Crypto Trading Strategies; All You Need to Know

The growing popularity of cryptocurrencies has made them a tempting trading asset, especially over the last few years. Trading is buying and selling of financial assets like cryptocurrency to make profits over the short term. The trading period can be as short as a day to a few weeks. 

How Is Trading Different from Investing?

The prime objective of both trading and investing is to buy and sell assets to make profits but the difference is in the approach:

A trader plans to make profits in shorter time frames and makes smaller profits on each trade. Hence their strategy is more active; they buy and sell multiple times a day, weeks or months. They profit from the short term volatility (ups and downs), following more risk because of the uncertain nature of the markets.

An investor, however, desires to make profits over the long term, say 5, 10 or more years. Their approach is passive. Since it is believed that the markets generally go up over the long run, they have a high chance of making considerable gains on each trade. Volatility has a minimum impact on investors.

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Based on whether you are investing or trading, your crypto trading strategy will also differ. 

Fundamental Analysis and Technical Analysis

Fundamental and technical analysis are the two research methods that form the basis for any crypto trading strategy. 

What is Fundamental Analysis?

Fundamental takes into consideration quantitative and qualitative factors to assess a cryptocurrency. Quantitative factors include the number of wallet addresses holding that cryptocurrency, the speed at which the coin is mined etc. Qualitative factors include leadership, technology and competence. 

Fundamental Analysis

Often, investors rely on fundamental analysis to decide which cryptocurrencies to invest in. A cryptocurrency with strong fundamentals is deemed to be investor-friendly. However, it could also be used by traders sometimes.

What is Technical Analysis?

It works on the principle that ‘ History will repeat itself.’ Technical analysis involves studying historical price movements and patterns to predict the future. It assumes that the past patterns will repeat in the future. Traders look at the historical price charts and trading activity to spot the same opportunities in the current market. 

Technical analysis includes analysis of price action, volume and chart patterns using technical indicators. It helps you spot trading opportunities in the market to make profitable trades. Traders primarily depend on technical analysis to discover the best opportunities for their short term trades. 

Technical Analysis

Fundamental analysis of a cryptocurrency helps you identify its intrinsic value (actual value) that may or may not be its current value. In contrast, technical analysis enables you to understand the present value of the cryptocurrency, study its past performance and find opportunities for the near future.

Key Technical Indicators

Since traders mostly use technical analysis, it would help if you know of some key technical indicators. They are metrics used in technical analysis that help traders identify their entry and exit opportunities. They enable traders to forecast the future and study ongoing trends or confirm already occurred events.

Some of the popular indicators used by traders are:

1.Relative Strength Index (RSI) 

RSI can be used to determine whether the cryptocurrency is overbought or oversold. An overbought cryptocurrency may experience a downtrend shortly whereas an oversold might indicate a price bounce.

RSI measures the rate at which the price changes happen in an asset. It usually gives a score between 0 to 100. An RSI value under 30 is considered oversold, and an RSI above 70 is deemed to be overbought.

The intention behind measuring the rate of price movement is: 

  • If the momentum (pace) increases as the asset price increases, the uptrend could be strong.
  • If the speed is decreasing, the uptrend could be considered weak.

RSI helps you forecast the forthcoming trend.

2. Moving Averages

Moving averages calculate the average price of a cryptocurrency over a period of time for easier tracking of trends. It uses past data to interpret an ongoing trend of a cryptocurrency.

There are two commonly used types of moving averages:

1.Simple Moving Average (SMA)

It is measured by using the price data for the ‘X’ period and calculating an average. For example, the 20-day SMA will add the closing price of a cryptocurrency for the last 20 days and divide it by 20 (number of days). 

Once you plot this on a graph, you will see a smooth trend without any random price movements.

In a simple moving average, each data input is given equal weight and slows it in reacting to the recent events. However, most traders believe that new data is more relevant and hence should have more influence. This is how the exponential moving average came into the picture.

