Ashish Singhal, co-founder and CEO, CoinSwitch, a cryptocurrency exchange, talks about the need for research before investments and how important it is to choose the right investment platforms with FE Blockchain.
What are the three best practices that today’s youth should follow when it comes to digital assets?
Crypto is a new form of financial asset. It is digital, and its outlook and future prospects are based on the underlying digital technology’s adoption. Today’s youth are internet savvy, spend more time online, and thus understand crypto than any other generation.
Yet, even for such cutting-edge technology, time-tested investment mantras hold true:
- Research before investing. It is important to not just understand the technology, but also the particular project that you are considering to invest in. Research what the coin is, what the problem the coin or the project is solving, what the use cases are, what applications are using it or are building using the technology. Once you understand these, go deeper and find out the economics of the token—what’s its supply and demand, what’s the circulation, how many of these tokens will be issued and when and such. The good thing is that all this information is readily available. You could go to the individual project websites, read up the white paper and information on tokenomics, or educational platforms of CoinSwitch that cover these information as articles, videos and more.
- Choose the right investment platform. There are no shortages of crypto assets or apps through which you can invest in crypto assets. The same due diligence that an investor does on different projects should also be applied when choosing the investment platform. Is it a trusted company? Does it conduct due diligence on crypto assets listed on its platform? Does it empower you with the right information for you to make wise investment decisions? Does it follow robust KYC practices? Is the app secured with a PIN or password? All these should be looked into.
- Never act in fear or under peer pressure. Investment decisions shouldn’t be made under peer pressure or in fear of missing out. Make your decisions logically and rationally. To help you out on these, you could try features such as SIP and Limit Orders that are designed to help investors make better decisions and not take irrational steps.
How can blockchain be used to keep digital assets safe? Which are the apps consumers can use?
Crypto assets are built on blockchain, which is a secure digital system of recording and verifying transactions. Blockchain uses an advanced security mechanism called cryptography to record and store these transactions. This is a battle-tested encryption technology.
But an investor should also do their due diligence and follow good security practices. Choose an investment app that follows good security practices: It should verify your phone number, it should be secured with a PIN, it should be ring-fenced through an OTP. These practices ensure only you can access your app and your crypto asset holdings are safely stored on the investment app.
What are three tips you would like to give to people who dabble in crypto trading?
- Understand your risk appetite. Every individual’s risk profile is different. One should closely assess their income and expenditure, and carefully plan their investments. Invest only the amount that you can afford as per your financial profile. You could start as low as Rs 100, to begin with, for instance.
- Don’t try to time the market. Young investors often try to time the market movements to maximize their profits. While this may sound reasonable, research shows that investment returns can be maximized by instruments such as the SIP. By investing through an SIP, you are reducing the possibilities of FOMO-based decisions. You set aside an amount of your choice to invest in a chosen asset at a regular interval. Rupee-cost averaging helps you maximize returns and reduce risk.
- Maintain a contingency fund. Every individual should have a contingency fund. The pandemic was a reminder of the health emergencies that could strike us when we least expect. It is as important to build a contingency fund for such emergencies as it is to invest in growth assets.
Which according to you is the country leading in the space and the Indian start-up ecosystem can pick up the best use cases?
Traditionally, the US has led the technology race by creating a progressive environment for innovation and adopting newer technologies. Which is why today the largest technology companies are in the US. But this is slowly changing.
India is increasingly pulling its weight in the technology race. This is, especially, true on crypto. Crypto is a new technology and therefore the growth opportunity for India is immense. Even in the young days of this industry, we have seen that some of the most innovative crypto and blockchain solutions and applications have come from India developers and entrepreneurs.
Recently, in the state of Uttar Pradesh, the police department began using blockchain technology to record and track FIRs registered by citizens. Secure and transparent documentation is a great use-case of the crypto technology and one that can be especially beneficial for a country such as India.
India should recognize this wave of innovation sweeping through our startups and colleges. We have the talent, startup culture, investors and the users to be a Web3 superpower.
What are the advantages and disadvantages of blockchain?
Blockchain is a cutting-edge technology to securely store and verify data. This data can be financial transactions, property documents, business invoices or personal identity. All these data when stored on blockchain can be easily verified and transacted. And this data is foolproof—no one can erase the data stored on blockchain or make changes to it surreptitiously. On a public blockchain, data and transactions can be easily traced.
The benefits of this technology are manyfold. Blockchain-based property documentation, for instance, could reduce document forgery and property disputes that are so common. Bank loans, mortgages and refinancing could be made seamless and fast as banks can easily and quickly verify the documents on the blockchain. Small businesses could avail financing on the basis of their invoices stored on blockchain.
The only disadvantage here is that there is an initial learning curve—as is with any emerging technology. But learning and gaining new knowledge is how a country can innovate and stay ahead of the curve. And fortunately, India is progressing in the right direction.