A Beginner's Guide To Crypto Investing In Singapore

Investing in cryptocurrency in Singapore is relatively straightforward, as it is completely legal. Singapore citizens can purchase cryptocurrency by registering with a brokerage, app, or exchange like Binance. However, it is important to carefully consider the security and reputation of the crypto exchange.

Before investing, it is recommended to have the following:

- Personal identification documents for verification

- A secure internet connection (avoid public Wi-Fi)

- A phone for two-factor authentication

- A bank account to wire money from

- A secure method of cryptocurrency storage, such as a cold wallet

Choose a cryptocurrency exchange

When choosing a cryptocurrency exchange, there are several factors to consider. Firstly, it is important to ensure the exchange is secure and has a good reputation. The custodian should be in good financial standing to minimise the risk of bankruptcy. It is also crucial to verify that the exchange uses secure storage solutions, such as cold storage, to protect your cryptocurrencies from hacks and theft.

Another key consideration is the range of cryptocurrencies and fiat currencies supported by the exchange. Some popular cryptocurrencies include Bitcoin, Ethereum, Litecoin, and Dogecoin. If you are interested in a specific cryptocurrency, ensure that the exchange supports it. Additionally, check if the exchange allows trading against fiat currencies and which fiat currencies are supported.

Trading and withdrawal fees are also important factors to examine. Compare the fees charged by different exchanges for buying, selling, and withdrawing cryptocurrencies. Some exchanges may offer lower fees for high-volume traders. It is also worth noting that your bank or financial institution may impose additional fees for fiat deposits or withdrawals.

Other features to consider include the user interface, customer service, educational resources, and any additional tools or services provided by the exchange. For example, some exchanges offer interest-earning programmes or the ability to trade cryptocurrency futures.

• Crypto.com: Supports a wide range of cryptocurrencies and fiat currencies. Offers affordable fees, a crypto app, and a Visa card.
• Independent Reserve: An Australian institutional-grade exchange operating in Singapore since 2019. Provides affordable fees based on trade volume and maintains high security standards.
• Coinhako: A Singapore-based exchange supporting over 40 cryptocurrencies. Allows seamless bank transfers and offers an attractive user reward programme. Charges a flat 1% trading fee.
• Coinbase: Supports more than 90 cryptocurrencies and is available in over 30 countries. Offers recurring cryptocurrency purchases and insured cash balances of up to US$250,000. However, it charges relatively high fees and lacks support for Singaporean users.
• Huobi Global: Supports 379 cryptocurrencies and provides a variety of options for exchanging with fiat money. Offers margin trading, interest-earning programmes, and a trading bot feature. Utilises a tiered fee structure.
• Kraken: Best suited for advanced investors, supporting 86 cryptocurrencies and offering flexibility in trading futures and margin trading. Allows users to generate interest on their holdings but has limited fiat currency support. Charges vary depending on the trading volume and type of trade.

Set up a secure wallet

Setting up a secure wallet is an important step in investing in crypto in Singapore. A cryptocurrency wallet is a software programme that stores your private keys and tracks your balance. It is important to note that if you lose your private keys, you will lose your cryptocurrency.

There are two main types of crypto wallets: hot wallets and cold wallets. Hot wallets are connected to the internet, allowing users to transfer or trade crypto assets quickly. However, due to their connectivity to the internet, hot wallets are more vulnerable to cyber-attacks and theft. Examples of hot wallets include exchange wallets (where the exchange holds the private keys to your coins), desktop wallets, and mobile wallets.

Cold wallets, on the other hand, store your crypto assets offline, making them more secure but less accessible. Cold wallets include paper wallets (where the private keys and QR codes are printed on paper and stored in a secure location) and hardware wallets (where the private keys are stored on a USB or other hard drives). Some hardware wallets also come with security features that protect the device from malware and viruses.

While hot wallets are more convenient for trading, cold wallets are generally recommended for storing long-term or sizeable cryptocurrency holdings to reduce the risk of theft. It is also important to choose a reputable and secure wallet provider and to back up your wallet regularly to ensure the safety of your crypto assets.

Understand the risks

As with any investment, it is important to understand the risks involved before investing in cryptocurrency. Here are some key risks to consider when investing in cryptocurrency in Singapore:

Volatility

The value of cryptocurrencies is highly volatile due to their relative youth and the fact that they are not regulated by the Monetary Authority of Singapore (MAS). This means that their value can fluctuate sharply within a single day, and they are subject to significant price movements in a short period. For example, Bitcoin prices fell by nearly 65% in 2022, and it is not unusual for the value of other cryptocurrencies to double or halve within a matter of months.

Regulatory Risk

The regulatory environment for cryptocurrencies is still evolving, and the lack of regulation means there is little to no legislative protection for consumers. The Payment Services Act (PS Act) is a key piece of legislation for regulating cryptocurrency in Singapore, but it is mainly targeted at addressing money laundering and terrorism financing. There is currently no guarantee that you will be able to recover your money or cryptocurrencies if your service provider's business fails.

Security Risks

The decentralised nature of blockchain technology means that transactions are secure and transparent, but it also means that there is no central authority to investigate fraud or track lost or stolen cryptocurrencies. Additionally, while blockchain technology is secure, the exchanges and wallets where cryptocurrencies are stored and traded can be vulnerable to hacks and cyber-attacks. It is important to carefully research the security and reputation of the crypto exchange or wallet provider before investing.

Realising Gains

Selling your cryptocurrencies and realising the gains involves a multi-step process, and you will be subject to transaction fees and possibly foreign exchange rates. It is also worth noting that there is no guarantee that the real-world applications of cryptocurrencies will continue to grow, and companies that currently accept them may drop them at any time.

