Currently Bitcoin is trading below $10,000 and a large number of global investors and market experts are predicting further corrections in it.
Digital currency Bitcoin was in the news again when it surged past $11,000 in the international markets on Wednesday, prompting sceptics to declare it a classic speculative bubble that could burst anytime. Currently it is trading below $10,000 and a large number of global investors and market experts are predicting further corrections in it because it has risen ten-fold in value so far this year, the largest gain of all asset classes.
It also must be noted that traditional high-value investors are wary about investing in cryptocurrencies due to lack of regulations. This means that in case of any loss, you will not be able raise the issue with any regulator. However, it is a fact that Bitcoin is well regulated in developed places such as the US, EU, Japan, and Singapore, and the general public in India is keenly anticipating a regulatory move from the RBI or SEBI to come in soon.
Some experts, however, say that Bitcoin is a revolutionary digital currency which is decentralized and non-inflationary in nature. “Its value has appreciated exponentially over the years owing to its store of value and treatment as a digital asset and investment. This high appreciation can be attributed to limited supply and global acceptance by various nations,” says Sreekanth G S, COO, Coinome Crypto Currency Exchange.
Whatever be the case, experts suggest that cryptocurrencies like Bitcoin must be treated as a high-risk, high-reward investment asset, and all precautions that are taken for a high-risk asset are applicable to Bitcoin as well.
Keeping this in view, here are 5 precautions which every investor should take before investing in a Bitcoin:
1. Bitcoins are normally bought and sold on crypto-currency exchanges and all reputed Indian exchanges are fully KYC-compliant. Still, “Bitcoin being a digital asset with no physical backing, must be stored securely in personal crypto wallets, and exchanges must not be treated as a storage option if planning for long time store,” says Sreekanth.
2. Investors must be cautious about general volatility trends in Bitcoin and other crypto currencies, and the impact of global trading trends as well.
3. One should start investing with small amounts whose loss can be tolerated, and high-value investments should be made only after proper study and research. “Particularly, digital assets which are new into the market, and ICO (Initial Coin Offerings) must be looked upon with caution as they are mostly penny stocks with unpredictable market movements,” says Sreekanth.
4. One should invest in cryptocurrencies like Bitcoin with a long-term view as their value increases over time. So, “if you are looking for short-term gains, then Bitcoin is not for you. Investing in small amounts and brace yourself for massive value swings in the long term,”
5. It should also be kept in mind that international exchange prices and Indian exchange prices differ by a premium because of low supply and high demand from Indian customers.