The rising attraction of cryptocurrency worldwide has similarly impacted Indians as well. According to Nasscom, cryptocurrency investors have witnessed a significant 1,100% growth between 2022 and 2023. This remarkable transformation is evidence of heightened interest in the sphere by the Indian populace, but it comes with a critical question - should individuals who were not part of the recent cryptocurrency growth contemplate investing in cryptocurrencies?
Potential investors must research the potential advantages and disadvantages associated with cryptocurrency investment before deciding to jump into it. Some of these assets intrigue the investors based on the developers’ mission statement, whereas alternative investors favour postulating over price action and volatility of their preferred digital assets. Investing in cryptocurrencies is often intricate, but all of these assets are highly dissimilar in nature. Beginners must always be prepared to lose their capital, which can be avoided with appropriate prior analysis and due diligence.
What are the potential benefits of investing in crypto?
The first benefit of crypto investments that comes to mind is the significant growth potential. Bitcoin, the largest cryptocurrency globally, highlights this potential by its remarkable returns over the years. Investors must keep in mind that previous returns do not guarantee future returns, but in 2021, the value of Bitcoin soared well over 60%, demonstrating the possibility of serious returns. Meanwhile, in 2022 it plummeted by more than 70%. Since then, the value of Bitcoin has increased almost 49.2% to 2024. This highlights the inherent volatility associated with this particular asset class.
Crypto Tracker
Cryptocurrencies are part of decentralised networks, meaning they often offer autonomy and enhanced transparency. Transactions of these assets are recorded on blockchains which promote confidence and decrease the dependency on conventional financial tools. Crypto transactions are also faster and often cheaper than traditional bank transfers, especially when used internationally. This is made possible since cryptocurrencies lack intermediaries and the fees associated with them. According to the World Bank, international transactions on average were an astonishing 6.3% in 2022, which demonstrates the economic nature of crypto in binational transactions.
Many investors also point out cryptocurrencies like Bitcoin as a promising hedge against inflation because of its finite supply of 21 million coins. Theoretically, this allows Bitcoin to be impervious to inflation, which can take the value of conventional currencies over certain periods.
What are the potential risks associated with cryptocurrencies?
Volatility is synonymous with cryptocurrencies and market fluctuations are common. The significant volatility is often unsettling for investors and holds the potential to register complete loss without meticulous supervision. Furthermore, cryptocurrencies often fall victim to hacking and cyberattacks that can hand a significant blow to investors’ aspirations. Cyberattacks resulted in the theft of $2 billion worth of cryptocurrencies in 2022 throughout the world, highlighting the safety issues correlated with these assets.
Virtual digital assets (VDA) like cryptocurrencies do not have legal frameworks that regulate them presently. However, governments around the world are currently working towards establishing a global framework. This unpredictability holds the potential to create difficulties for investors and it's pivotal to remain vigilant about developments regarding regulations and be ready for changes that can affect the market.
Another challenge associated with cryptocurrencies is their slow adoption and limited usage in the real world. In countries like India, individuals cannot use cryptocurrencies to purchase products, which reduces their value proposition in comparison with conventional asset classes.
Crucial factors to consider before crypto investment
Before deciding to invest in cryptocurrencies, investors must contemplate several things. Understanding their risk tolerance, investment goals, duration of their investment and knowledge in the domain are of paramount importance before investing in VDAs. The fact that cryptocurrencies are a comparatively new mode of investment and come with unique advantages and risks should be considered before being influenced by public opinion. The Indian cryptocurrency market has been flourishing, which means beginning at a modest position and cautiously expanding the portfolio enables investors to become competent and discover the market dynamics with ease.
(Attributed to Roshan Aslam, CO-Founder & CEO of GoSats)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
FAQs
Most financial experts recommend limiting crypto exposure to less than 5% of your total portfolio. Crypto is considered a high-risk asset class. Limiting allocation helps manage overall volatility and risk. Those new to crypto investing may start with 1% to 2% as an introduction.
Should I invest in crypto or not? ›
Most financial experts recommend limiting crypto exposure to less than 5% of your total portfolio. Crypto is considered a high-risk asset class. Limiting allocation helps manage overall volatility and risk. Those new to crypto investing may start with 1% to 2% as an introduction.
