‘Cryptocurrency Is Innovative; Risky But Rewarding’

An IT professional who started investing in cryptocurrency early this year reveals how the market operates and the risk it carries

I work in the IT Sector and have a fairly good understanding of how the cryptocurrency market works. I had kept an eye on the crypto market for several years but began actively investing only since April 2021. I needed time to get properly acquainted with the extremely volatile market.

Cryptocurrency can be described as totally unregulated digital tokens or coins, whose value often changes faster than you can pronounce the word cryptocurrency. It is not considered a legal tender and is definitely subject to market risks. These tokens exist on a widely distributed and decentralised digital ledger, known as Blockchain. Each different cryptocurrency has its own ledger or Blockchain.

Not only is the cryptocurrency highly volatile, it is also highly innovative and more and more players are joining the fray with each passing day. Bitcoin, the first cryptocurrency and other currencies in general are designed to keep government intervention and regulation at bay when it comes to finances.

The world seems divided between people who love cryptocurrencies and those who don’t. Governments across the world, including India, don’t encourage dealing in cryptocurrencies as those who don’t have a proper understanding of the market can be easily defrauded, since the market is an unregulated one.

Only a few days ago China’s regulators banned all cryptocurrency mining and trading, a move that sent Bitcoin (the most expensive) and other coins tumbling. Furious buying and selling is still going on and Chinese investors are scrambling to protect their digital assets. Many are saying that China is doing this because it wants no competition for the government-run digital currency in the pipeline – the digital Yuan.

ALSO READ: Bitcoin Nosedives After Chinese Crackdown

The most expensive digital coin in the world right now is Bitcoin that originated in Japan around 2008-09. 1 Bitcoin is equal to ₹31 lakh as of today morning. Compare this to the fact that $1 is equal to nearly ₹73 and you know how totally different the two markets can be. Other popular cryptocurrencies are Ethereum, USD-Tether, Dogecoin, Cardano, Ripple, Litecoin, Binance. Due to the Chinese crackdown Bitcoin fell to as low as $41,018.41, while altcoins (alternative cryptocurrencies) saw an even deeper fall in value.

I have invested in cryptocurrencies like Ethereum primary, Dogecoin, Litecoin, Ripple, Cardano, USD-Tether etc over the months. Overall you could say my cryptocurrency portfolio value (much like share portfolio in the stock market) has gone down in the past months due to volatility because of the Chinese crackdown. I haven’t suffered losses yet because I haven’t sold or traded my holdings, but their value has reduced drastically.

Most people do not have an understanding of how the crypto market works and they buy disproportionate amount of coins only to suffer losses; they have no idea that crypto coins can be bought in decimal units as well, known as ‘Token Decimals’. I had traded USD Tether (A US Dollar-based cryptocurrency) with Shiba Inu coins and the currency immediately crashed. Had I opened my trading window and sold off my holdings, I would have heard a huge amount that day, but I chose to play safe.

ALSO READ: Bitcoin – A Goldmine Or A Landmine?

The crypto trading and exchange works much like stock exchanges in real life and it is known as a Digital Exchange Platform (CEP) or Digital Currency Exchange (CCE). These software platforms are based on block chain. The top digital exchange platforms in the world are Binance.US, Coinbase, Crypto.com, Kraken, Gemini etc.

In India the main platforms are: Coin DCX, Wazir X (Indian Subsidiary of Binance Holdings),Coin Switch Kuber, Unocoin, Bit bns.

I would like Indians to try out the cryptocurrency market, though it is at a nascent stage here. Moreover, the financial sense of Indians is conservative and needs a little cleaning up too. We are too impatient and disparage a new financial model at the slightest hint of discomfort. I would say one should not only focus on making big bucks, but also be consistent with it.

The cryptocurrency market isn’t regulated by a SEBI (Securities and Exchange Board of India) like body. Yet, the risk is totally worth it and with new players entering the market everyday, one can hope to make recovery fairly quickly. One should both thoroughly read about the market and know how to use one’s instincts when it comes to cryptocurrency. As they say in all financial disclaimers: investment is subject to market risk, read all scheme-related documents carefully.

As Told To Yog Maya Singh

(The identity of the narrator is kept undisclosed on request)

Bitcoin: A goldmine or virtual land mine?

LokMarg offers five quick takeaways about this controversial currency for potential investors: 1) No one regulates the value of Bitcoin although it is projected to be run by an unidentifiable user community, which means it can be priced $10,000 today and $1,000 tomorrow and $100,000 the day after. Investor must realise this is the proverbial roulette in a casino. 2) Even though there is little proof of it most security experts suspect that Bitcoins are being used for unlawful trading of funds and rogue nations or organisations could be using it to channel their funds or launder their assets. This means if you are a Bitcoin user or investor, you are willy-nilly aiding and abetting unlawful operations. 3) Mobile or desktop apps are used to create an online wallet for the users, which in turn can connect a Bitcoin exchange to your bank for trading. Apparently, the system seems to be working fine due to a block chain, a continuously growing list of users. However, the day this chain breaks down, like in Ponzi schemes, the newest entrant will be the most severely hit. 4) Early birds have devoured the worm. Experts believe that the cryptocurrency has had its most fruitful run in 2017. This means the early traders have booked their profits and exited safely. The current price is too high from an investor’s point of view to reap high dividends. So, purely from the business point of view, the currency does not have much returns to offer. 5) Mystery drives it. The charm of Bitcoin lies in its secrecy. There is no valid reason behind its popularity other than the enigma around this currency. It is this mystery that often drives users and investors to fall for it, akin to becoming the member of a secret society. // ]]>