The dramatic fall of the price of one Bitcoin by 50 percent between it’s peak on April 15 and June 21 may have shaken the crypto markets, but Naimish Sanghvi, 32, is not unnerved. He is a cryptocurrency enthusiast and founder of Coin Crunch India. He says that cryptocurrency isn’t for the faint-hearted. He claims to be mentally prepared for seeing Bitcoin’s price fall to near-zero levels, though he doesn’t see that as a possibility. How are millennials dealing with this new fad in investing?
Keep greed away
Rupesh Firodiya, 28, comes from a business family that is into real estate broking in Pune. In November 2016, he got drawn to the Bitcoin. After having invested Rs 1 lakh, he borrowed Rs 20 lakh from his parents and invested in Bitcoins and other cryptocurrencies through a company called Gainbitcoin.
Later, he realised that the website was a fraudulent one – it even sold non-existent cryptocurrencies. Firodiya says, “Initially, I didn’t know how the crypto market worked. Stay away from the schemes that claim to give you fixed returns.”
But that didn’t stop him from investing in cypto. Instead, he says, he started reading up and understanding the technology behind cryptos to better understand their potential. Now wiser, he advises investors in his network on how to identify crypto scams. His own crypto portfolio has coins such as Bitcoin, Litecoin, Ethereum and Ripple.
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Navigating through research
Shubham Khare, 35, a product manager in an information technology firm is another crypto scam victim who’s learnt the lure of quick money the hard way. In 2018, he invested in a new currency that was under development, hoping it would become something big. Instead, the developers abandoned the crypto project and vanished with investors’ money – called ‘rug-pull’ in crypto culture. Khare lost Rs 50,000. “Some coins do not have any relevance. I see many investors invest in them in the bull run,” Khare says.
Khare now studies the coins before he invests in them. He prefers the coinmarketcap website. It is a global dashboard of the top cryptocurrencies as per their market capitalisation. He also looks at crypto agencies that rate every crypto coin based on its underlying technology, its founders’ track record, the overall market capitalisation and so on. Khare also believes in reading on the background of the coin, why it was conceived, and what it aims to achieve through the white paper route.
Sanghvi says, “More than the white paper, I believe in judging the team thay is building it. If the team has a good history and has previously done a good job, then there is better trust.”
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Baby steps to investing
In September 2017, Sanghvi had started investing Rs 100 daily in cryptocurrencies. Bitcoin’s underlying technology, blockchain, fascinated him. When Bitcoin’s price touched $20,000 in December 2017, he took money off the table. “That’s when I became confident, because I booked profits,” he says. Apart from investing in Bitcoin when prices dipped, he also diversified into other currencies.
His party came to an end in April 2018 when the Reserve Bank of India (RBI) restricted banks from providing banking services to those who dabbled in cryptocurrencies. That taught Sanghvi how regulatory sweep can bring the juggernaut to a halt.
As crypto investors wait for the government’s clarification on the acceptability of cryptocurrencies, Sanghvi, like many others, has been investing in crypto coins since the beginning of 2020. He now invests up to Rs 40,000 every week in his crypto portfolio, which consists of Bitcoin and Ethereum, the world’s second-largest cryptocurrency by market capitalisation.
Shardul Shah, 41, working as a marketing professional in a private firm prefers averaging out the investment on dips. He prefers investing 20 percent of the target investment amount in a particular cryptocurrency at regular intervals. He has kept a part of the amount in the crypto wallet to invest when the market crashes. He prefers to invest 5 percent of the amount from his crypto wallet on every dip.
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Plan an exit strategy
Kush Jain, 28, is working with a crypto start-up Mudrex. He had started investing in 2018 with Rs 10,000 every month. Throughout his investment journey in cryptos, he did not focus on the exit part, as profit was rising rapidly since last year. But, last month, the market crashed after tweets against Bitcoin from Elon Musk and China’s tough stance on regulatory issues with cryptocurrencies. Prices crashed and his crypto portfolio registered losses. Jain says, “It’s important to set targets and take out profits at regular intervals.”
For instance, if you buy bitcoin worth Rs 1 lakh and at some point in time, investment grows to Rs 1.5 lakh very quicly, you must take some money off the table.
While investing in a cryptocurrency, it’s important not to get emotionally attached. Firodiya sets targets for each crypto coin. When the target is achieved, he withdraws the principal amount, a part of profits and keeps the remaining amount invested for the long term. This strategy works for large market-cap cryptocurrencies.
Sanghvi says, “If you are a trader then set a target, book profits and exit at regular intervals. But, if you want to build wealth by investing in cryptocurrencies then invest as a SIP and let the investments grow in your portfolio for atleast five years.” He prefers investing in Automatic Investment Plans i.e. AIPs (which works like SIPs) strategy on Vauld, a crypto exchange. Not all crypto exchanges provide with SIP option.