IS IT SAFE TO INVEST IN CRYPTOCURRENCIES?

 In this article we are going to know about, does  it is safe to invest in cryptocurrencies?

Despite the growing popularity of cryptocurrencies in India, a large number of investors hesitate to put their money in the virtual coin trading space. Find out if it is safe to invest in cryptocurrencies in India.

• The popularity of cryptocurrencies has been growing rapidly in India since last year as more investors try their luck in the lucrative virtual coin trading space.Indian cryptocurrency exchanges confirm that they are adding people to their platform at a faster rate in 2021.

• In view of the rapid customer base growth, cryptocurrency exchanges are optimistic that the emerging asset class will keep attracting more investors in India. However, the amount of cryptocurrency investments in India is only a fraction of traditional investment-class assets like equities.

• The trend indicates that while younger Indian investors are placing their bets on crypto assets instead of traditional options, a larger number of individuals still remain hesitant, even though they are keen on exploring the cryptocurrency space.

Is it safe to invest in cryptocurrencies?

• The answer to the question is tricky as it is still an emerging asset class and has not yet gained widespread acceptance like equities, commodities and mutual funds.

• Whether investing in cryptocurrencies is safe remains a hotly debated topic in the financial space, with many backing the decentralised digital currency and an equal number of people opposing it.

• However, from a pure investment point of view, the risks associated with Bitcoin, Ethereum (Ether) or any other cryptocurrency are no different from other traditional assets, except the fact that the virtual coin market faces higher volatility.

• Analysts have clearly stated that all cryptocurrencies are risky assets and wild price swings are common in the virtual coin trading space. This is likely to reduce as the asset gains wider mainstream acceptance.

• But investors should be clear that the crypto space at the moment involves high risks and rewards. In other words, you need to have a big risk appetite to gain from crypto trading.

• At the same time, investors should note that cryptocurrency is far more resilient than it appears.Nischal Shetty, CEO of popular cryptocurrency exchange WazirX, has highlighted in the past that the asset has survived two major global recessions and has been around for over a decade.

• Shetty had said that cryptocurrencies, like gold, act as a hedge to protect fiat currencies and equities. This is one reason why cryptocurrency demand grew rapidly during the first wave of the pandemic.

• Unlike fiat currencies and stocks, cryptocurrencies are not impacted as much by inflation and offer an ideal alternative to gold, which is another preferred hedge investment.

• It should also be noted that investing in cryptocurrencies is legal in India and there are no laws that prohibit individuals from buying or selling virtual coins.

• For people who have a high risk appetite and have the patience to remain invested for a longer period, exploring the cryptocurrency space may not be such a bad idea. People should also ensure that they conduct adequate research before investing.

• Having said that, there are visible risks that cannot be ignored.

REGULATORY HURDLES, POSSIBILITY OF

 BAN

• In India, like many other parts of the world, the biggest risk involved in cryptocurrency trade is the lack of regulation and oversight. The fact that the government has not been able to come up with a concrete stand on cryptocurrency is the reason behind the lack of regulation.

• The problem dates back to 2018 when the Reserve Bank of India (RBI) came out with a circular to impose a blanket ban on such trade.

• In 2018, the Reserve Bank of India released a circular to caution users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. It had advised all entities regulated by it to no deal in virtual currencies or provide “services for facilitating any person or entity in dealing with or settling virtual coins”.

• While the RBI circular was set aside by the Supreme Court on March 4, 2020, banks remained hesitant in dealing with cryptocurrencies. It is only after the RBI clarified its stance on cryptocurrency recently that banks have started dealing liberally with cryptocurrency exchanges.

• Another issue that poses a risk to crypto trade in the country is the possibility of a ban. Though the government has softened its stance recently, it is still not clear whether it will go for a complete ban or regulation.

• In case the government goes for a complete ban on decentralised virtual coins, investors in India could face heavy losses. However, experts familiar with virtual currencies and analyst feel that regulating crypto trade would be a better option, considering that it is emerging as the next big asset of the financial world.

• The lack of regulatory protection discourages many keen investors from placing bets on cryptocurrencies. Apart from that, there are some other risks that cryptocurrencies face including exposure to hacking, permanent loss in case of forgotten password, malware attacks and scams.

After reading this article you came to know that, does it is safe or not?

WHAT IS MEANT BY CRYPTOCURRENCY?

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 CRYPTOCURRENCY

In this article we are going to know about cryptocurrency. 

What Is Cryptocurrency?

