Before we begin with our core topic, let's understand:
What are cryptocurrencies?
Cryptocurrency by a laymen can be understood as some asset or a new investment class with technology as its backbone and herein blockchain technology comes into picture. Now other than that there are miners of these cryptocurrencies which can mine only a limited supply. Also, as on the recent Tesla's course wherein he has barred Bitcoins (BTCs) to be purchased for buying vehicles, it has come to light that these cryptos or in particular if we talk about Bitcoin( BTC) consume a whole lot of energy in the process of their minting.
Notably the recent sharp spike in some of the cryptos was influenced by investor interest or in-fact large investors in them.
Why should you invest in cryptocurrencies?
This we shall highlight in points:
1. Cryptocurrencies is a big world:
While we come across a few names, the cryptocurrencies are many of over 5000 count. But it is just that some of them do not have trading volumes but now as there has been a sharp spike in their, prices including Dogecoin and Dogecoin Killer, there has been seen deviation of funds from BTC to other cryptos. This is one reason why bitcoin were hit with the huge outflow last week. So, it is not just 1 crypto i.e. available to you, you can take your bets as per your understanding and risk appetite.
2. Trading volume/ Liquidity is high:
To prove this Elon Musk, Tesla's boss lately offloaded position just to show, cryptocurrencies or rather BTC serves as a ‘cash alternative'. Also, it is only the recent penchant for these digital tokens by investors across the board amid the pandemic that is pushing them to scale to new higher market capitalization and hence their valuation. Furthermore, this heightened interest is unlikely to fade anytime soon.
3. Can provide a platform to diversify your investment portfolio:
It has been time and again said that keeping all eggs in one basket is always a bad choice and this shares analogy to even the investment world where single investment or more so into one asset can never be rewarding enough to reach your financial goal. So, as is the current scenario, you may be pushed to invest in these cryptos to hedge against inflation and even the volatility in global stock markets amid the geo-political, health and economic crisis.
4.Cryptos like bitcoin have gained the status similar to gold:
Experts have acknowledged the fact and are putting bitcoin at par with gold when it comes to being both considered as a store of value. Furthermore, gold as well as bitcoin work to be an inflation and volatility hedge. In fact some of the investors are even flocking to buy bitcoins to safeguard themselves from the likely devaluation of the dollar in the near future given the large stimulus measures of the US.
5. Some of the cryptos trading at a steep discount from their life time highs:
Here if we are giving the example of the most traded cryptocurrency that commands the highest market-cap, yes you guessed it right, we are talking about Bitcoin which from its life time highs of sub $65000 hit in April is now trading at $43,371 (last quote as on Coindesk), this translates into a 33 percent discounted price. As per longforecast, bitcoin may see correction this year and by July 2022 may hit levels of sub $85000, providing good gains of over 46 percent.
6. Cryptocurrency-India connection
Now even as the financial entities are becoming cautious on these digital tokens and for some time fresh investment into cryptocurrencies came to a halt in India, it is being asserted that banning cryptocurrency shall neither be feasible and will be hard to come by. Also, as the investor interest in the domain is leapfrogging, there have been advised some of the ways to regulate cryptocurrency market in India and among them is a suggestion that India should follow the Singapore model and work on ways to curb any fraudulent attempts such that neither of the stakeholder suffers on account of any illicit act.