Navigating the crypto universe: Insights from Coin DCX's Mridul Gupta

Gupta commenced by tracing the internet's evolution from its nascent stages to its current state. The "read-only" era of Web1 in the 80s and 90s offered minimal user interaction. This phase gave way to Web2, introducing "read and write" capabilities, fueling innovations like e-commerce and social networks. However, Web2 is marked by central data intermediaries controlling user data.

In contrast, Web3 represents a paradigm shift, empowering users with ownership of the digital assets they contribute to. This transformation is driven by blockchain technology, a decentralized ledger system ensuring security and transparency by dispersing data across multiple parties.

Cryptocurrency: A New Asset Class

Cryptocurrencies like Bitcoin, Ethereum, Solana, and Ripple are digital assets rewarded to users who validate transactions on blockchain networks, recognized as virtual digital assets (VDAs).

India leads in global crypto adoption, ranking second in transaction volumes and first in the number of users. The period from July 2022 to June 2023 saw substantial growth in both transaction volumes and user numbers, solidifying India's pivotal role in the crypto ecosystem.

Understanding the Risks and Types of Crypto Tokens

Gupta emphasized the inherent risks of investing in cryptocurrencies:

Volatility:

Crypto assets can experience significant price fluctuations, sometimes as high as 5-10% in a single day.

Mitigation:

Invest systematically over time, understand token fundamentals, and analyze supply-demand patterns.

Cyber Frauds:

Though smaller in proportion compared to fiat markets, cyber frauds still pose a risk.

Mitigation:

Secure private keys, store passwords safely, and be cautious of schemes that seem too good to be true.

He categorized crypto tokens into four main types:

Blue Chip Tokens:

Bitcoin and Ethereum, known for stability, wide adoption, and institutional interest.

Altcoins:

Tokens outside Bitcoin and Ethereum, often representing innovative projects with varying stability.

Stablecoins:

Cryptocurrencies like USDT and USDC, pegged to stable assets like the USD or gold, offering less volatility.

Meme Tokens:

Tokens such as Shiba Inu and Dogecoin, driven by viral internet trends and social media, often highly speculative with questionable underlying value.

Advice for Crypto Investors

When to Sell Crypto?:

While numerous research reports offer insights on when to buy or sell, Gupta stressed personal due diligence. For beginners, long-term investments are advisable over short-term speculation.

Impact of UPI Ban on Crypto Liquidity:

Though the UPI ban affects one aspect of fund transfers, alternatives like bank transfers and crypto-to-crypto trading ensure market liquidity remains largely unaffected.

Focus on Bitcoin and Ethereum:

The launch of Bitcoin ETFs has boosted interest in Bitcoin. Similar products for Ethereum are emerging, indicating increased demand and price appreciation.

Legal and Regulatory Landscape

Addressing concerns about crypto trading legality in India, Gupta affirmed its legality. The Supreme Court has upheld crypto investments' legitimacy, with investors ensuring tax compliance.

The Future of Crypto Investments

Gupta stressed understanding token fundamentals and market dynamics. For instance, Bitcoin's limited supply of 21 million tokens drives its value over time, akin to gold. Recent developments like Bitcoin ETFs and halving influence market demand and supply.

Investing in Bitcoin can enhance portfolio returns, as historical data demonstrates. Gupta advised diversifying portfolios and viewing Bitcoin as a long-term investment.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

Source: Forex-Markets-Economic Times