A Script of Cryptocurrency – A Little Bit Understanding on Bitcoin Investment in India
Dr. C N Narayana, Founder MBA Pulse Professor, Author, Mentor & Social Worker
When the virtual reality was possible and moved beyond VR to augmented reality and still further through AI, people may raise their eyebrows why not invest in virtual currencies for trading and investing to enhance valuation of your holdings. It is agreed that it is not a difficult task to invest in cryptocurrency bitcoin exchanges are further facilitated by the deep penetration of the internet and smartphones. One must understand the basics of investment pattern and agree for the new culture of such trading requiring fair amount of guts and courage. For any layman to understand, I would simply say that it is accepting a small chit of paper for the balance of cash you paid and next time when you visit the same shop you can adjust or trade for some other merchandise and leave as deposit for future merchandise. Imagine the value of the small piece of paper may vary.
As it is going to be a deposit or investment there, it is most likely to grow without any guarantee for growth. Similarly, cryptocurrency is accepted as a digital or virtual coin secured by cryptography impossible to counterfeit. Let me just script a few things for the readers to understand a bit on bitcoins before they invest in this. Why Indian investors are skeptical about cryptocurrency investment is the amount of risk involved in it. I quote Warren Buffet “Risk comes from not knowing what you are doing, and successful investing takes time, discipline and patience”
1. A Digital Global Investment method
These bit coins as mentioned is next to impossible to counterfeit secured by cryptography have their own store value depending on the country it belongs to and how much is demand is there to buy or sell a simple economics. The value of a specific bitcoin will go up when the global acceptance and demand is there. Primarily these coins are designed to use as a medium of exchange to buy goods and services. These are currencies are generally decentralized and built on blockchain network technology. Generally, these currencies are free from government interference or adjustments for inflation etc. Therefore, they are inflation proof.
2. Tracking & Portability of investment
As these currencies are based on digital structure the portability across geographies and does not have underlying economic base. However, an investor must be fully aware of the risk that these coins can be used for illegal activities and subject to exchange rate volatility. As this form of investment uses blockchain technology they do carry pre-determined store value of their own. Cryptocurrencies are highly sophisticated digitally mined like solving complex computational mathematic problem. Their mining is pretty expensive and not always rewarding.
3. Blockchain Technology connect with Crypto
It is a form of a shared and immutable ledger which records the tracks the assets in business network. This means virtually anything of value can be tracked and traded on a blockchain. Normally in a digital database it can be delinked. In blockchain data in blocks they are linked or chained together. The filled data is chained to the previous block in a chronological order. In Cryptocurrency transactions it used in a decentralized way so that an individual or a group can have a control over it. A collective control mechanism is possible. The data once entered is irreversible and it is permanent in nature and can be viewed by anyone.
4. How do you choose your investment in Cryptocurrency?
The investor has to do the basic research before buying their own country currencies or US dollars. There are some cryptocurrencies globally accept only cryptocurrencies to make investment in Bitcoins . Therefore you need to select the crypto exchange, create your account and verify the same, deposit and start investing, place the order of your preferred currency and create a portfolio of currencies ( Bitcoins of various countries globally) and manage the risk by spreading the risk between cryptos you are investing. It is similar to that of investment in Gold called crypto ETFs which is nothing but Exchange Traded Funds. It is a collection of various market instruments in this case it is portfolio of various cryptocurrencies, which can be called as Portfolio of investment like Mutual funds.
5. How much should be the minimal investment in Crypto and the process?
Just like the investment in the stock market there is no minimum value you can invest. However, interestingly in Cryptocurrency you can buy small units of it after you are registered and add it to your wallet and use the amount to place an order for bitcoin or any other cryptocurrency. You can invest as low as Rs.100 in India. The limit is subject to vary between crypto currencies you are dealing or transacting with. In India you can invest in Indian Rupee but cannot use the same for payment. A bank account link is a must for crypto transactions and only KYC approved users are allowed to make payments. The fee levied may vary from one currency to another and one exchange to another. There are many online procurements which can be done but these stores accept a specific or designated crypto currencies only. One can make use of various search engines to understand online acceptability for purchases.
6. Regulatory framework of Cryptocurrency in India
There is no clarity on cryptocurrency operations and acceptance in India. RBI and the government of India must be clear about the same. The new age technology across many countries globally impacted to go for these digital currencies . However, in India the ban of 2018 on these transactions by RBI was reversed in 2020 by the SC of India and there is a scope for crypto trading in India too in the years to come. But it is in an absolute nasal stage.
How do we perceive the growth of Cryptocurrencies and Bitcoins in India?
Though Gen Z investors in India is quick to catch on to or adapt to crypto the realties are different. Elon Musk’s endorsements and last year’s buzz for Indian apps. A word of caution is long term viability for an instrument as an instrument connected to regulatory landscape. There are more than 15M investors in cryptocurrency in India according to the Internet and Mobile Association of India ( (IAMAI) . Also, the recent surges of popular cryptocurrencies like Bitcoin, Dogecoin have motivated Indians to look at such digital investment as a great opportunity and easy access globally have further attracted Gen Z to invest and trade in cryptocurrencies.
The risk of fluctuating valuation will result in huge losses. Even in the recent past Bitcoin went into 4 month low and in August first week again further losses (Between 50% to 57% drop). A careful Indian investor or a Risk Manager must evaluate the usefulness of conducting transactions apart from looking at the weakness of crypto infrastructure and the sources of changes in the values of these assets. Any money in my view is a fiat money if not blocked by other assets with intrinsic value which includes cryptocurrencies. The value of Bitcoins may increase over time only if the demand is good enough and there is a consistency in value growth and the fluctuations are within a reasonable limit. Cryptocurrencies in the middle of August 2021 shows a struggle for Bitcoin, Ether, Dogecoin with a fall again. Bitcoin prices plunged as he world’s largest cryptocurrency market capitalization was trading more than 2% lower on the 15th of August 2021.
The good news when you look at YTD amid volatility, Bitcoin showed a 50% plus value growth. It is not the same story with other coins. The value of more than 8800 tokens tracked by CoinGecko has shown improvement with the help of Bitcoin and ether rallies. Despite a big push by Cryptocurrency lobbyists, the procedural issues especially tax reporting of various countries will make it a daunting task to grow this sector. There are not many Elon Musks in the market the investors can listen to and take risks at least in India.