Crypto Guides and FAQs
Alternative to bitcoin and crypto
Bitcoin and crypto is a high-risk high-reward investment so we recommend diversifying your portfolio. Here are some ideas to help:
Professional investors put 35% of their portfolio into private funds to help diversify, hedge inflation, whilst also receiving great returns. Find out more by clicking here.
We have created a number of videos you can check out here:
Many people do not look at crypto as currencies. Instead, they are interested in investing for the long term in certain crypto projects for the technology and use case of that particular project.
Our view is that investing in crypto is halal as long as the project itself is halal.
There is some nuance when it comes to analysing which cryptos are halal and the different opinions that are held. You can check out a more detailed article here on the permissibility of crypto. We also have an article covering the differing views of the permissibility of crypto.
We have also compiled a table of the major coins, including altcoins, and whether or not they are halal which you can find at the bottom of the page.
Whenever you invest, you should ask yourself about the risk levels associated with that investment. Crypto sits in the high risk column of investments.
As with anything which is high risk, you need to be comfortable with the fact that your investment may significantly underperform and you could be sat on losses of 70% or more. On the flip side, if your investment pays off, crypto has shown that you can make lucrative returns of 10x or more.
The key thing when decided how much to invest in crypto is to only put an amount that you would be comfortable losing. That way, even if you come up against a turbulent time in crypto, you can ride it out over time or simply sell and accept your reduced capital.
If you’ve decided that you want to invest in crypto, you will need to open an account with a crypto exchange. These work in a similar way to online stocks and shares platforms but instead of buying and selling shares, you buy and sell crypto.
There are platforms such as Revolut or Paypal which will allow you to transact certain crypto coins.
There are also other specialists brokers, such as Coinbase and Binance, that will allow you to trade a wider variety of coins. Coinbase and Binance are the two most reputable brokers out there. And you want to use a reputable broker for this stuff.
Here’s our crypto broker comparison article.
What is staking?
In short, staking is a way of generating a return on your crypto. In a nutshell, you offer up your crypto to be locked up in a smart contract and in return for you doing so, you get rewarded. Your coins get put to work by the system and they’re needed to help the system to achieve consensus. The reward is typically additional coins of that coins you have staked which you can then sell for cash if you so wish.
There are different ways of earning yield on your crypto and we’ve gone into the whole thing in some detail in this guide.
Is staking halal or haram?
It can be, yes. There are different terms such as yield farming, liquidity mining, lending, staking, yield farming and they all have different technical meanings.
We highly recommend a good thorough read of this guide if you are serious about earning on your crypto.
Cryptocurrency, Bitcoin, Ethereum and Ripple are now established investment products. But as these assets are so new, Muslims have a whole series of questions around them both from an Islamic perspective but also a commercial perspective.
In this detailed guide (which we will add to live) we will cover off all the big question on this topic. Each of the links below refers to a detailed article that we have done to address that question.
Zakat on Crypto is a topical question. You can calculate your zakat on crypto here plus you get a free portfolio health check too.
Introduction to Cryptocurrency & Key Definitions
- What is blockchain and what are its uses?
- How does blockchain work?
- What is a cryptocurrency?
- What is bitcoin?
- What is an initial coin offering (ICO)?
- Major cryptocurrencies
- A list of sharia-certified cryptocurrencies
Islamic Issues with Bitcoin and Cryptocurrency
Make sure that the cryptocurrency or token you are investing in is halal. You can do that by consulting with our muftis on the IFG Forum, or by consulting our halal crypto list of the top 50 coins here.
We think that is incredibly hard to say right now as two competing trends are colliding: (1) there is insane bubbly ordinary-investor-piling in shenanigans going on which suggest a bubble; and (2) Bitcoin and crypto is going mainstream and it is very clear it is hear to stay and will likely form an integral part of the technological future that lies before us.(2) suggests that (1) is rational, but, well, (1) is pretty crazy right now. Long term we are bullish on bitcoin, but we do not think it should form a massive part of your overall portfolio for three reasons:
- It is high risk and high reward
- It is fundamentally not a very “impactful” or “useful” asset. It is not like a company or a property that actually does something productive for the world.
- You should have a diversified portfolio. Not financial advice, but perhaps a 5-15% allocation of your overall portfolio is sensible.
A small amount in crypto is not going to hurt anyone. We think its a nice additional diversification to a portfolio and hedge against the future too. If you do invest, we’d suggest investing in a basket of cryptocurrencies as right now it is unclear which the clearly dominant currency is.