Cryptocurrency investing: Opportunities and risks

CEBU, Philippines — While there has been a rising fever of speculation on cryptocurrency investing — particularly on bitcoin, a Cebu-based bitcoin investor attributed this to the lack of understanding about this new type of currency.

Michelle Varron, a Cebu-based investor for Coinage.ph, a bitcoin exchange platform, said: "Uncertainty has always been a part of cryptocurrency investing from the start. It's a part of all kinds of investing, but it appears more so in crypto because of the utter novelty and complexity of what cryptocurrency is and is trying to achieve."

She recalled since the first bitcoin was mined in 2009, until today when over a thousand cryptocurrencies are already in circulation, "information and understanding have lagged behind invention."

"The sense of uncertainty is there because it requires an entirely new way of thinking, and because of what I still believe to be a lack of proper forums for discussion that aid in absorbing this new information," explained Varron who became first fascinated with bitcoin in 2011.

"The technology may be new but there is nothing new under the sun when it comes to human nature: The problem is rooted in both ignorance and greed," she said.

She agrees that volatility is a feature of cryptocurrency investing.

"Good traders and investors use it to their advantage. I have always said that cryptocurrency investing involves substantial risk. And I too advise everyone to be cautious. It involves common sense too: don't invest in something you don't understand reasonably well. And if you want to ride the markets, expect losses as you would in stocks. Even the best skilled traders lose. No one is immune from losses and profitable trading and investing require skills that don't appear overnight," she advised.

In Cebu, as in many other places in the world, there are investment scams flourishing that attempt to lure people into putting in their hard-earned money into bitcoin, then reinvesting that bitcoin in a scheme that promises large and regular returns — sending their coins to the scammers' wallets and then those scammers running away with their money, if not soon then eventually.

"These give cryptocurrencies in general a bad name. They feed upon the public's unfamiliarity of digital assets and how they actually work," Varron stressed.

A bitcoin is a form of easily transferable electronic currency not issued or guaranteed by a central bank that is used for paying goods sold through the Internet, which sometimes stands as an investment for its holders given its fluctuating valuations. It is a form of digital money that is, and can be sent or received by anonymous users internationally.

Interest in bitcoin has skyrocketed worldwide.

"This is a global phenomenon. Bitcoin has caught on, from Google searches to social media to mainstream news. It's no surprise that Cebu is seeing a rise in inquiries and perhaps microinvestments. You'll be surprised, though, that the inquiries and discussions about bitcoin do not match the actual ownership," the Cebuano investor said.

"A very small percentage of people in the world still actually own bitcoin. Are people in Cebu talking about it? Definitely. Are the majority invested in it? I don't think so. Far from it," she also explained.

She believes those who have been invested a long time have always been grounded about it and that they know this is a monetary experiment that had some risk of failure.

"Early believers invested not just because of potential returns but more because they believed that this technology has the potential to benefit and change the world. Many early players are worried for new investors, however, because they are being lured into it for the wrong reasons, like getting rich quick or making wildly profitable trades despite having zero experience," Varron further added.

She also explained that the original intent was to create a decentralized peer-to-peer payment system, giving rise to a new somewhat decentralized economy.

"Cryptocurrencies aim to create new means of transacting, of representing, sending and storing value. I'm hoping that those ideals and that sense of innovation prevails over the fever of speculation," Varron said.

She advised those interested in bitcoin investing to do as much research and inquiry as possible into the subject before they dive in.

"We can only provide guidelines, but in the end, I believe the ultimate responsibility to make an informed investment falls with the individual," she said.

The Bangko Sentral ng Pilipinas earlier warned the public on the risks that comes with investing in cryptocurrency, as it also recognizes the potential benefits of virtual currencies.

It said it is equally aware of their potential risks to be used in illicit activities such as money laundering and terrorist financing.

The central bank noted that unlike stocks or debt issues, virtual currencies are not backed by any company or commodity and the price is purely dependent on market demand and supply.

“Virtual currencies (VCs) are seemingly gaining momentum in terms of usage as a medium for payment and remittances in the country. This is largely attributed to their ability to facilitate the movement of funds at a much faster, cheaper, and convenient way,” it said. “As such, investing in VCs presents a highly speculative and risky undertaking which might result into huge financial losses."

When asked for his comment, Marco Nino Velasco, trader at Maybank ATR Kim Eng, said the term invest doesn't apply to bitcoins; speculation does.

"Investing is putting your money into something that has value and foreseeing its value grow in time," he said.

"Speculation is an art. Leave it to the experts and experienced traders or speculators. They either make money or incur minimal losses with bitcoins," Velasco said.

"If you're clueless about what to do after buying bitcoins, better stay out of the game," he advised.

"Bitcoins has no clear value. Yes, it's promising. The concept of cryptocurrencies is revolutionary but is still too early. The risks involved are enormous as well. Potential is not value," the stock trader explained.

"It's not about whether you make money or not. Sure you'll do. But it's about knowing how to play the game," he said. (FREEMAN)