As Bitcoin’s dollar value hits a correction, experts candidly chat about what you need to know about cryptocurrency before you hop on this fin-tech bandwagon
During the wild, off-chance you are at a startup incubator and have your ear to the ground, chances are that you might hear murmurings about crypto, such as ‘how did your Ether investment work out?’ or ‘Don’t worry about stop-loss just yet, ride this tide out!’
The headline mania — such as Bitcoin hitting a value of $40,000 and the crypto-market reaching a $1 trillion value — became the making of novice traders eager to make a quick buck. Despite this, and maybe also due to this, crypto is saddled with a stigma similar to that of gambling. These decentralised digital currencies are seen as a tool only for the ultra-rich with a Midas touch.
The downside of novice traders entering the game is that they might not have not done all the necessary reading and learning before heading into this coin-dazzled world. So what should people know before making a decision of ‘to coin or not to coin?’ The answer: there is no hard-and-fast formula.
Contrary to popular belief, not all crypto business-people are utopists; wise ones warn that investing in crypto-coins or tokens is speculative, the market is largely unregulated, and that anyone considering it should be prepared to lose their entire investment. In fact, on January 11, Bitcoin and other coins tanked, wiping off some $170 billion from the market, signalling some market correction and proving that the industry itself is battling obstacles in terms of scaling, efficiency and security.
In 2018, the scene had experienced what experts call a ‘crypto winter’: value was at rock-bottom and there was a lot of speculation around government intervention. Alongside this apprehension, crypto technologists took more than a sleeves-rolled-up commitment to technical development in the infrastructure. This strengthened the foundation, which contributed to crypto’s ‘spring’ in the late-2020 ‘success’ of Bitcoin.
Neeraj Khandelwal, co-founder of CoinDCX
Alexis Ohanian, founder of Reddit and crypto advocate, explained in a past interview with CNBC that, “I’m personally happy with the fact that there has been a tough year in all these cryptocurrencies because it gets people focussed on the things that matter, which is building the software which is, hopefully, going to make these things tremendously valuable in the long term.”
With lakhs of such currencies available to choose from, Neeraj Khandelwal, co-founder of India-based cryptocurrency exchange CoinDCX, says, “people should be guided by principles and ground rules, rather than persons or certifications.” He adds that “the top 10 cryptocurrencies [such as Chainlink, Binance Coin, as well as Bitcoin and Ether] are widely trusted and properly decentralised, in that no single party has control over the prices.”
Neeraj’s company CoinDCX powered through the Supreme Court-RBI ban (April 2018 – March 2020) announced on crypto based on the belief that it would not last long. “We were confident in the technology,” he recalls, “We were not emotionally driven, we were rather focussed on the technology of CoinDCX itself and in the industry.”
He explains that crypto-investments should be made only when someone is “stable and thinking in the long-term.” He adds, “we should not take ultra-high risks with hard-earned money. If you are absolutely keen and have done consistent studying and analysis into the crypto world, then start with a small amount and monitor that for a reference to increase exposure.”
CoinDCX has its own learning platform as well: DCX Learn, where people who sign up to the exchange program can learn the in’s and out’s, free of cost.
Akshay Aggarwal, CEO at Blocumen Studios, says education is extremely important and any exchange platform should have an element of responsibility to teach. He also runs Blockchained India, one of the world’s largest networks of blockchain or crypto enthusiasts. Here, the members host virtual global talks about the latest developments to keep everyone in loop about an unpredictable tech. “If you do decide to start in crypto, it’s always helpful to have a network or even a person you trust to bounce ideas off. This kind of ‘closer peered investing’ could be helpful in keeping you in check.”
Akshay Aggarwal, CEO of Blocumen Studios, with venture capital investor Tim Draper
“The ideal crypto-investor should be patient, have some foresight after seeing how the market behaves for a certain time period, and maintain self-control and restraint. Also one should always stay as informed as possible,” urges Akshay, “because crypto evolves in a volatile manner at any time. Don’t think that you can always be ahead of a curve that is unpredictably impacted by innumerable factors.”
Don’t fall prey
Neeraj warns that, like most other fin-tech industries, crypto has its fair share of red flags. Those firing up their search engines to read up are most likely inundated with ads of bizarre encouragements: ‘give us your money and we’ll double it for you using crypto!’ or even ads for shady-seeming exchange platforms that just do not sit right. Neeraj urges netizens not to cave. “People should not believe in everything written in online forums, and don’t invest in just any token. People should restrict to the top currencies which can’t be manipulated,” he advises.
Agreeing with this, Akshay says, “Whoever is coming in, does not know how things might pan out. When the market sees a stabilisation, there may be a lot of losses for those who are experimenting.”
Another down-side to the crypto-trading and investing realms is the risk of addiction. “There is an element of FOMO (fear of missing out),” says Neeraj. “Understand that the market is volatile and have a mindset that you are in it for the long term. As markets go up, they also come down; so in these compulsions, short-term decisions are risky. This behaviour can eliminate a fair number of risks.”
“Just as you would not do it with your ‘offline money’, don’t trust your crypto with a stranger,” adds Akshay. “No matter how much returns they promise, it is impossible to predict prices in this space.”
It is easy to find resources and experts a click away to seek advice on crypto. But on a regulation level, things are still grey. Whether 2021 will finally be the year India clarifies laws around crypto remains to be seen.