Bitcoin, Ethereum, and other cryptocurrencies (aka digital assets) are now part of mainstream financial assets. Should you consider investing in BTC or other crypto assets?

Updated: Jan 26, 2024

What is Bitcoin?

Bitcoin (BTC) is an independent digital currency capped at 21 million (21,000,000) units without a centralized intermediary party (such as the Treasury or banks) to manage the transactions.

There is no coin!

Contrary to what it is called, bitcoin values are just numbers. It is the same when you check your bank account balance online – what you see on the screen is just a representative of the amount of cash you have with the bank, as stored in the bank’s centralized database. In banking terminology, the database is the bank’s ledger but for bitcoin, it is called the “blockchain”.


BTCUSD chart by TradingView


BCHUSD chart by TradingView

Bitcoin is Decentralized

Unlike bank where customer data is stored in physical data centers that located in a few selected locations, bitcoin leverages on its worldwide bitcoin network nodes.

A node is a PC that has the bitcoin client installed and running (similar to distributed computing projects such as SETI@home). Each node is equivalent to a data center and each node holds a copy of the blockchain that stores all bitcoin transactions that have ever taken place; from the very first to the most recent transaction.

Compared to the financial and banking system we have today which is prone to risks like fire, hacking, and natural disasters, the bitcoin network is naturally more resilient since there is no single point of failure.

 

How do I Print/Earn/Mine Bitcoin?

If the blockchain is the bank ledger, then there needs to be a bank teller who registers all the transaction into the ledger. In comes the “miner”, a group of dedicated and independent bitcoin enthusiasts who race against each other to crack the algorithm that locks a block (a group of transactions). For their service of keeping the bitcoin gears churning, the first miner who solves a block is awarded 50 BTC and this amount is halved after every 210,000 blocks to 25 BTC, 12.5 BTC and so on.

 

What happens when 21,000,000 Bitcoin is mined?

As bitcoin is finite, once 21 million bitcoin is mined, bitcoin will become a deflationary currency. Supply will reduce causing prices to rise as long as there is continued demand for bitcoin.

Miners receive compensation in the form of minting money and transaction fees for processing transactions into new blocks. Once 21,000,000 BTC is mined, miners will only receive transaction fee as compensation.

 

How to Use Bitcoin

Compared to conventional fund transfers, bitcoin transactions have lower fees and are faster. A typical transaction takes only minutes and this is a big advantage especially when you are looking to transfer a large amount to recipients globally.

Payment capabilities have been further advanced with the Bitcoin Lightning Network which is a secondary network that sits on the Bitcoin blockchain to allow for near instantaneous transactions.

Bitcoin is also very useful in places or occurrences of capital controls, shortage of cash, or financial disasters (E.g. 2013 Cyprus financial crisis where citizen’s bank deposits were at risk of being confiscated).

While it was once considered as being hipster for small stores to accept bitcoin, today even major merchants (i.e. Microsoft, Dell, Starbucks) also accept bitcoin payments.

Pros

  • Fast transfers globally without requiring 3rd party approvals.
  • Lower fees (or even no fees) for transactions.
  • Protection from payment fraud as payments are instantaneous, irreversible, and anonymous.

Cons

  • Risk of losses through bitcoin theft or if you lose your password.
  • Increased regulation by authorities on bitcoin usage.
  • Excessive volatility on bitcoin value.

 

Using Bitcoin in 3 Simple Steps

  1. Buy bitcoin online, via a trading exchange, or another person.
  2. Setup your bitcoin wallet (or you can leave them in the account).
  3. Spend/donate/keep (invest?) your bitcoin.

 

Investing in Bitcoin

For investors, bitcoin is the leading cryptocurrency and may offer very high returns at the risk of higher volatility.

Bitcoin is increasingly well-known and efforts are to make bitcoin publicly traded. This suffered a setback in 2017 March when the US  Securities and Exchange Commission (SEC) rejected a Bitcoin ETF proposal. Bitcoin Futures are now available from Dec 10, 2017 from CBOE and Dec 18, 2017 from CME. Bitcoin ETFs were finally approved by US SEC on Jan 10, 2024.