2. Exponential Moving Average (EMA)

EMA is similar to SMA, but it assigns more weight to the recent price inputs and reacts quickly to price fluctuations and price trends. Short term traders find EMA to be a better indicator than SMA because it responds instantly to the market.

Unlike SMA, EMA is complicated to calculate.

P.S: Trading View is a great website to check the RSI, SMA and EMA for the cryptocurrency you want to trade-in. They do all the calculations and give you the final numbers.

4 Popular Crypto Trading Strategies 

Moving on, here are some of the best crypto trading strategies. 

Trading indicators hint at the buy and sell opportunities in the market, whereas a crypto trading strategy tells you how to execute the trades. A thorough understanding of the technical indicators could help you execute some of your most profitable crypto trading strategies.

cryptocurrency trading strategies

 1. Day Trading

As the name suggests, day trading involves trading (buying and selling) cryptocurrencies within a day to make profits. They sell off all of their holdings by the end of the day. Day trading is more suitable for pro traders familiar with cryptocurrencies because of the small profit window.

There are multiple approaches that day traders can follow:

  1. Scalping: It is one of the day trading approaches widely used by traders. This approach involves traders to profit from the intraday movement of cryptocurrencies.
  2. Range Trading: This strategy requires you to identify trading ranges with the highest and lowest price points to trade within.

2. Swing Trading 

Swing Traders are traders that try to profit from the market trends. They hold long positions ranging from anywhere between a couple of days to a couple of months.

They find undervalued cryptocurrencies that are likely to go up shortly and invest in them. You can use both technical and fundamental analysis to determine undervalued cryptocurrencies. Because though you are trading, the period is longer and fundamental analysis can come in handy to strengthen your research.

As opposed to day trading, swing trading is an ideal cryptocurrency trading strategy for beginners because they have more time to make profits.

3. Position Trading

Position trading is a long term strategy. A position trader dodges the short term and midterm movements of the market and plans to trade on the long term trend. 

It could be one of the most profitable crypto trading strategies as traders aim for bigger profits from the long term upward movement in the prices. They invest in a cryptocurrency by determining an expected upward trend and sell it for a profit after the trend is complete.

Position traders might also benefit from backing their technical analysis with some fundamental research.

4. Bot Trading 

Bot trading is one of the best strategies for crypto trading. It includes designing and training trading bots to make profitable trades. Mainly, big fund houses use bot trading strategy as it requires a huge investment of time, money and effort.

Bots account for 86% of the total trades in the cryptocurrency market, according to a survey leading Cryptonomist Adam Cochran

Bot trading could be a highly complex strategy for everyday users because it needs experts to create and train such bots.

Bottom Line

Learning how to trade well and finding and improving your trading strategy is a continuous process. Trading is a vast subject consisting of many indicators and techniques that might look tricky as you read and learn about them. However, if you combine learning and reading with actually implementing these strategies, the process will speed up.

Implement what you learn and keep learning newer and effective strategies, watch this space for more trading insights.

P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. 

Day trading means buying and selling financial assets within the same day with the expectation to make profits from the short term volatility of the market. Volatility refers to the ability of an asset to go up or down in value.

This is how it works: 

Day trading cryptocurrency is a game of hits and misses. You invest in assets throughout the day based on your research. If your study is strong enough, you have a better chance of making profits by selling them sometime during the day. 

Since cryptocurrencies are a very volatile asset class, they attract a lot of day traders. Day trading cryptocurrency is lucrative because of the possible opportunities to make good profits. However, volatility can be a trader’s best friend and their worst enemy. While it creates a chance to make profits when the price goes up, it also puts you at risk if the prices go down.

3 Popular Day Trading Strategies

Day trading could be comparatively risky as it requires you to profit in a single day. Hence it’s important to learn strategies that can help you effectively day trade crypto before you start day trading cryptocurrency. 