Is cryptocurrency a good investment right now? ›
Investors must keep in mind that previous returns do not guarantee future returns, but in 2021, the value of Bitcoin soared well over 60%, demonstrating the possibility of serious returns. Meanwhile, in 2022 it plummeted by more than 70%. Since then, the value of Bitcoin has increased almost 49.2% to 2024.
What are the pros and cons of cryptocurrency? ›
Cryptocurrency in India offers financial inclusion, protection against inflation, remittance benefits, new investment avenues, fast transactions, and decentralization. However, it faces regulatory challenges, volatility, fraud risk, power consumption, and impact on traditional banking.
Why is investing in crypto important? ›
Cryptocurrencies are a portrayal of a brand-new decentralization model for money. They also help to combat the monopoly of a currency and free money from control. No government organizations can set the worthiness of the coin or flow, and that crypto enthusiasts think makes cryptocurrencies secure and safe.
Why is investing in crypto a risk? ›
There are several risks associated with investing in cryptocurrency: loss of capital, government regulations, fraud and hacks. Loss of capital. Mark Hastings, partner at Quillon Law, warns that investors must tread carefully in crypto's unique financial environment or risk significant losses.
Which crypto is best to invest now? ›
Here are six of the best cryptocurrencies to buy now:
- Bitcoin (BTC)
- Ether (ETH)
- Solana (SOL)
- Avalanche (AVAX)
- Polygon (MATIC)
- Cardano (ADA)
Key Takeaways. Bitcoin, the cryptocurrency, is most likely to remain popular with speculators over the next decade. Bitcoin, the blockchain, will probably continue to be developed to address long-standing issues like scalability and security.
Will crypto rise or fall? ›
Bitcoin, it found, is likely to hit an average peak price of $87,875 in 2024, with some experts predicting it will climb as high as $200,000. On the flip side, the average lowest price Bitcoin could hit by the end of 2024, is seen as $35,734, the report said, with some predicting it will fall as low as $20,000.
Is crypto still a good investment in 2024? ›
Key points. Bitcoin has plenty of bullish momentum in 2024. The SEC approved the first spot bitcoin ETFs in January 2024. The original crypto is on track for its next halving in April 2024.
Crypto firms were amongst the sectors that posed the greatest money laundering risk, according to a U.K. government report.
What are the benefits of crypto? ›
There are no long processing times and the transaction fees are usually much lower. Increased security: Bitcoin transactions are secure and cannot be reversed, making it a safe option for storing and transferring money. The blockchain technology used to power Bitcoin also helps to prevent fraud and double spending.
Is cryptocurrency legal? ›
As decentralized currencies, crypto is not and will likely never become banned in the U.S. Currently, the sale and purchase of cryptocurrency is legal in all 50 states.
How to spot a crypto scammer? ›
Be wary of social media adverts: Crypto scammers often use social media to promote their fraudulent schemes. They may use unauthorized images of celebrities or high-profile businesspeople to create a sense of legitimacy, or they may promise giveaways or free cash.
Can you still make money on crypto? ›
Earning Interest
Cryptocurrency can help you earn interest on your investments. It is done through a " yield farming process," where you lend your cryptocurrency to a platform in exchange for interest. The amount of interest you gain will solely depend on the platform and the type of cryptocurrency you are lending.
Does crypto have a future? ›
Analysts estimate that the global cryptocurrency market will more than triple by 2030. This all leads to one big trend. Cryptocurrency, once only understood among a relatively fringe community of anti-establishment investors, is now becoming a household name – and quickly.
Is it worth investing in crypto in 2024? ›
Thinking about investing in the popular cryptocurrency? A recent report predicts that Bitcoin will reach a new all-time high in 2024. Bitcoin (BTC) is expected to reach a new record of $88,000 (€82,000) throughout the year, before it settles around $77,000 at the end of 2024, according to a new report.
Is Bitcoin worth investing in 2024? ›
Our real-time BTC to USD price update shows the current Bitcoin price as $63,888 USD. Our most recent Bitcoin price forecast indicates that its value will increase by 11.75% and reach $71,387 by April 28, 2024.
Should I sell my crypto to pay off debt? ›
Very rarely should you sell your investments to pay off debt. The one exception here is if you have high-interest debt (like an outstanding credit card balance), but even then there are alternatives to consider before using your investments as repayment.