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

• A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.
• The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network.
• Blockchains, which are organizational methods for ensuring the integrity of transactional data, are an essential component of many cryptocurrencies.
• Many experts believe that blockchain and related technology will disrupt many industries, including finance and law. 
• Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.
• Many of us heard about ''BITCOIN'', but some of us don't know what is it ? It is also one of a cryptocurrency.

  
Now Come To Know About Cryptocurrencies

Cryptocurrencies are systems that allow for secure payments online which are denominated in terms of virtual "tokens," which are represented by ledger entries internal to the system. "Crypto" refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

Types of Cryptocurrency

The first blockchain-based cryptocurrency was Bitcoin, which still remains the most popular and most valuable. Today, there are thousands of alternate cryptocurrencies with various functions and specifications. Some of these are clones or forks of Bitcoin, while others are new currencies that were built from scratch.

Bitcoin was launched in 2009 by an individual or group known by the pseudonym "Satoshi Nakamoto."

 As of August 2021, there were over 18.8 million bitcoins in circulation with a total market cap of around $858.9 billion, with the figure updating frequently. Only 21 billion bitcoins exist, preventing both inflation and manipulation.

Some of the competing cryptocurrencies spawned by Bitcoin’s success, known as "altcoins," include Litecoin, Peercoin, and Namecoin, as well as Ethereum, Cardano, and EOS. By August 2021, the aggregate value of all the cryptocurrencies in existence is over $1.8 trillion—Bitcoin currently represents approximately 46.5% of the total value.

 Important Point To Remember In Cryptocurrency

Although cryptocurrency bills itself as a form of money, the Internal Review Service (IRS) considers it a financial asset or property. And, as with most other investments, if you reap capital gains in selling or trading it, the government wants a piece of the profits. On May 20, 2021, the U.S. Department of the Treasury announced a proposal that would require taxpayers to report any cryptocurrency transaction of $10,000 to the IRS. How exactly proceeds would be taxed—as capital gains or ordinary income—depends on how long the taxpayer held the cryptocurrency.

Criticism Of Cryptocurrency

 

Since market prices for cryptocurrencies are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely, since the design of many cryptocurrencies ensures a high degree of scarcity. 

Bitcoin has experienced some rapid surges and collapses in value, climbing as high as $17,738 per Bitcoin in Dec. 2017 before dropping to $7,575 in the following months.Cryptocurrency blockchains are highly secure, but other aspects of a cryptocurrency ecosystem, including exchanges and wallets, are not immune to the threat of hacking. In Bitcoin's 10-year history, several online exchanges have been the subject of hacking and theft, sometimes with millions of dollars worth of "coins" stolen.

There is concern that cryptocurrencies like Bitcoin are not rooted in any material goods. Some research, however, has identified that the cost of producing a Bitcoin, which requires an increasingly large amount of energy, is directly related to its market price.

Cryptocurrency blockchains are highly secure, but other aspects of a cryptocurrency ecosystem, including exchanges and wallets, are not immune to the threat of hacking. In Bitcoin's 10-year history, several online exchanges have been the subject of hacking and theft, sometimes with millions of dollars worth of "coins" stolen.

Nonetheless, many observers see potential advantages in cryptocurrencies, like the possibility of preserving value against inflation and facilitating exchange while being easier to transport and divide than precious metals and existing outside the influence of central banks and governments.

What Is Cryptocurrency In Simple Words?

Cryptocurrencies are systems that allow for secure payments online which are denominated in terms of ''virtual tokens''.

 Where We Get Cryptocurrency?

 Cryptocurrencies were bought from apps like COINDCX,COIN BASE,TRUST,etc., even we can able to buy our crypto from '' INR 100''.

What Is The Point Of Cryptocurrency?

Many experts see blockchain technology as having serious potential for uses like online voting and crowdfunding, and major financial institutions such as JPMorgan Chase (JPM) see the potential to lower transaction costs by streamlining payment processing.

How Does Cryptocurrency Make Money?

Cryptocurrencies allow for secure payments online which are denominated in terms of virtual "tokens," which are represented by ledger entries internal to the system. Investors can make money with cryptocurrency by mining Bitcoin, or simply selling their Bitcoin at a profit.

What Are the Most Popular Cryptocurrencies?

Bitcoin is by far the most popular cryptocurrency, followed by other cryptocurrencies such as Etherum, Litecoin, Cardano and Tron.

These all are the basic things which we have to know about cryptocurrency.