Chances are, you’ve already heard the words “Bitcoin” and “cryptocurrency.” Maybe you’ve encountered them in your circle of investment-savvy friends or you while you’re reading finance articles online. At some point, you might have shown some interest in it, but you decided not to pursue the topic further, fearing that you’d get drowned in highly technical terms, jargons, and hard-to-understand topics fit for tech geeks.
Over the years, cryptocurrency has been called a lot of things. Some consider it to be the money of tomorrow while others think of it as a risky and rather volatile asset. But with reputable companies like Tesla buying Bitcoin in large quantities,[1] the general public’s interest in cryptocurrency in the Philippines has skyrocketed in recent years. A lot have started to think that maybe the likes of Bitcoin are worthwhile and viable investments.
But we highly advise you to hold your horses and arm yourself with knowledge before doing anything or putting your money in a cryptocurrency wallet in the Philippines. We’ve come up with a short yet informative guide that will give you a head start on cryptocurrencies.
What is Cryptocurrency?
Cryptocurrency is digital money—it’s virtual and has no physical form. Don’t confuse it with the money in your e-wallet or online banking account, as it is tied to real physical coins or bills.
Because cryptocurrency is purely digital, this means that you can store it online and even in small, specially designed hardware. And since it doesn’t require a bank or any middleman, you can easily send your digital money to anyone, anytime, anywhere.
How Does Cryptocurrency Work?
Cryptocurrencies work through blockchain technology. Blockchain is a special kind of database, and it differs from traditional databases when it comes to storing data. Traditional databases are centralized, meaning only select people can access them. Blockchain, on the other hand, allows all participants to view the records and all the changes that happen in the database.
To understand how blockchain works in the context of cryptocurrency, let’s take a look at this example. You buy a laptop from a shop using a credit or debit card. The bank then subtracts the money from your account and then updates your records. Only you and the bank have the access to your transaction records.
But if you buy a laptop from the shop using cryptocurrency, here is what will happen. Your transaction data will be stored in a block, which is technically a list of other transactions made by other people. The block where your transaction is listed will then be chained to previous blocks.
With this setup, you can think of blockchain as a global ledger that records all the transactions of the people who are using the same cryptocurrency. This ledger also makes sure that all the transactions that go to it, from past to present and to future, are all valid.
What are the Differences Between Bitcoin, Blockchain, and Cryptocurrency?
Cryptocurrency is digital money. Bitcoin is a form of cryptocurrency. Blockchain, on the other hand, is the technology used to make cryptocurrencies (such as Bitcoin and others) work.
Read more: 5 Essentials for Cryptocurrencies: Get Started Now
Is Cryptocurrency Legal in the Philippines?
Yes. Cryptocurrencies are regulated by the Bangko Sentral ng Pilipinas (BSP).[2] In fact, 17 virtual currency exchanges are registered with the BSP and authorized to operate in the Philippines.
What Happens When I Buy a Cryptocurrency?
For context, let’s use Bitcoin in this example. When you purchase Bitcoin, you buy a fixed number of slots in a virtual ledger, which for Bitcoin, is the blockchain. When you trade away your Bitcoin, you sell your slot in the blockchain.
Bitcoin uses electronic coins as its form of exchange. However, these electronic coins are nothing more than slots in the blockchain. A transaction is considered valid only when the majority of users in the network determine it is valid, therefore creating a complex system for exchange that is essentially impossible to hack.
How are Cryptocurrencies Protected?
Cryptography, the process of protecting information by using codes, is used for the security of cryptocurrencies. It’s also used to control transactions and increase the supply. With this feature, cryptocurrencies have become self-governing and self-regulating.
Digital money is free from the shackles and rules of traditional banks. This allows practically everyone to complete digital transactions without a third-party financial institution facilitating the process. By principle, the cryptocurrency model is a financial system designed by the people, for the people.
Read more: Dabbling in Crypto? Learn More About Crypto Apps
What are the Advantages of Investing in Cryptocurrencies?
Below are some of the outstanding advantages of investing in cryptocurrency in the Philippines.
Potentially Massive Returns
While cryptocurrencies are relatively young, they can bring potentially higher profits compared to other forms of investments. Yes, it’s risky, as cryptocurrencies’ values fluctuate fast over a short period. But in the world of investments, great risks come with great rewards.
Good for Diversification
Experienced investors go beyond the usual assets, such as bonds, stocks, and equities, to minimize losses and establish new sources of income and gains. They diversify their portfolio by putting their money in alternative investment vehicles, such as jewelry and even art pieces. So, if you’re already well-versed when it comes to investing and you want to try another asset, cryptocurrency could be a good start.
See also: Investments for Beginners: How to Find the Right Investment for You
Highly Liquid
Cryptocurrency, after all, is a form of money. You can easily buy cryptocurrencies and sell them quickly. Just time your selling, so you can earn. Transactions are much easier these days, as there are many trading platforms available that will also help you come up with sound investment strategies.
