Cryptocurrency in India: Associated risks and Virtual Investment

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Cryptocurrencies have become a global phenomenon. Over the years, there has been a significant rise in awareness around cryptocurrencies. This rise in awareness is also being reflected in the Indian markets are enthusiasm around cryptocurrencies is at an all-time high in India. Suddenly, Indian news channels as well as the Indian parliament are all discussing cryptocurrencies!

This rise in awareness came particularly after the massive boom in cryptocurrency prices late last year. In November, Bitcoin crossed the $10,000 mark. By mid-December, Bitcoin was eyeing the $20,000 mark. That one month was the period of massive growth in interest and awareness around cryptocurrencies, prompting many first-time traders to invest into the markets.

However, while millions of Indian citizens are tuned in to the movement of cryptocurrency prices, it is essential to understand that with every investment comes some sort of a risk. There are plenty of risks associated with cryptocurrency investments too! Before you begin cryptocurrency trading, let us take a closer look at all the risks that are associated with cryptocurrency trading!

Risks Associated with Cryptocurrency Investments

  • Market Fluctuations: Trading in cryptocurrencies feels similar to trading in the stock markets. However, the big difference here is that there is no fixed algorithm and there are no indicators which can determine the movement of the currencies. Much of the price fluctuations happen due to panic and uncertainty in the markets, which makes it almost a gamble! Cryptocurrency markets are driven by sentiments which makes investments a major risk.
  • Hacking Attacks: Cryptocurrency hacks are getting increasingly common these days.The recent Coincheck scam resulted in cryptocurrencies worth $500 Million being stolen. A number of other such hacks are taking place on a frequent basis! The best way to avoid these scams is to store your cryptocurrencies in a hardware wallet!
  • Scams: Every time a new technology makes its way into the markets, there are bound to be a large number of first-time investors who are at a risk of being scammed by fraudsters because of a lack of experience. Many ponzi schemes which offer a guaranteed return for a small investment tend to pop up from time to time which are aimed at making people part with their cryptocurrencies! Bitconnect is a popular example of such a scam.
  • ICO Frauds: A problem which has had the international governments in a fix, ICO fundraisers are posing quite a challenge. ICO fundraisers are the cryptocurrency equivalent of IPOs. However, there have been many instances where the developers and the team behind the ICOs disappear after they raise the funds! Strict government regulations are needed here!

How To Be Safe From Cryptocurrency Risks

  •  Research: Before investing into any new cryptocurrency, do a thorough research on the currency. Look at the people who are backing the currency, the problem this coin aims to solve, if it is a legally registered entity and are all the details about their operation properly listed out. If these details aren’t convincing enough, there’s a chance the currency or the ICO may be a fraud. If you are a new trader, we strongly recommend checking out cryptocurrency guides to learn more before you start trading!
  • Enable 2FA Security: Whenever setting up a trading account on any cryptocurrency exchange or setting up a new cryptocurrency wallet, always make sure you set up the 2 Factor Authentication system. This way, no one can log into your account without your permission! A unique six digit code is needed to access the account which can be seen only on your phone. This ensures that your account remains safe from most hacking attacks!
  • Never Invest More Than What You Can Afford To Lose: The most basic trading advice when it comes to crypto investments – it is never wise to invest more than what you can afford to lose. The sum being invested in cryptocurrencies should always be of that amount which won’t affect your day-to-day lifestyle even if all of it is lost in the trade! If you are planning to mine for Bitcoins instead of trading in Bitcoins, you must make use of tools such as Bitcoin Mining Calculator to assess your profit/loss scenario and to pre-empt all the expenses involved in the process.

India Shows Faith in the Blockchain Technology

While the cryptocurrency craze hits fever pitch in India, the country is also on the verge of the blockchain revolution. Blockchain is the technology that actually powers cryptocurrencies – but can be used for multiple purposes, such as for tracking the movement of funds, as well as for maintaining government records. The state of Andhra Pradesh is developing a ‘blockchain valley’ in Visakhapatnam (Vizag).

This blockchain technology has also been appreciated by the Indian Prime Minister Narendra Modi, who had commented during a recent conference saying: “Disruptive technologies such as Blockchain and the Internet of Things, will have a profound impact in the way we live and work. They will require rapid adaptation in our workplaces.”

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