Basic rules to follow to invest in Crypto
Invest small amounts: Many crypto coins have surged 5,000–6,000% in the past few months. But don’t get carried away by these numbers. As in case of any other investment, one should invest only what one is willing to lose. Even if you have a high risk appetite, don’t put more than 10–15% of your overall portfolio in cryptos.
Learn to stomach extreme volatility: This is a high-risk high-reward game and investors must be able to digest high volatility. As the May crash showed, an overnight fall of 70–80% is a possibility. Keep in mind that even a bluechip like Bitcoin is down 25% from its November high of Rs 54 lakh. Enter this market only if you can stomach extreme variations.
Use trustworthy platform: The crypto space is not regulated in India and new outfits are mushrooming every day. Invest through an established and trustworthy platform so that your money does not get stuck if there is a regulatory setback or the promoter company goes under. Investing through an overseas platform may require greater compliance on the tax front.
Don’t act on tips: The crypto space suffers from a severe lack of credible data. Investors are dependent largely on unverified information on social media. Selfstyled crypto analysts create Whatsapp groups packed with accomplices who vouch for their accuracy. These analysts trap gullible investors, first by charging a fee for the tips and then using them for their pump-and-dump operations.
Focus on blue chips: Like the stock markets, the crypto market also has bluechips, mid-caps and penny coins. Don’t get tempted into buying obscure coins just because they are priced very low. Bigger coins may be costlier but are more stable. You can buy in fractions so don’t worry about the price. Bitcoin and Ethereum are the bluechips of the crypto space and drive the overall market sentiment.