Pros

  • High potential returns.
  • Increasing bitcoin adoption and first mover advantage versus other crypto-currencies.

Cons

  • Very high volatility and risk of possible total loss.
  • Differences of opinion among the community for the future of Bitcoin.

Bitcoin returns versus other asset classes

Crypto Taxation

Crypto gains in Malaysia is taxed if traded (trading by nature) but not as an investment (capital by nature). More info on Malaysian crypto taxation here.

 

How to Invest/Open a Bitcoin Account in Malaysia

To store your Bitcoin, you will need a wallet that can store Bitcoin. You will also need to buy Bitcoin from an exchange, or individual. There are many options for various exchanges to buy/trade Bitcoin with some available only for specific countries/regions. You will want a reputable, secure, and low-fee Bitcoin exchange. Advanced users may want to consider hold a separate wallet that is not linked to an exchange for increased security.

3 SC Registered Recognized Crypto Market Operators

  • Luno Malaysia
  • SINEGY Technologies
  • Tokenize Technology
  • MX Global
  • Halogen Capital

Source: SC

Popular Bitcoin Sites

  • Luno (Previously known as BitX)
    Deposits/Withdrawals: free (IBG)
    Trading: 0.00% (maker) / 1.00% (taker)
    Free RM50 for new account signup and  buying/selling of RM500 with above link or promotion code “LUNOMYPF50”
    Free RM75 for new account signup and  buying/selling of RM250 with above link or promotion code “JASZ6”
    Luno is one of only 3 approved Digital Asset Exchanges (DAX) approved by SC in Malaysia
  • Binance
    Deposits: free / Withdrawals: ranges 0.0005
    Quick support of new coins and forks, and reduced fees if you used their own BNB coin. Not SC licensed in Malaysia.
  • Coinbase
    Trading: 1.49% / 3.99% (credit card/PayPal)
    One of leading sites globally supporting Bitcoin, Ethereum and Litecoin. Malaysia accounts unable to buy yet (Singapore is supported). Not SC licensed in Malaysia.
  • Halogen Capital
    World’s first Shariah Compliant Bitcoin & Ethereum fund with full client trust account segregation.
  • Local Bitcoins
    Buy/sell bitcoins online/cash locally in Malaysia

More Info: Comparing Bitcoin and Cryptocurrency Exchanges

 

How much Bitcoin should I buy?

Bitcoin is very speculative, may end up being worth very much OR worthless, and possibly in a bubble. As an investment, you will probably want to set aside anything from 0% to 5% of your overall investment portfolio into Bitcoin.

A good way to start is to buy just a small amount of RM250-RM1,000 worth of bitcoin to familiarize with how Bitcoin works.

Your overall Bitcoin holdings recommended would be 5% or below of your overall investment portfolio.

Look also to buy when there’s a dip in the pricing.

A whitepaper by CFA Institute shows that holding up to 4% of your portfolio in Bitcoin increases your portfolio returns without increasing your overall portfolio volatility significantly.

 

Storing Bitcoin in Your Own Wallet

It is recommended to store the bulk of your Bitcoin in your own paper wallet which is offline and therefore not subject to hacks and cyber-attacks. You can leave a small amount of funds in an exchange for easy trading or transfer purposes.

How to create a paper wallet

  1. Generate a bitcoin address (BitAddress.org)
  2. Click on “Paper Wallet” and generate (1 or more addresses) with option to hide art and for encryption
  3. Print to make a hardcopy of your Bitcoin Address and your private key (keep in a secure location as there’s no forgot my password option).

You and others can now transfer funds into your Bitcoin wallet using the public Bitcoin Address or QR code

Example of Bitcoin Wallet Address: 1C1n8EQF54y8PTm2cUGrFVvhFnj38yZhYF

 

Bitcoin/Crypto History and Milestones

What’s been happening with Bitcoin/Crypto?