Can be Used Anytime, Anywhere
Cryptocurrencies are portable, meaning you can bring them anywhere and use them anytime. And since your money is stored online or in a digital wallet, no one will know that you’re carrying thousands, millions, or even billions of dollars or pesos.
Related article: How Much Bitcoin Do You Need to Buy a Car?
What are the Risks of Investing in Cryptocurrencies?
If you’re really adamant about investing in cryptocurrency in the Philippines, don’t forget about its drawbacks and risks:
Market Volatility
The value of cryptocurrency changes quickly; the value may be high right now, but it may drop a few minutes later. And if you don’t have a good strategy in place, you may experience massive losses. This may make some new investors quite anxious.
Your Wallet Can Still be Hacked
Hacking the cryptocurrency network will be very difficult. However, your hardware or virtual wallet, which stores your digital money and private keys, can still be hacked. And when that happens, your money may be stolen.
Cryptocurrency in the Philippines: What are the Options for Investment?
If you’re planning to invest in cryptocurrencies, know that it comes in many different forms. Here are the most popular digital currencies today.
Bitcoin
Launched in 2009, Bitcoin is perhaps the most popular cryptocurrency out there. As of this writing, it has a market capitalization worth more than USD 685 billion. It doesn’t come cheap though, as a single coin currently costs over USD 36,000. That’s equivalent to more than PHP 1.7 million.
Many investors and experts consider Bitcoin to be the first and original cryptocurrency. Developed by a programmer under the pseudonym Satoshi Nakamoto, Bitcoin has decentralized digital currencies and created a disruption in the financial world.[3]
Ether
Ether is the digital money of the cryptocurrency network Ethereum. It is the second largest cryptocurrency with a market capitalization worth over USD 266 billion. One ether costs around USD 2,200. If you’re a developer who builds applications using the Ethereum platform, you can also use ether to run commands.
XRP
XRP is the digital currency of the company and cryptocurrency network called Ripple. Currently, it has a market cap of over USD 39.5 billion and is priced at USD 0.86 per coin. Compared to Bitcoin and other cryptocurrencies, XRP transactions are much faster and cheaper.
Litecoin
While many call Bitcoin the gold of the digital money world, Litecoin is touted as the silver cryptocurrency. It was released in 2011 to compete with Bitcoin. It was also developed to process transactions faster than Bitcoin. At present, Litecoin has a market cap of more than USD 10 billion. One Litecoin is currently pegged at USD 161.
Dogecoin
Developed in 2013, the meme-inspired Dogecoin has enjoyed some popularity in recent months, thanks to a series of tweets from Elon Musk.[4]
Currently, Dogecoin has a market cap of more than USD 43 billion, and each coin costs USD 0.33.
Note: All the costs stated in this section are subject to change without prior notice. If you want to track these cryptocurrencies’ prices, visit coinmarketcap.com.
Related: How to Start Axie Infinity: Beginner’s Guide to Playing and Earning from the Game
Where Can I Get Cryptocurrency?
To buy cryptocurrencies, you’ll need to download an app that will act as your virtual wallet. Using this wallet, you’ll then use real money to buy cryptocurrencies of your choice. Cryptocurrency wallets in the Philippines also come in physical forms, which may look like a USB device. Popular brands and models include Ledger Nano S, which can store Bitcoin, Ether, and Dogecoin, and Trezor, which can store XRP and Litecoin.
Related article: Coins Pro Trading Basics: What You Should Know Before Buying Cryptocurrencies
Final Thoughts
Cryptocurrency is just one of the many things that prove how the world has become more globally connected than ever. Its accessibility also gives people a chance to grow their money and build their wealth.
However, investing in cryptocurrencies should always be done not just with proper strategy but also with thoughtfulness. Take it from Elon Musk who says that while cryptocurrency is promising, people should still invest with caution.
Just a word of caution from us: Invest only in what you know and truly understand. If you really want to invest in cryptocurrency in the Philippines, read more materials and ask trusted professionals about it.
Sources:
- [1] Tesla Buys $1.5 Billion in Bitcoin, Plans to Accept It As Payment (CNBC, 2021)
- [2] BSP's Regulatory Approach on Cryptocurrencies (BSP, 2018)
- [3] Were There Cryptocurrencies Before Bitcoin? (Investopedia, 2021)
- [4] How a Series of Elon Musk Tweets Helped Lead Investors to Dogecoin, a Meme-Inspired Cryptocurrency Worth 4 Cents (Entrepreneur, 2021)
DISCLAIMER: Information published on this blog or elsewhere on www.moneymax.ph should be used for general information purposes only and does not constitute investment advice, performance data or any solicitation or recommendation that any security, investment product, transaction or investment strategy is suitable for any specific person. This material does not take into account your financial situation, risk tolerance level, investment experience or objectives; all of which are unique to you. Before acting on information on this blog, we suggest consulting an independent professional to advise you on the risks of any decision and the extent of any exposure to loss.
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