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Simply Save podcast | The many similarities between cryptocurrencies and equity investing

Cryptocurrency investing need not be about speculation. Most of the credible coins have an underlying technology that is now sought to be used in our daily lives. Understand this technology to decide which coin to invest in, and the one to avoid.

June 04, 2021 / 05:29 PM IST

Many of us want to invest in cryptocurrencies. But it is not that easy. Did you know that there are around 4,000 cryptocurrencies in the world? And the total market capitalisation of the global cryptocurrency market is $1.62 trillion. That’s how big the crypto market is. How should you decide which coins should you invest in?

In today’s Simply save podcast, Swapnil Pawar, Founder of ASQI Advisors takes us a little deeper into the world of cryptocurrency. How to choose which coins to buy and which ones to avoid? For starters, Pawar tells us that investing in cryptocurrencies is not that different from investing in shares of listed companies. Just like how you buy large-caps, mid-caps and small-caps, the same way you build yourself a portfolio of cryptocurrencies. Infact the technology has, over the years, has improved as newer coins come into the market, says Pawar. That is also why he segregates cryptocurrencies into first generation, second generation and third generation coins. Bitcoin, being the first ever cryptocurrency, gets classified as a first generation, according to Pawar. Matic Network, an Indian cryptocurrency platform where US billionaire Mark Cuban recently invested in, he says, is a typical third generation coin.

Read up on cryptocurrencies, first. Most of the cryptocurrencies, Pawar tells us, are built on advanced technology platforms. Some of these technology platforms, he explains, have the potential to be used in our daily lives, like banking and finance. Pawar says that if the underlying technology holds promise, the cryptocurrency is typically considered to be a solid investment. There are some coins such as Dogecoin, which was invented like a ‘joke’; no logic or an underlying technology, but mostly a meme. Avoid those coins, he says. 

A regular investor in cryptocurrencies himself, Pawar also says that word ‘cryptocurrency’ is a misnomer. He says cryptos are not currencies since you cannot buy anything using these coins. Since these are mainly used as investments across the world, cryptocurrencies should ideally be called crypto asset or crypto investment.  

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Kayezad E Adajania heads the personal finance bureau at Moneycontrol. He has been covering mutual funds and personal finance for the past two decades, having worked in Mint and Outlook Money magazine. Kayezad was the founding member of Mint’s personal finance team when it was set up in 2009.

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