  • 2009 Jan 3: Bitcoin “Genesis” 1st Bitcoin record (bitcoin.it)
  • 2010 May 22: Bitcoin Pizza Day – 2 pizzas bought for 10,000 BTC (worth then $25, today $20m) (businessinsider.com)
  • 2010 Aug 15: Bitcoin protocol bug causes hard fork (sourceforge.net)
  • 2011 Feb 9: Bitcoin price reached $1 USD (slashdot.org)
  • 2011 Jun 19: Mt Gox hacked and $8.7m lost (wired.com)
  • 2012 Nov 28: Halving day where BTC mining rewards reduce every 4 years until eventually reaches 0 in year 2140 (prlog.org)
  • 2013 Nov 20: China cautiously okays Bitcoin market participation (nytimes.com)
  • 2014 Feb 24: Mt Gox closes for good (recode.net)
  • 2014 Dec 11: Microsoft accepts bitcoin as payment (microsoft.com)
  • 2015 Jan 26: Coinbase launches US licensed exchange (wired.com)
  • 2015 Sep 18: Bitcoin is officially a commodity (bloomerg.com)
  • 2016 Jul 9: The halvening – 2nd halving day to 12.5 BTC per mined block (techcrunch.com)
  • 2016 Aug 2: Bitfinex hacked (coindesk.com)
  • 2017 Jan 3: Bitcoin breaks $1000 for first time in 3 years ushering in mass media coverage (cnbc.com)
  • 2017 Mar 10: SEC rejects Bitcoin ETF proposed by Winklesvoss brothers (washingtonpost.com)
  • 2017 Apr 1: Japan enacts law that accepts Bitcoin as legal tender (cnbc.com)
  • 2017 Aug 1: Bitcoin splits into Bitcoin (BTC) & Bitcoin Cash (BCH) (businessinsider.com)
  • 2017 Sep 2: Bitcoin crosses $5000 for the 1st time (bbc.com)
  • 2017 Sep 4: China declares Initial Coin Offerings (ICO) illegal (bloomberg.com)
  • 2017 Sep 12: JPMorgan Chase CEO Jamie Dimon calls Bitcoin a fraud (cnbc.com)
  • 2017 Sep 14: China Bitcoin exchange shutdown (bloomberg.com)
  • 2017 Oct 12: Bitcoin surges pass $5000 (bloomberg.com)
  • 2017 Oct 31: CME to launch Bitcoin Futures (cmegroup.com)
  • 2017 Nov 2: Bitcoin new high $7000 (cointelegraph.com)
  • 2017 Nov 9: Bitcoin SegWit 2x hard fork abandoned (bravenewcoin.com)
  • 2017 Nov 21: Bitcoin hits new record high of above $8k (cnbc.com)
  • 2017 Nov 26: Bitcoin goes above $9k (cnbc.com)
  • 2017 Nov 29: Bitcoin hits five figures $10k $11k (cnbc.com)
  • 2017 Dec 7: Bitcoin $14k $16k (bloomberg.com)
  • 2017 Dec 10: Bitcoin futures trading launches (usatoday.com)
  • 2017 Dec 22: Bitcoin slumps 30% (bbc.com)
  • 2017 Dec 29: Ripple is now (again) the 2nd largest crypto by market cap (mashable.com)
  • 2018 Mar 20: Bitcoin bubble burst (forbes.com)
  • 2018 Apr 2: Bitcoin lost $120b in 2018 Q1 (moneycontral.com)
  • 2019 Jun 4: SC approves 3 digital asset exchanges (DAX) in Malaysia (sc.com.my)
  • 2019 Jun 18: Facebook announces Libra crypto (techcrunch.com)
  • 2019 Jul 4: Bitcoin slump over? (cnn.com)
  • 2019 Jul 12: Trump calls Bitcoin, Libra and crypto a scam (marketwatch.com)
  • 2019 Nov 2: Bitcoin reached $1b in cumulative transaction fees (indepedent.co.uk)
  • 2019 Nov 25: Luno Malaysia official relaunch after approval by regulators (mypf.my)
  • 2020 Mar 19: Bitcoin flash crash caused by BitMEX outage (forbes.com)
  • 2020 May 11: Bitcoin mining “halving” (coindesk.com)
  • 2020 July 9: Malaysia’s SC cautions against illegal crypto ATMs (mypf.my)
  • 2020 Oct 21: PayPal to allow crypto transactions (paypal.com)libr
  • 2021 Jan 29: Bitcoin reaches new all time highs (ATH) after Elon Musk puts #Bitcoin on his Twitter bio (cnbc.com)
  • 2021 Feb 19: Bitcoin reaches USD1t (USD1,000,000,000,000) market cap (cnbc.com)
  • 2022 Mar 1: Binance takes strategic stake in MX Global (fintechnews.my)
  • 2022 May 11: USDT and Terra Luna stablecoin crash (business2community.com)
  • 2022 Jun 13: Celsius crypto lender pauses all withdrawals (bloomberg.com)
  • 2022 Jun 21: Luno Malaysia adds Uniswap and Chainlink (mypf.my)
  • 2022 Jun 27: Singapore-based Three Arrow Capitals liquidation (nymag.com)
  • 2022 Aug 26: Malaysia’s tax authorities (LHDN) releases crypto tax guidelines (mypf.my)
  • 2023 Jun 5-6: US SEC sues Binance and Coinbase (cnbc.com)
  • 2023 Jun 20: Luno exits Singapore believed to be due to tightening regulatory requirements. Malaysia not impacted. (straitstimes.com)
  • 2023 Aug 23: World’s 1st Shariah compliant Bitcoin fund launched in Malaysia by Halogen Capital
  • 2024 Jan 4: World’s 1st Shariah compliant Ethereum fund & Malaysia’s first staking solution launched in Malaysia by Halogen Capital
  • 2024 Jan 10: US SEC approves spot bitcoin ETF Funds (sec.gov)

