As cryptocurrencies were legalized in India, this sector received a much-needed new gust of wind. This move potentially brings back crypto investors that startups in the Indian crypto space have claimed to be seeing. However, cryptocurrencies are an entirely new concept that will remain so until India’s public blockchains have been established, and the idea of decentralized digital currencies goes mainstream.
The continuation on what should be the initial step for the first-time crypto investor, van de Poppe adds, “Start slow, read whitepapers, understand what blockchain is. Then, register on exchanges, through which ‘paper trading’ (or writing down trades without using actual money) is the first way to go, hence using a dummy account. After that, slowly start building your portfolio.” He also insists that crypto opportunities seem to be spontaneous and are a hit-or-miss concept, and there is no need to rush the investment.
“There’s always an opportunity lying in the markets,” he also added.
KEEP INVESTMENTS SECURE
Once the procedures of the basic learning are clear, van de Poppe also states that the next frontier lies in understanding cyber risks, that ensure complete security of online transactions and investment portfolios.
Elucidating on the matter, van de Poppe said, “Use two-factor authentication or 2FA to exchange accounts. Use your primary mobile, ideally an offline phone. The reason for it is simple. If you get SIM-swapped or your phone got stolen, they are able to access it through your device, and in turn, your funds. Use a complicated password and a different one for each exchange. Finally, do not have your coins on an exchange. It creates significant risk, as exchanges provide you with keys for coins you own. As a result, if the exchange gets hacked, you will lose your investment. To prevent it, keep large amounts of coins outside of the exchange, in secure wallets.
IDENTIFYING RIGHT BETS
van de Poppe addresses a key question that investors often have in the crypto space to put money in established blockchains such as Ethereum or bitcoin. Or, you rather put faith in newer and smaller coins that potentially bring a windfall?
On this, he said, “The more significant potential reward, the risk the higher. In the crypto space, established currencies in the top 10 cryptocurrencies, such as Ethereum and bitcoin have lower risk than coins among the top 100 public blockchains. One can invest in smaller cap coins along with the public trade and lesser valuation that should be done with the proper research on the whitepaper of blockchain. To factor risk, disciplines take risk-taking and portfolio management that should be accounted for. Investing five percent of the portfolio in the lower cap coin is the decent approach while using eighty percent of the portfolio for a small coin would give you high risk, at higher losses.”
IN A BAD ECONOMY
So, with digital currencies’ nature, would it mean that digital currencies remain immune to market forces, hence not reacting to equities in various markets? According to van de Poppe, a scenario is yet to arise with the initial signs positively.
He said, “The moment an economy gets into a recession, the potential of cryptocurrencies starts to show. If cryptocurrencies become easily accessible and usable, they could potentially take over established national currencies. However, such a scenario is yet to materialize – thankfully, we have not experienced a recession on such a scale, yet. However, the numbers from the economies of Argentina and Turkey largely suggest that the demand for crypto increases in economic downturns.”
In the end, van de Poppe believes that cryptocurrencies are at the bleeding edge of today’s technology. It is a private asset, and its core nature of it remains the same. “People should understand national currencies based on trust. When people lose faith in digital currency, it will lose its value,” he concludes.