Is investing in Cryptocurrencies a good idea?
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Before we answer this question, lets talk about whether cryptocurrency is legal in India. While the regulation is ambiguous currently, the RBI and our Finance Ministry have been formulating a new law which seeks to make cryptocurrency illegal in the country. That law is expected to be passed shortly. But that said, crypto is already illegal in the USA and several other countries. What you want to make of that law is up to your judgment 🤫
The purpose of cryptocurrencies is to move away from government regulation. What started as a way to deal with underground, grey, and black markets online has now become a movement. In fact, a couple of years ago, it was set to breakout when all cryptocurrencies were trading at crazy life highs. But since then, governments woke up and made regulation at various stages – machinery for mining crypto, exchanges trading crypto, etc – and there has been a massive crash since then. The last few months have seen a resurgence in the crypto world with Bitcoin leading the way. Now lets get to answering the question here – is investing in cryptocurrencies a good idea.
Answer this question first please – why do you want to invest in crypto? Is it to diversify your investments? Is it to move some portion of your assets into the cloud? Is it just a fad you want to get into? Or is it to become a zillionaire because someone told you Bitcoin (or some brand new unheard-of coin) will be worth a million times what it is today? Most people who got into crypto got in as a fad and wanting to become incredibly rich very fast. Most of them lost everything they put in since much of that investment went into new coins which were touted as being ‘more versatile than Bitcoin and Ethereum’. If you’re treating this as another investment opportunity to diversify your portfolio, please be aware that you could end up losing all of it very quickly – if regulation comes in and you’re no longer able to transact in your holdings. While there may be alternate methods of redemption through international channels, it may not be worth the hassle for a small amount. On the other hand, some day soon we may see Bitcoin or other cryptocurrencies being accepted by large online retailers and they suddenly become mainstream. There are advocates to both sides of this argument, but what is certain is that our governments will not cede control over finance flow that easily. They want to have every rupee and dollar flowing through their avenues, and if possible, they’ll make the flow tighter! Crypto, if it fulfils what it set out to do, will move trillions of dollars away from their control, and obviously that got our people into high gear to pass regulation banning it all.
Already for many investors, the amounts they put into cryptocurrencies is just lying there. There are easy channels in India as of now to buy and sell popular cryptocurrencies, but again, since legislation is currently not in place, you never know if the taxman will come knocking for the bank transactions we make when buying or selling crypto. Personally, we are convinced that cryptocurrencies are an idea whose time has come. In our lifetime we will see them being used regularly – whether legally or not is something we can’t answer yet. But that said, for an individual Indian investor who doesn’t have easy access to forex or the savvy to navigate the complexities of buying, holding, and selling crypto, we would advise you to stay away for now. Treat this like a trinket that has caught your eye. Add it to watchlist and look it up once in a while if anything changed.
Let’s get a bit more serious here. It is very possible to lose everything you put into crypto if you’re not careful. The logistics of buying, storing, and selling cryptocurrencies need a decent level of tech expertise. If you’re not VERY comfortable with the internet and at maintaining multiple accounts with complex authentication protocols, don’t get into it. There are several exchanges which just shut down the last couple of years. Several big exchanges got hacked to the tune of several million dollars. Moving crypto holdings offline onto a USB ledger device needs you to be even further savvy with technology. If that device is lost, everything you invested is lost. If you lose the login information or get locked out of your exchange account, you lose everything you invested. No way to ask someone to help; and account retrieval may not even be possible. We’ve heard of Swiss banks in movies, right? Cryptocurrency accounts are almost like that – you just have an account with login info, and if someone gets their hands on it, they can use whatever you’ve stored in it. That is the core purpose of cryptocurrency – of not being traceable and of being entirely anonymous. I’m not putting the fear into you here, this is the truth. Many people got into the game without knowing all this, and they’ve lost truckloads of money in the rush to get rich quick. But if you’re aware of this all, and consider yourself up for the challenge, why not! Keep your eye out for regulation though, and be nifty about it when changes happen in the crypto markets. If you think our stock markets are volatile, wait till you see the market movements of cryptocurrencies 😂. Feel free to reach out to us via any of our Social Media accounts if you’re looking for answers to a specific query – Twitter, Facebook, Quora.