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Three popular crypto day trading strategies:

1.Scalping

Scalping involves profiting from the small intraday movements of an asset. The trading period is remarkably brief, say from a few seconds to a few minutes. Since the trading period is too short and price movements are minor, traders conduct numerous trades and in large volumes to make considerable gains.

E.g. Let’s say you bought 100 Tron tokens worth 400 for 4 each. After 10 minutes or an hour, Tron’s value turns to ₹4.20. You would sell your holdings at ₹420 and make an instant profit of ₹20.

This trading strategy enables you to benefit from the regular price variation of the market. The more capital you risk, the bigger your profit could be. Referring to the same example as above, If you had put ₹4000 to buy 1000 Tron tokens, your profit would be ₹200.

It is one of the simplest strategies in trading; however, try not to get carried away and risk excess capital. It is one of the most widely used strategies to day trade crypto.

Investing all your money into trading could lead to losses. Also, while selecting the cryptocurrencies to trade in, it would be best to choose the ones that can be easily bought and sold in the market (highly liquid). You can determine the liquidity of a cryptocurrency by looking at the order books. If the difference between their buy and sell price is slim, the cryptocurrency is liquid and vice versa.

2. Range Trading

It is a trading strategy where traders trade within a trading range (price range) with a support and resistance level. 

  • A trading range is the price movement of an asset between a support and resistance level for a period of time.
  • A support level is the lowest price in the range. It is the price beyond which the sellers couldn’t push down the cryptocurrency further. Generally, a new uptrend starts after an asset hits a support level. 
  • A resistance level is the highest price of the range. It is the price point after which the sellers couldn’t further drive the price up. Generally, a downtrend is expected after the asset hits a resistance level.

Range traders usually try to buy at support levels and sell at resistance levels to make profits.

For instance: The graph below shows that the asset’s price has stayed within a price range between 29th July and 2nd Aug. Day traders can identify such ranges and make their trades depending on where in the range they have entered the market.

Range tradingSource: https://forextraininggroup.com

This strategy assumes that the cryptocurrency’s price will always remain between the support (lowest price of the range) and resistance (highest price of the range) levels until the range is broken. 

The more times the price touches the highest and lowest points, the likely it is that the range will break. Hence, traders should always prepare for the chance to break out or break down the range.

P.S: The graph is used just to give you an idea of what a range looks like on the charts, it’s not a cryptocurrency chart.

3. High-Frequency Trading (HFT)

High-frequency trading, as the name suggests, is “ high frequency (speed) trading”.

This strategy requires you to develop algorithms and trading bots to enter and exit multiple positions. Since we use algorithms and trading bots, the trades happen in milliseconds.

These algorithms are designed to spot opportunities in the market at a much faster speed than a human. They can help traders make profitable trades. However, this strategy is too complex to implement. It takes a lot of time, effort and expertise to create and train these bots. 

It is an advanced strategy, specifically used by trading firms to day trade crypto.

Things to Know Before You Start Day Trading

Before you jump right in and start day trading; here are a few things you should know:

Day trading tips

1.Understand the Market Inside Out

Learn the market; understanding how the cryptocurrency market works and how the trends of the industry influence the price will help you trade better. You also need to understand how volatility works. It will help you recognise the price movements.

Keep a close watch on the events happening in the crypto space; they also influence the short term price movements of the asset and impact traders.

2. Set Goals and Limits

Setting goals and limits push you to make every trade count and stops you from getting carried away. 

Decide your trading capital; this should be the money that will not affect your lifestyle even if it’s lost. Day trading isn’t easy, and expecting to be good at it from day one is too optimistic. Set ‘realistic’ profit goals and actively work towards them. Put a limit on your losses; Most traders risk only 1% of their total trading capital for each trade.

3. Order Types Are Your Friends

Order types like limit order and stop-loss order can be beneficial for traders. They allow you to decide at what price you want to buy or sell your cryptocurrencies.

