[Finterest] What is cryptocurrency, and what's with the hype?

MANILA, Philippines – Since the first Bitcoin was mined more than 15 years ago, cryptocurrencies have become popular.

Currently, some of the world's largest investment firms, such as BlackRock, are investing large sums of money in Bitcoin, showing that even conventional financial organizations are dabbling in cryptocurrencies. And that can also be seen in the price. Bitcoin recently recovered to new highs, reaching a record of $73,000 for 1 BTC. Five years ago, that rate was less than $4,000 per 1 BTC.

Filipinos are also taking note. In 2023, the Philippines ranked sixth among 155 countries in terms of cryptocurrency adoption, according to American blockchain analysis firm Chainalysis.

So what's fueling all this fuss? We spoke to the team at Coins.ph, the largest cryptocurrency exchange in the Philippines, to learn more about this disruptive digital asset that was once dismissed as a fad.

Crypto, explained

Let's start with what cryptocurrencies are and what they are not.

Cryptocurrencies are the “money of the internet,” as Coins.ph country manager Jen Bilango puts it. But unlike the fiat currencies (think a dollar or a peso) that most of us are familiar with, cryptocurrencies are not issued by a state or government. Despite what their name may suggest, cryptocurrencies are not typically used as money to settle payments.

“It is a digitally native asset class that is now diverging based on the use case and utility of a particular token,” Bilango told Rappler.

Different cryptocurrencies can be classified into different general categories. The largest and most popular ones, such as Bitcoin, Ethereum, and Solana, are called “top cryptocurrencies,” those that have become generally accepted and trusted by people and financial institutions. Like the frontline stocks of the stock Exchangethe price of these tokens is more stable.

At the other end of the spectrum are highly speculative tokens whose prices are much more volatile. These "memecoins" lean toward the humorous side of internet culture, with names like Dogecoin, Shiba Ina, and Pepe.

“It has no inherent or innate value, but people like its speculative nature. Predominantly, you can see people trading based on that merit because in any asset class, there will always be people who would like to put money in and take it out, not just on the utility side,” Bilango told Rappler.

There are also gamified tokens where cryptocurrencies are used in the context of a game. While this may seem like a niche use case, it is actually what fueled the cryptocurrency craze in the Philippines, with the meteoric rise of play-to-earn games. infinite axie.

In games like Axie, players can earn cryptocurrencies called soft love potions, which can then be redeemed for other fiat currencies. But remember that the value of tokens like these is a function of their usefulness within the game ecosystem; In other words, the demand and value of the token rises and falls depending on how many players there are. If the game loses popularity, that can burn out players.

Which brings us to what cryptocurrencies are not. Cryptocurrencies should not be treated as a get-rich-quick scheme. There are no guaranteed profits in cryptocurrencies, nor are there any in other asset classes such as stocks. People can easily be fooled by what is promised and the benefits that are obtained.

Practical uses of cryptocurrencies

But what can cryptocurrencies really be used for? Coins.ph Global Marketing Director Katrina Gonzalez said it can “democratize access to financial instruments and services.”

This concept of decentralized finance, or DeFi, eliminates banks, clearing houses, settlement houses, and other financial intermediaries, allowing people to transact directly with each other using cryptocurrency. The vision is to use the security of cryptocurrencies. block chain to enable peer-to-peer financial transactions, for example, granting a loan directly to your friend with interest and collateral conditions that you set.

“The central concept of decentralized finance is that it is not necessary to go to an institution to access financial services. You can do things peer-to-peer, you can lend, you can contribute to a pool and then you can make money from it,” González told Rappler.

Cryptocurrencies have long been touted as a killer of middlemen in finance: large financial institutions such as banks and remittance centers. Another example is how overseas Filipino workers have used crypto to send moneyavoiding banking hours and the expensive rates of the “pera padala” centers.

“In cryptocurrencies, in blockchain, all of that happens simultaneously. This is how we eliminate all the fat from the financial ecosystem. By using stablecoins, you can transfer money across the blockchain instantly, in real time, because you don't have to rely on intermediaries to validate a particular transaction,” Bilango told Rappler.

Cryptocurrency remittances are often made through stablecoins, a type of cryptocurrency that is protected from the price volatility often associated with cryptocurrencies. Stablecoins have a constant exchange rate with fiat currencies, such as being pegged 1:1 to the US dollar.


For most people who want to get into cryptocurrencies, the easiest entry point would be through a cryptocurrency exchange. Using the familiar interface of an app, a user could easily exchange their pesos for Bitcoin tokens.

Those who are just getting into cryptocurrencies may want to stick with the top cryptocurrencies first, such as Bitcoin or Etherium, as they have been around longer.

“Bitcoin is like digital gold. It is your coverage, it is a reserve of value,” Bilango told Rappler. “It will maintain its value because there is only a finite amount of Bitcoin. In history, only 21 million Bitcoins will exist.”

Once you have purchased your tokens, the next decision you need to make is when to sell them. You can make a simple, simple purchase or use more sophisticated stop-limit orders that allow you to buy or sell cryptocurrencies when the price reaches a certain level. But if investing in cryptocurrency isn't what you want to do, there are still other ways to enter this space.

“Different people will have different use cases. It can be for remittances using stablecoins. It could be because you are going to play and you want to play and earn money from the games you play, or you want to be able to access NFTs,” Gonzales told Rappler.

“Maybe you like NFTs and the Solana ecosystem, and that's great. Maybe you are very excited about what is happening in Bitcoin from an asset class perspective…. Or maybe you see opportunities in DeFi and you're just a trader who just looks at charts, like technical analysis, and sees an opportunity there. It's really not a one-size-fits-all solution. “It is a very vibrant ecosystem,” he added.

Is cryptography secure?

But before you jump headlong into cryptocurrencies, let's make sure they're safe. Over the years, cryptocurrencies have had scandals and scams that have damaged their reputation. In 2022, the world's second largest cryptocurrency exchange, FTX, declared bankrupt after its CEO was convicted in a multimillion-dollar fraud case. A year later, the CEO of the world's largest cryptocurrency exchange, Binance, pleaded guilty to violate anti-money laundering laws.

Is that something we should still be concerned about?

Bilango acknowledged these issues, but said it actually demonstrated the resilience of cryptocurrencies as an industry.

“The cryptocurrency industry as a whole has been tested several times. One of the biggest exchanges blew up. One of the largest hedge funds that invested money in cryptocurrencies also exploded. But we are still here,” he told Rappler.

The Coins.ph team also noted that concerns about scams and fraud mostly occur on unregulated exchanges.

In contrast, local cryptocurrency exchanges that are licensed and regulated by the Bangko Sentral ng Pilipinas (BSP), such as Coins.ph and PDAX, must comply with the regulations. The central bank reviews exchanges' technology for vulnerabilities, checks that they comply with anti-money laundering guidelines and ensures that they have sufficient capital.

“BSP guarantees that when you invest money [Coins.ph]that your assets are backed one to one, so we are not doing any additional nonsense,” Bilango told Rappler.

Ultimately, Bilango said avoiding the traps that novice cryptocurrency investors fall into is a matter of knowing your risk appetite and being smart about where you put your money.

“Do your own research. Invest only the money you are willing to lose. And only transact on platforms that are regulated and monitored by your license to transact those types of transactions in your country,” he said. – Rappler.com

Finterest is Rappler's series that demystifies the world of money and gives practical advice on how to manage your personal finances.

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