 

Bitcoin News (Source: Google Finance)

 

Alternatives

Besides Bitcoin, there are many other cryptocurrencies. The leading alternatives to Bitcoin are Ethereum, Ripple, Cardano and Solana.

What is Proof of Stake Crypto?

Staking is how proof of stake cryptos like Ethereum add & confirm the latest transactions on the blockchain, serving a similar function to mining. By locking up your coins for a period & helping validate the network, you are given some reward for “staking” your coins. A key thing to note that staking is not to be confused with lending.

 


ETHUSD chart by TradingView

Ethereum (ETH)

  • Ethereum is a metaphor referring to Ether – the hypothetical invisible medium permeating the universe and allowing light to travel.
  • 2nd largest cryptocurrency by market cap.
  • Ethereum is a decentralized platform that runs decentralized apps on a blockchain (while Bitcoin focuses on peer to peer electronic cash transfers).
  • Ethereum is being tested by enterprise software companies for various applications including Microsoft, IBM, and JPMorgan Chase.

XRPUSD chart by TradingView

Ripple (XRP)

  • Ripple is a digital currency and also a payment protocol that allows transferring of other payments (including fiat currency) together.
  • 3rd largest cryptocurrency by market cap.
  • Ripple transactions are final and transfer immediately aka Real Time Gross Settlement (RTGS).
  • Publicly known Ripple partnerships include Accenture, American Express, Mitsubishi UFJ Financial Group, National Australian Bank, National Bank of Abu Dhabi, Royal Bank of Canada, Siam Commercial Bank and Standard Chartered.
  • Malaysian cross border money transfer services MoneyMatch uses Ripple’s blockchain.

 

 

 

Buying Ethereum, Ripple and Other Cryptocurrencies in Malaysia

Check whether your platform supports the cryptocurrency you are interested in buying.

If not, you will need to buy Bitcoin or Ethereum first and then exchange it other cryptocurrencies via sites like Shapeshift or Changelly.

 

To transfer over you will need a wallet that supports the cryptocurrency. For example, here is a wallet for Ethereum.

Make sure that your transfer is to a wallet that is for the exact same cryptocurrency you are transferring to!

ETH Wallet Address: 0x138DC203D5F35C3FabBcFf7abe23e0264F32cD5a

 

Have Malaysians Bought Ethereum/Other Cryptocurrencies Besides Bitcoin?

