India’s virtual currency industry had come to a standstill in April 2018 further to the RBI notification of prohibition on banking channels for transactions of cryptocurrencies such as Bitcoin. It’s obvious when a regulator like RBI bans, the market is bound to close down. Further to the recent Supreme Court verdict of their legalisation, Cryptocurrency companies like ZPX, WazirX, etc., are expected to ramp up their operations and expand their businesses in India.
With cryptocurrencies being legalised in India, the sector has finally received a much needed fresh change of course which will potentially bring back investors – something that startups in the Indian crypto space have already foreseen. However, for many, cryptocurrencies are an entirely new concept. It’s important to analyse the market thoroughly and closely to avoid any mistakes. Here are a few tips by Pehla Kadam Season 5 which you can practice before investing in the digital currency.
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Understand the concept
Talking about how investors can get started with their cryptocurrency investments, the key is to get a full understanding of the technology of crypto-coins, and avoid weaning information off social media. Despite crypto opportunities seeming very spontaneous & being a bit of a hit or miss concept, there is no need to rush into any investment. Continuing on what should be the first steps for a first-time crypto investor, start slow, read whitepapers, understand what blockchain is. Register on exchanges, through which ‘paper trading’ is the first way to go, hence using a dummy account. Slowly start building your portfolio.
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Security is the key
Use two-factor authentication for your exchange accounts. It is ideal to use a secondary mobile phone. The reason is simple – in case of theft, the thief would have the ability to access the exchange through your device, and in turn, your funds. Use a complicated password, and a different one for every exchange. Don’t have all your coins on one exchange. This creates significant risk, as no exchange typically provides you keys for the coins you own. As a result, if an exchange gets hacked, you lose your investment. To prevent this, keep a large amount of the coins outside the exchanges, on secure offline wallets.
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Identify the right path
Established currencies in the top 10 such as bitcoin and ethereum have lower risk than coins outside of the top 100 public blockchains. While one can safely invest in smaller cap coins (with lesser valuation and public trade), it should be done with proper research on the blockchain whitepaper. Investing 5% of your portfolio in a lower cap coin is a decent approach, while using 80% of your portfolio for one small coin would give you a very high risk.
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Keep a strategic approach
When an economy gets into a recession, the potential of cryptocurrencies starts to show. If cryptocurrencies become easily accessible and usable, they have the potential to take over established national currencies. However, such a scenario is yet to be materialised.
At the end of the day, despite cryptocurrencies being at the bleeding edge of technology, it is a private asset, and the core nature of that still remains the same. People should understand that national currencies are based on trust. So act wisely and invest accordingly. For more such information, watch Pehla Kadam Season 5.