Cryptocurrencies are exciting. Cryptocurrencies are risky investments. Cryptocurrencies aren’t something many understand very well at this time. In India, the risks are a notch higher than what your global investment counterparts perhaps face. While they restrict their risk evaluations to what Elon Musk may randomly tweet about some cryptocurrency or what the market forces are deciding in terms of crypto buying and selling rations, things are a bit more complex here. In India, banks and banking institutions aren’t ready to play along with cryptocurrency platforms, which has led to more than a stumbling block. Over the past few weeks, cryptocurrency investment platforms in India including WazirX, CoinSwitch Kuber and ZebPay have shared official communication at different points of time warning investors about banking issues, loss of banking services and alternate routes of investing in crypto coins.
There is a certain amount of trepidation among investors, about the future support for cryptocurrency platforms by banking institutions. It is reported that the Government intends to set up a panel of cryptocurrency experts as a first step towards regulating cryptocurrency in India. For investors, cryptocurrency panel recommendations cannot come soon enough. News18 speaks with Vikram Subburaj, Co-Founder and CEO of the Giottus Cryptocurrency Exchange. Giottus as a platform also offers crypto investment for users, and the app is available on the Google Play Store for Android phones and the Apple App Store for the iPhone. Subburaj believes that the government of India will soon formalise some regulation for cryptocurrencies in the country and that the industry is set to double in the next 12 months, from current market capitalization of $1.7 billion. Edited excerpts here.
Q. First things first, for the uninitiated, how would you simply define cryptocurrencies? And why do they matter?
While there has been innovation in most fields, the concept of money has had little or no innovation over the last few decades. Money has all been a governed by sets of centralised entities that have failed to control inflation and safeguard people’s investments in them. Cryptocurrencies are mathematical solutions to governing money or use cases that money is currently solving. Cryptocurrencies are global and decentralized digital currencies. They are not regulated by any Government or a central body. Most transactions are publicly visible on the blockchain technology that supports them giving authenticity and trust to its investors. The currencies are traded 24×7 without a minute of downtime. Cryptocurrencies are currently evolving much like how the internet of 1990s did. They, especially Bitcoin, have the potential to be the de facto currency or a store of value in future. In addition, multiple real world use cases can be solved by the including removing intermediates and associated costs from transactions. You will definitely hear a lot of negative vibes about cryptocurrencies simply because they are trying to innovate something as fundamental as money and it is a new technology. Internet did not have it easy either!
Q. We hear a lot about blockchain and cryptocurrency in the same breath – how are the two linked?
Blockchain is a technology where information (including transactions) can be stored publicly that is impossible to hack or cheat. Hence, they are 100% safe. Cryptocurrencies are one of the popular applications of blockchain technology where transactions of units of currencies are approved and stored on a public ledger.
Q. Should someone who is looking for safe investments put their money in cryptocurrency? And if yes, which ones are the safer bets?
Cryptocurrencies are emerging to be a strong asset class and definitely warrants an inclusion in every investor’s portfolio. The market can be highly volatile but investors who have held on to their coins/tokens for years have always gained disproportionately compared to traditional assets. We strongly recommend first time investors to consider buying Bitcoin and Ethereum only before diversifying. Also, it is always wise never to have more than 10% of the portfolio in cryptocurrencies.
Q. Can one random tweet from Elon Musk set such a flutter in cryptocurrency markets or are there other factors at play? Should investors Buy The Dip or is this more of a long term strategy once money is put in cryptocurrencies?
Such a reality exists with all asset classes. Influencers’ opinions are strongly adopted by investors who fail to do research on their own and succumb to FUD (fear, uncertainty, and doubt). Long term investors who HODL (in crypto lingo) on to coins always gain. They do minimal trading and identify opportunities based on their own research into the currencies and their potential. We believe the market and investors will mature with time and education. Buying the dip (buy when the market goes down before coming back up) works if you have spare cash at all times. We advise investors to never invest money in cryptocurrencies that one can’t afford to lose. In such a scenario, it’s difficult to allocate money for dips. The long-term viable strategy instead is to do DCA (dollar cost averaging), that is spread your investments over weeks or months to get a better entry price for coins.
Q. What is the best time to invest in crypto? As an investor, how much money should one lock with cryptocurrencies?
The answer is today or as soon as possible. We believe the crypto market has only reached 5% of its potential and hence it is set to explode in near future. We want all investors to be part of this growth. Hence its best to start today with however minimal investment you can. Keep crypto investments to 3% to 5% of your overall portfolio depending on your risk appetite. Start with large market cap coins like Bitcoin and Ethereum before slowly diversifying to other coins.
Q. What Are NFTs and how do they tie in with cryptocurrencies? How are NFT valuations so high?
NFTs (non-fungible tokens) are units of data stored on a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. They are essentially another application of blockchain technology where pieces of video, art, music etc are created and traded. They are not directly linked with cryptocurrencies other than being supported by the same technology. Currently though, NFTs are bought or sold with cryptocurrencies as a measure of value.
Q. For crypto investors in India, how risky is it considering banks seem to be hesitant to engage with crypto trading platforms? Is there a risk of being locked out of the investment?
Though there is a minor misunderstanding that banks have with crypto exchanges in India, they have not restricted their retail customers from trading in cryptocurrencies. There has always been some friction between banks and cryptocurrency entities. Time and again we have been able to resolve issues and keep moving forward. Crypto investors in India will never be locked out of their investments.
Q. How do you see the cryptocurrency market developing in the next 12 months or so, particularly in India?
The market is primed for increasing adoption in India and across the world. Cryptocurrencies have got more attention than ever before in 2021. Many HNIs and financial institutions from the West have started investing in cryptocurrencies since 2020. This trend is catching up with Indian HNIs as they consider this asset class with more clarity. We expect some form of Govt. regulation to boost adoption and clear all FUDs from retail investor minds. Overall, we believe, the industry is set to double in the next 12 months from current market capitalization of $1.7 billion.