  • No. Only Bitcoin (53%)
  • Yes. Ethereum/other cryptocurrencies (47%)

Bitcoin & Crypto FAQ

Q: Is Bitcoin taxable in Malaysia?
Not as an investment. However, if you actively trade, you are likely liable for tax via the tax authorities (LHDN). Income generated will be treated similar to business income (Income Tax Act 1967 section 3). You are less liable to be taxed if it is a capital gain, passive, occasional, unplanned or unsystematic.

Q: Is Bitcoin a scam or like money games?
It’s not a scam, but it is very high risk.
Japan officially recognizes Bitcoin and digital currencies as money.
Malaysia does recognized Bitcoin as legal tender and will not regulate bitcoin operations.
Legality of bitcoin by country or territory (wikipedia.org)

Q: Is Bitcoin in a bubble?
The price of btc has moved very rapidly in the last 12 months. Bitcoin price, like currencies, is driven by supply and demand. Opinions differ on this topic. Some view it as a “little bit” of a bubble. While others are comparing it with the “tulip mania” of the 1600s.

Q: Is Bitcoin susceptible to hacking, theft, or viruses (that Wanna make me Cry)?
Any unnatural transaction that attempts to fool the blockchain will be discarded unless there’s a consensus from at least 51% of the nodes. Due to the tremendous amount of bitcoin network nodes that existed today, a hacker would have an easier time targeting individual bitcoin accounts (also known as bitcoin wallet) instead. To be safe, you will want to ensure you have your private key safely stored with you and backed up.

Q: Can You Compare Bitcoin to Gold?
Bitcoin is programmed to be anti-inflation. Unlike real world fiat currency which is freely printed as deemed necessary, there will never be a 21,000,001 bitcoin. Bitcoin that has been lost cannot be recovered, thus there will never be 21 million BTC in circulation.  Some individuals are starting to use bitcoin for portfolio diversification.

Q: Is Bitcoin a Hedge?
No in a traditional sense as Bitcoin price movement does not have a correlation with stock markets movements, and Bitcoin has very high volatility. However, Bitcoin may be viewed as a safe haven versus a currency’s collapse or rapid devaluation.

Q: What is the future of Bitcoins ETFs
US SEC rejected 2 Bitcoin ETFs proposed in 2017 as Bitcoin ETFs failed to meet standards as markets for bitcoins are unregulated. However, the SEC may in the future allow for a Bitcoin ETF.

“The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop… Should such markets develop, the Commission could consider whether a bitcoin ETP would, based on the facts and circumstances then presented, be consistent with the requirements of the Exchange Act.”

Q: Why do Malaysians Buy Bitcoin?

  1. Investing (45%)
  2. Speed of transactions (16%)
  3. Trading (15%)
  4. Payments (13%)
  5. Control (11%)

Q: Do People Trust Bitcoin?
Like most speculative new investment it is a mix. The number of people saying yes appears to be doubling annually. More people will also trust Bitcoin if government laws approve it.

Q: Can You be a Bitcoin Miner?
The mining reward is periodically reduced by half, and the mining difficulty or hardware requirements (calculated in hashrate) will ever increase with every block mined. A high-end CPU was all you needed in the past, but today you need to either join a bitcoin mining farm or group-up together with other bitcoin miners to pool your mining resources. Due to the ease of bitcoin mining in the past and coupled with the lack of purpose back in the early days, analysts have estimated that millions of bitcoins are now lost forever.

Q: How can you trade Bitcoin (short term trading)?
While you can buy Bitcoin through an exchange, it’s functionality may be limited. This for short term trading, a better platform would be a reputable forex broker that supports crypto. Bitcoin ETFs are another option but the amount of actual coins get RTF holds is much lesser than the value of the ETF although the coins are largely kept in cold storage giving you slightly more protection from theft or an exchange’s collapse

 

Open a SC Approved Crypto Account

Open and fund a crypto account with Luno with a promotional code and get FREE crypto

 

More Info

 

Discuss on Bitcoin and Crypto Currencies.