Inherent Worth

Finally, there is the issue of the inherent worth of cryptocurrencies. Unlike shares, which reflect a company's performance, or commodities, which are daily necessities, cryptocurrencies do not have an underlying asset. This means that their value is purely based on supply and demand, and there is a risk that their value could drop significantly if they are no longer widely accepted.

In summary, investing in cryptocurrency involves a high level of risk due to its volatile nature, the evolving regulatory environment, security concerns, and the potential for gains to be eroded by fees and exchange rates. It is important to carefully consider these risks and only invest what you can afford to lose before entering the world of cryptocurrency investing.

Research the market

Researching the market is a crucial step in investing in cryptocurrency in Singapore. Here are some detailed steps to guide you through the research process:

• Start with the basics: Familiarise yourself with the fundamentals of cryptocurrency and blockchain technology. Begin with well-known cryptocurrencies like Bitcoin and Ethereum, as there is a wealth of information available online, much of it free. The original Bitcoin Whitepaper by Satoshi Nakamoto and the book "Mastering Bitcoin" by Andreas Antonopoulos are excellent resources to understand Bitcoin and blockchain technology.
• Review the project's website and whitepaper: For new or smaller coins, information may not be readily available, so it's important to do thorough research. Check the project's website for legitimacy, including important information such as contact details, terms of use, privacy policy, content quality, and external links.
• Understand the project's industry and market: Gain a clear understanding of the industry the crypto project is targeting and the issues it aims to address. Evaluate whether the industry is growing or facing challenges. Determine if blockchain technology provides a meaningful solution or improvement for the industry.
• Analyse the problem the project aims to solve: Dig deeper into why the project believes its approach will help solve existing problems. Assess if the project simplifies existing processes, saves costs, or offers any other tangible benefits.
• Evaluate the use of the cryptocurrency: From an investor's perspective, it's crucial to understand the actual use and value of the cryptocurrency or token. Even if a project has a strong use case, the associated currency may not have any real-world application, making it purely speculative.
• Research the cryptocurrency or token: As a potential investor, gather as much information as possible about the token or coin. Understand if it is built on an existing blockchain or has its own. Look into the total amount of tokens issued and whether there will be a cap on the maximum amount.
• Examine the team behind the project: Conduct thorough research on the team's qualifications, experience, and achievements. Don't rely solely on the information provided on the project's website; utilise platforms like LinkedIn and Twitter to learn more about the team members. Reach out to the team with any questions to assess their dedication and responsiveness.
• Study the project's roadmap: A roadmap outlines the expected timeline and milestones for the project. While software projects often face delays, be cautious if the developers consistently miss their targets. An unrealistically short timeframe is also a potential red flag.
• Identify strategic partners: Established partners bring credibility to a crypto project and help tap into additional resources and expertise. Analyse how the project portrays its partnerships and look for detailed information. Don't be fooled by mere logos; verify the partnerships through external sources, such as press releases.
• Research competitors: Understand the project's competitive advantage by researching other crypto projects in the same industry or with similar use cases. Compare their differences, development status, and strengths and weaknesses.
• Utilise external sources: Go beyond the information provided by the developers and seek out news websites, analysts' insights, and other businesses' perspectives. This can reveal important details, such as past security breaches, mishandling of funds, or key team members' departures.
• Leverage social media: Assess the project's presence and engagement on social media platforms. A dedicated social media presence that actively updates its community is a positive sign. Observe the general sentiment and engagement of the community. Be cautious of overly hyped or emotionally charged communities.
• Explore open-source code repositories: Many crypto projects claim to be open source, so check platforms like GitHub to see if they have posted their code. While you may not understand the code, you can view the number of contributors and the last update date.
• Understand how to buy the token or cryptocurrency: Evaluate the process of purchasing the token or coin. ICOs, for example, may lock up your funds for a period. Also, consider the exchanges where the tokens are listed, as smaller exchanges may pose higher security risks and lower liquidity.
• Evaluate the market cap: A small market cap means the price can be easily manipulated by a few large holders, leading to pump-and-dump schemes.
• Check hardware wallet support: Well-established cryptocurrencies are often supported by hardware wallets like Ledger or Trezor. For smaller projects, dedicated wallets or exchange storage may be the only options, each with its own set of risks.

Make your first purchase

Now that you have an account on a cryptocurrency exchange, you can make your first purchase.

Firstly, sign in to your account via a private home connection. Then, select the option to buy crypto and choose the digital asset you want to buy. For example, you can select coins like Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), and Ripple (XRP).

Next, enter the amount you want to buy, ensuring that you have sufficient SGD or other fiat currency in your bank account or deposited with the brokerage. Preview your purchase, checking that you are comfortable with the current price of the cryptocurrency and aware of the overall market trend.

If all the details are correct, click "Buy" to complete your purchase. You can then keep your new assets in the exchange's built-in wallet or transfer them to other hot or cold storage.

Using a Crypto ATM

If you want to skip the sign-up process, you can head to a cryptocurrency ATM to buy and sell cryptocurrencies directly and instantly with cash. The buying process involves depositing fiat currency (e.g. SGD) and withdrawing cryptocurrency to your secure digital wallet. The selling process is simply the reverse.

While this method is convenient, it is also costly. According to Coin ATM Radar, these ATMs charge between 4.1% and 6.9% for cryptocurrency transactions, with minimum transaction fees starting at $10.

Peer-to-Peer Exchanges

Another option is to use a peer-to-peer (P2P) cryptocurrency exchange like Binance P2P, where you can post advertisements to sell your cryptocurrency and provide details about the price and payment methods. You can also browse listings to buy cryptocurrency and choose who you want to trade with.

However, P2P exchanges carry risks as you are dealing directly with another trader. Therefore, it is important to assess the credibility of the user before starting a trade.

Frequently asked questions