5 Things You Should Know Before Investing In Cryptocurrency
Despite the fact that a lot of people are still more comfortable with using traditional cash, crypto has certainly piqued the interest of many.
In Malaysia, there still isn’t much conversation on cryptocurrency, but with time, more and more people are interested to find out how it works. At this point you might be thinking of embarking on that crypto journey.
But before you do, there are some things you should know so you can decide what’s best. Here are 5 things to consider before investing in crypto.
1. Start off small
Crypto can be super exciting, and if you’re new to this, you’re going to want to jump right in. It’s great to get enough exposure, but it’s also wise to take one step at a time. Before you start investing, know what the market is like and what type of crypto might be suitable for you.
Once you’ve figured these out, start investing in small amounts first. The last thing you want is to quickly lose a huge chunk of your hard-earned money. Take your time to know the market well enough before investing more.
2. It’s not recognised as legal tender in Malaysia
Before you start investing in cryptocurrency, take note that at this point in time, cryptocurrency is not considered to be legal tender. This doesn’t mean that it’s illegal or that you will get in trouble for investing in it. When we say that it isn’t legal tender, it just means that it’s not accepted as a form of currency in Malaysia for now.So, you can go ahead and accept payments in cryptocurrency from all over the world, but you just won’t be able to use it to buy things the way you can with Ringgit Malaysia.
Due to it not being legal tender, it’s not regulated by Bank Negara Malaysia. This simply means that it doesn’t have the same kind of protection that is given to legal currencies in Malaysia. Any money in your bank account is protected and insured by PIDM, which stands for Perbadanan Insurans Deposit Malaysia. Unfortunately, cryptocurrencies do not have the same protection for the time being.
3. You’ll need to be mindful of scams
Speaking of protection (or a lack thereof), you should take extra precaution to ensure you don’t fall prey to any crypto scams. Scams exist even in our daily cash transactions, but with crypto, it can be harder to identify them. There are Ponzi schemes, NFT scams, pump-and-dump schemes, and many more.
Before you invest, make sure the platform you’re on is legitimate. If something is too good to be true, that should already be a huge red flag. Look out for giveaways, job offers or other deals that promise you the moon and the stars, but don’t really have the credentials to back them.
4. Diversify your portfolio
The fact is, cryptocurrencies are volatile, and it’s very common to see the value of a crypto plummet within days and to see it rise again soon after. As an investor, your top goal is to get the best value from your investment by taking the least risks.
One way to ‘distribute’ your risks would be to invest in more than one place. That way, even if one investment dropped in its value, there might be others in your wallet that have great returns. By diversifying your portfolio, you’ll also eventually find out what type of crypto you enjoy investing in.
5. Find the right place to store your crypto
Speaking of wallets, that’s exactly where you’ll need to store your crypto. There are mainly two types of wallets: hot wallets and cold wallets. The first refers to online wallets, while the second refers to offline ones which don’t require an Internet connection.
Some examples of hot wallets are:
- Desktop wallets
- Mobile wallets
And as for cold wallets, some examples are:
- Hardware wallets that have a physical key storing your crypto
- Paper wallets that have QR codes
Crypto is an extensive subject and there’s a lot more we can say, but maybe we’ll save the rest for another article. For now, we hope this piece taught you a new thing or two! And if you’re wondering when the right time is to start investing, feel free to check out the article below: