Now that RBI has clarified that cryptocurrency trade in India isn't banned and has asked financial entities to carry out due diligence for customers under the various stipulated norms such as Know Your Customer (KYC), Anti-Money Laundering (AML) etc., if you are also considering to tread the crypto path given the past mind-boggling returns as well as future price projections, here we suggest some safe ways to lap up the cryptocurrency:
Notably there is bullish sentiment around the crypto tokens and some of the analysts earlier estimated bitcoin to hit $1,00,000 by 2022 end.
1. Cryptocurrency Index funds:
Similar to index mutual funds which provide a substantial exposure to a particular index and the returns from the fund more or less are in line with the index, there have evolved cryptocurrency index funds.
Crypto 20 or C-20 is one such fund that is available on Invictus Platform and is the first tokenized crypto-only index fund. The fund autonomously tracks the top 20 cryptocurrencies. Now, as the top cryptocurrencies shall change, so will the Crypto 20 composition will change. These funds also carry a lower charge in comparison to active managed funds. So, buying into a crypto fund shall be an effective way to invest in cryptocurrency effectively mitigating risk and volatility.
Here note each of the underlying asset has a cap of 10 percent in the overall fund's portfolio and is re-balanced every 1 week.
Features of the Crypto 20 fund
C-20 is the token for the Crypto 20 fund. These tokens are representative of investors share of the fund. Investors at their discretion can sell or exchange these tokens.
The fund entails no broker or exit or advisory cost.
So having a diverse portfolio of cryptocurrencies is as simple as buying a single token that is directly linked to 20 underlying crypto assets.
2. Another option to play safe is buying a mix of cryptos or Cryptobasket
In the recent May sell-off which saw bitcoin tumbling by a huge 30 percent in one day to hold just above $30000, we saw churning of portfolios by investors who sold off positions in bitcoin and diverted funds to other digital currencies.
Similarly, there are platforms that offer to invest in a mix of cryptocurrencies and if you are not able to find any such avenues then do the analysis and decide on the different cryptocurrency and the fund allocation for each of them.
Ideally the best way out shall be to first include cryptos that have the highest market cap and then slowly and gradually go on to pick mid value cryptos.
Some of the exchanges like Unocoin offer the crypto basket service where weighted basket orders in respect of different digital coins can be placed.
How to place a crypto basket order at Unocoin?
- First of all you need to register with the Unocoin app and after all the credentials are given and you successfully register the Passcode
- You need to go to the Cart on the app, on the bottom right, then on click on Crypto basket
- Remember to go ahead with the investment via this route, your profile should be verified with the exchange. Here the cryptocurrencies can be added to your portfolio based on the
- Now on the Crypto basket screen you can enter in INR the amount you wish to invest and choose the cryptocurrency by m-cap and volume. Now the allocation of fund to the various available cryptos is basis a fixed template.
- lastly you need to click on the Place Buy order to complete your cryptocurrency purchase via this method.
Buy stocks of a bitcoin or cryptocurrency related firm:
By investing in shares of crypto or bitcoin associated firms, an investor will have indirect exposure to this novel asset. Say for instance, one can buy into the shares of Coinbase Global Inc. which recently made its Nasdaq debut. Coinbase is a US-based cryptocurrency exchange and as of March 2021 ranks as the top exchange by trading volume. Also, the platform facilitates trading in over 50 digital tokens.
Also, you may consider other companies that are either bullish on bitcoin such as Tesla or those like PayPal that have allowed some of its users to pay at checkout via their crypto holdings as easily as they would do with a Mastercard.
Similarly you can go for companies such as MicroStrategy, Square and Marathon Digital Holdings who have the largest bitcoin holding as in May 2021.
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