CRYPTOCURRENCY AS AN ASSET CLASS

Dr. S. Thilak, Assistant Professor, Department of MBA, Sankara College of Science and Commerce

Cryptocurrency is proving to be one of the biggest disruptions to traditional finance, only held back by its current high market volatility. Despite being speculative and lacking global backing, these digital coins are fast gaining popularity because of the support some of these are getting from billionaire tycoons such as Elon Musk, Jack Dorsey and Michael Novogratz. Some have also been skeptical about their success, such as Warren Buffet and Ken Griffin. Yet, there is no denying that more people are getting drawn towards crypto coins than ever before.

While the crypto market has taken some beating in recent months, experts believe the market will bounce back due to the increasing interest of people. They also feel this could be a good time for those planning to put their money in the digital currency market. There are demands to classify Bitcoin as an asset class in India.

If you intend to invest in cryptocurrency, follow the steps listed below.

1. Find A Crypto Exchange

The first thing you need to do to become a crypto investor is choosing an exchange for trading. Since cryptocurrencies are not regulated in India, anyone can start an exchange. So do a detailed background check on the core team behind the exchange. Some of the popular exchanges in India are WazirX, CoinDCX, and CoinSwitch Kuber.

2. Create An Account

Once you finalise an exchange, sign up to open an account. The platform may require to verify the identity, depending on its policies and the amount you plan to invest. They have to submit documentary proofs. This is intended to prevent fraud.

3. Deposit Money

To buy crypto, buyer need funds in your account. You can do that by linking your crypto account with your bank account and depositing money via a wire transfer by using a debit/credit card. There could be a waiting period before you can start trading with the money.

4. Make Your First Purchase

Once you are ready to invest, you will need to pick a crypto coin. There are hundreds of cryptocurrencies, with the popular ones being Bitcoin, Ethereum and Dogecoin, among others. You can invest in any of them or in several of them at a time. Many of these coins are known on the exchange also by their symbol. For example, Bitcoin is known as BTC, Ethereum by ETH, and Dogecoin as DOGE.

5. Storage Method

Crypto exchanges face the risk of being hacked and, currently, lack insurance protections. You can also lose your money if you forget or lose the codes to access your account. So, it’s important to have a secure storage place for your digital coins.

Before You Buy Bitcoin

There are several things that every aspiring Bitcoin investor needs. A cryptocurrency exchange account, personal identification documents if you are using a Know Your Customer (KYC) platform, a secure connection to the Internet, and a method of payment. It is also recommended that you have your own personal wallet outside of the exchange account. Valid methods of payment using this path include bank accounts, debit cards, and credit cards. It is also possible to get Bitcoin at specialized ATMs and via P2P exchanges. However, be aware that Bitcoin ATMs have increasingly required government-issued IDs as of early 2020.

Privacy and security are important issues for Bitcoin investors. Even though there are no physical bitcoins, it is usually a bad idea to brag about large holdings. Anyone who gains the private key to a public address on the Bitcoin blockchain can authorize transactions. Private keys should be kept secret; criminals may attempt to steal them if they learn of large holdings. Be aware that anyone can see the balance of a public address that you use. That makes it a good idea to keep significant investments at public addresses that are not directly connected to ones that are used for transactions.

Anyone can view a history of transactions made on the blockchain even you. And though transactions are publicly recorded on the blockchain, identifying user information is not. On the Bitcoin blockchain, only a user’s public key appears next to a transaction, making transactions confidential but not anonymous. Bitcoin transactions are more transparent and traceable than cash, but the cryptocurrency can also be used anonymously.