high. From nations deciding to use Bitcoin as legal tender (first El Savador, and recently the Central African Republic), others (e.g. US, and most recently Australia) have also started to list spot Bitcoin ETFs to allow for exposure within the traditional markets. With the increased interest and scrutiny, we have seen governments and brands worldwide implementing various regulations for and against cryptocurrency. Despite it all, investors have not been deterred by its volatility. Instead of speculating on the future of cryptocurrency, it is important to note that the industry is still in its infancy and is constantly evolving. Conversations about regulations are expected to continue across the world, and companies across industries are likely to continue adoption of cryptocurrency and blockchain.

So, is it too late for me to invest?

When it comes to investment generally, it is always never too late to start somewhere. At the end of the day it is not about being too early or too late, what is important are the challenges/problems cryptocurrencies like Bitcoin or Ethereum aim to solve. In fact, if the title of this article piqued your interest, you might want to take concrete actions to get started – by reading up properly. While it’s not too late to invest, it’s essential for anyone to at least know what they are in for in order to convince yourself – not others – on the long term potential of this industry.

Any investment activity is safer when you learn more about it before getting involved

I can’t stress enough on the importance of research here. As with any investments – cryptocurrency or non-cryptocurrency such as funds, stocks, or bonds – it is always important to be well-informed before one makes any decisions about investing. The usual set of considerations when jumping into any investment are largely personal and dependent on individual circumstances. For instance, what’s your tolerance for risk and the time horizon you want to commit to?

More specific to cryptocurrency, you could start off by taking time to find out more about the cryptocurrencies you wish to get into as well as the platforms you plan to use.

• When considering cryptocurrencies as an investment option, it is worth noting that:
  • Cryptocurrencies can be volatile. Cryptocurrencies have proven to be more volatile than traditional assets due to its smaller pool of buyers and sellers and this may not be something that everyone is comfortable with. Beginners should start investing with only an amount they can afford.
  • Don’t be misled by headlines around new and “sensational” coins. News coins are naturally driven by speculation, but do not forget that once these coins fizzle out, so does their value. Again, only invest after thorough research to make an informed decision – researching both the upside and downside of the protocol will help to internalise the potential risk to return of investing in a particular coin. It is always better to consider cryptocurrencies with a good and well-established track record and battle against the test of time. The general rule of thumb to abide by – if something sounds too good to be true, it probably is.
• When considering platforms, with several cryptocurrency platforms available out there, one will need to exercise discernment when making their selection. Before committing to a platform, conduct research and check if the platform has ever been compromised. Here are some things I look out for myself personally:
  • Credibility – when you are engaging the services of a company, it’s important that you find confidence in dealing with the company. Look out for platforms that are big on regulations and compliance and have a license to operate by the local regulators.
  • Security – Consider platforms that go the extra mile to keep your assets safe with stringent security features. Some questions to ask yourself: what does the platform do to protect your privacy and security of your assets? Does the platform have features like two-factor (2FA) authentication or password encryption to help prevent unauthorised access into your account?
  • Features and fees – everyone loves a good deal but it’s important to note that you have to look beyond just whether or not the fee is the lowest!

Before starting your cryptocurrency investment, do take the time to consult several sources to do your research. The internet is not short of information and useful resources – again, discernment is required, so consulting a variety of information sources is always useful. Don’t undermine the value of speaking to your professional and social network as well – your industry contacts, friends and families could provide some worthy insights. In terms of online resources, there are information aggregators such as Dollar & Sense, ChainDebrief, MoneySmart and Seedly which offer useful cryptocurrency resources. Luno Discover is also a good place to start for anyone who is exploring crypto for the first time. From daily briefings on cryptocurrency to trading guides, Luno Discover offers a wealth of knowledge to help users of all investment levels navigate the cryptocurrency investment landscape. LunoTV, our official YouTube channel, delivers close to 200 bite-sized pieces of knowledge across various topics from the latest market updates to industry insights relating to digital assets.

Remember, research and understanding help to make an informed decision.

Happy investing and always DYOR – Do Your Own Research!

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