Expert Series: Bitcoin questions answered by Suraya (ringgitohringgit.com)

Bitcoin is the oldest cryptocurrency. It started in 2009. What is a cryptocurrency? As per WIKI, “A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency.” Is it a legal tender for payment? Not in all countries but there are developments happening around the world for Bitcoins. Just a day ago, it is a legal payment method for Japan. Russia is meanwhile looking at regulating it. Article in CNBC here.  There are many questions which I would like to ask about Bitcoin actually and it so happened that my famous writer friend, Aaron of mr-stingy.com introduced me to the lady behind ringgitohringgit.com, Ms. Suraya. It was then that I got to know that she has been featured in many mass media outlets about personal finance and one of the subject she talks about is Bitcoin. I then asked and she agreed to be featured in this edition’s Expert Series. Happy reading.

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1)  How do I get started with Bitcoin? Where do I buy, how safe is it and would I be cheated if the vendor is from overseas?

A: You get started with bitcoin by knowing that it’s both a network and a currency. The network mines bitcoin keeps a record of the currency using an underlying technology called blockchain. The blockchain side attracts programmers/developers/IT people to it as it’s an exciting new technology. The bitcoin price side attracts investors.

Like fiat, the are many scams that operate with bitcoin as the currency. This is where the problem lies; without good digital security knowledge, it’s very easy to be cheated of bitcoins. There are HYIP scams, buying/selling scams, and many other types.

Bitcoin itself is safe to use – transfers from one wallet to another will be recorded in the blockchain (something like a data ledger) and proof of transaction is transparent to both parties. Finding ‘safe’ vendors or sellers is dependent on their reputation (as business or individual). To protect oneself, we always encourage the use of escrow services – services that protects both buyers and sellers. Without it, sellers can ‘mysteriously’ disappear after funds transfer. You’ll want to avoid this. More guides here. 

 

2) I have been putting my money into unit trusts thus far. Could you tell me three main reasons why I should also consider Bitcoin?

A: My answer is you shouldn’t consider bitcoin as an investment if you’re: (a) not good with digital security, (b) know very little about it and (c) have a low-medium risk appetite.

But you can consider it if you want to diversity into cryptocurrencies as a high-risk investment and/or if you just want to try out how digital and decentralised money works. Additionally, if you’re attracted to low-fee money transfer side of bitcoin. Some countries also sell bitcoin at a higher price, so some people take this arbitrage opportunity. That’s four reasons 🙂

 

3) The value of Bitcoin seems volatile. Could you explain more and are there ways to manage this better?

A: That’s correct; bitcoin is considered a high-risk investment. Price drops do happen, like when it crashed from USD12xx per bitcoin to USD2xx to back to now (as of time of writing) USD12xx again.

The politics of bitcoin is out of the average investor’s control, thus there is nothing much you can do about it. Some people use technical analysis to trade with bitcoin, but my personal strategy is to buy and hold for long-term.

 

4) In your opinion, how many years more is needed for Bitcoin to be one common world currency?

A: I am of the opinion that fiat system is strong and will continue to be strong but using both fiat and cryptocurrencies gives you more advantage as there are benefits to each type of currencies. I think both can exist together.

Additionally, bitcoin value is what it is as it had the first mover advantage. There are now so many cryptocurrencies today and who knows if another will replace bitcoin in market value. Bitcoin is still the clear #1 now, though. Read more here. 

 

About Suraya

Suraya Zainudin is the author of personal finance website Ringgit Oh Ringgit, where she shares her money journey. Like that time she almost worked for a forex company (who heavily hinted she should get someone to deposit RM500,000 into their account) and that time she rented an apartment in KL for RM150 per month. She likes passive investing, but makes an exception for cryptocurrencies like bitcoin.

When she’s not thinking about money strategies, she works with Wirex, a UK-based fintech startup. She also has a writing business and her work was featured in Hong Kiat, CompareHero, VulcanPost and more.

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Suggested article: Our investment resources: REITs, dividends, personal finance and bitcoins

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