Investing in Cryptocurrency: The Good & the Ugly side

New Delhi: Crypto currencies or digital coins have taken the investors and trading markets by storm. Be it novice investors or and an enthusiast, all have developed a keen interest in them, if not liking, as they have given colossal returns. Recent bloodbath gave investors enough reason to doubt the stability and profit-generation potential of crytos.

Still, if investors are wondering whether to grab an opportunity to invest in cryptos, whether they are here to stay. The answer is yes. Even, experts believe that crypto currency are a good investment option, provided market regulatory mechanisms are in place.

Dynamics of Crypto trading

Those associated with crypto markets are well aware of sudden and drastic price movements in cryptos and are prepared for it.

The crypto currencies exchange and market are not a thing of past. They came into being just a decade ago. Bitcoin, the first virtual coin emerged in 2009. Its value was $0 when it was introduced. It was only two years later that the value of Bitcoin touched $1 for the first time and in another 2 years, its value soared to $1,000.

Bitcoin saw its dream run in 2017, when its price galloped to $ 20,000. Though, the crypto soared to new highs, its growth was marked by many bouts of volatility. Going forward, in less than a year, it crashed to $3,300 levels.

Similarly, Bitcoin had slipped to $350 by April 2014 after hitting $1,000 for the first time in November 2013.

Young millennials drawn to crypto trade

Crypto currency has evolved drastically in a decade ago and is being accepted by many especially the youth brigade and millennials. It stands nowhere near conventional forms of trading but has gained quite a bit of traction among youths in past few years.

Year 2020 was particularly important for cryptos as valuations rose sharply in the middle of the coronavirus pandemic. One of the main reason why investors were lured towards virtual coins last year was weakness in traditional assets across the globe.

Some analysts even see 2020 as a breakthrough year for cryptocurrencies trade.

Easier to invest in crypto, than earlier

For most of the investors and traders, crypto currency market still remains a ‘tough nut’ to decipher and invest. Moreover, the extremely volatile fluctuations leave investors with a very little room for thought.

Bitcoin is a perfect example. It saw insane rise in 2017, with its price jumping from $ 1,000 to $ 20,000 in a year and then suddenly crashing to $ 3,000 in less than a year.

However, the massive returns in crypto currency trading is something that is drawing investors to this place. Moreover, the rules and mode of trading has been significantly eased up.Today, people can easily create an account using their phone and start investing.

Some crypto-dedicated apps are even allowing investors to make portfolios, which helps in diversifying assets. This will help investors invest in a pool of cryptocurrencies, giving them a chance to maximise their earnings while reducing overall risk.

Why people buy crypto?

In present economic scenario, there aren’t many attractive investment options. Interest rates have fallen sharply across segments, bank deposits have turned unattractive to the investors. Similarly, high volatility and a dull economic environment have made real estate, equity and mutual fund investments unattractive for HNI investors.
All these factors have prompted many investors to dabble in crypto markets.

What if crytocurrencies are banned tomorrow?

Unlike many European countries, India doesn’t have any regulation for trade and investment in cryptocurrencies. Rather, the Reserve Bank had banned all the banks from dealing in cryptocurrencies in 2018, however, the order was overturned by Supreme Court.

Lack of any regulation would mean that crypto investors are at high risk, if the government decides against cryptocurrencies in India. Tomorrow, if the government decides to ban cryptocurrency market and assets in India, all those holding it will get a sudden shocker.

No regulations, investors can be easily defrauded

According to data from crypto exchanges, there are approximately 1.5 crore Indians who have invested in cryptocurrencies and are currently holding assets worth Rs 15,000 crore. There are 350 startups who operate in blockchain and crypto.

Crypto exchanges, WazirX, CoinSwitch Kuber and other exchanges, have seen a big rush in demand from users and crypto exchanges are advertising heavily on investments.

There are now thousands of unregulated virtual coins in the market — some of which serve no purpose and were created just for fun.

Therefore, the worrying factor is that novice investors may end up investing in low-value cryptos thinking they are valuable. Since it is an unregulated market, there are a lot of ways in which investors can be defrauded.