2 Popular trading order types:

  • Limit Order: A buy limit order is used to execute the buy order at the set limit price or lower. Whereas a sell limit order is an order to execute the sell order at the set limit price or higher. A limit order can help you buy or sell at your preferred price.
  • Stop Loss Order: A stop order, also referred to as a stop-loss order, is an order to buy or sell a cryptocurrency once its price reaches the specified price. For instance, let’s assume you bought 1 TRX for 4; by using a stop-loss order, you can trigger a sell if the asset falls beyond your risk tolerance limit, which could be 3.50.

4.Pick Your Cryptocurrencies

This is one of the most crucial steps before you begin trading. This dictates whether you will make profits or losses and how much. Be strategic while picking your day trading cryptocurrency.

Volatility, Volume, and the Current activities of a cryptocurrency play an important role in determining the best crypto for day trading. We have covered how to find the best crypto for day trading and the list of some of the best day trading cryptocurrencies in an extensive guide if you are interested to know more.

Bottom Line

Trading could be exciting for crypto enthusiasts who like to follow the moves of the market and enjoy breaking them down. 

If you find day trading exciting, learn and practice the above strategies and keep learning new ones. Watch this space for more trading gyan!

P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. 

One of the oldest prophecies of digital currency – ‘Bitcoin is the new (digital) Gold’ – might be coming of age. 

In the past 12 months, ever since the Supreme Court of India lifted RBI’s ban on crypto trading, investments in crypto assets have soared from $200 million to nearly $40 billion. Daily crypto trading values in India are up by almost 900%, according to a report by Chainalysis. 

Why the Surge in Crypto Demand?

Amidst the ambiguities surrounding cryptocurrency regulations, the considerable jump demonstrates a shift in thinking among India’s youngest investors. 

More than 15 million Indians are now trading in some form of cryptocurrency. It compares well with merely 2.3 million in the UK and 23 million in the US. Nearly 60% of all crypto investors are between the age of 18 to 30, according to CoinSwitch Kuber, one of the 4 largest crypto trading apps in India. 

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The Future of Crypto Trade in India

Innovations in the crypto world based on blockchain technology, from fintech to education, are happening at a neck-breaking speed. As the world moves towards a more decentralized open-source future, India cannot be oblivious to these changes. 

Keeping in mind the importance of cryptocurrency and its underlying technology, the Government of India has reiterated time and again the need to come up with regulations that are more enabling than stifling. 

With stable regulations in place along with growing financial inclusion and awareness, the future of crypto trading in India will scale heights never imagined before. The present spike in trading is just the tip of the iceberg. 

Is Bitcoin There Yet, Beating Gold?

Image sourced from Pixels/David McBee. 

Historically, Indians are gold-obsessed but for the right reasons. Households in India own approx. 25,000 tons of precious metal. However, studies from the World Gold Council indicate that the younger generation is disconnected from Gold. 

The ease of acquiring, short-term returns, and technological backing make bitcoin more attractive for millennials. Moreover, as a financial asset, bitcoin has seen a meteoric rise in prices while gold has at the best managed to beat inflation in the last year. 

However, it’s too early to claim victory. Gold has something that bitcoin won’t have for a long time – price stability and millennia of history withstanding traumatic financial crises. 

P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.

 

Despite sceptics declaring doomsday on bitcoin, several of the world’s influential individuals continue to bet on digital currencies. The most recent being England’s cricketer Kevin Pietersen and Mexican billionaire Ricardo Salinas Pliego. 

Kevin Pietersen 

The former England cricketer known for his forcefulness on the pitch is now batting for bitcoin in real life. On the 28th of June, Pietersen, with a Twitter following of 3.7 million people, updated his profile picture with iconic red laser eyes in his show of support for the cryptocurrency. 

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The carefully calibrated move by Pietersen was prompted by Peter McCormack, the host of the “What Bitcoin Did” podcast. Interestingly, within hours of joining the bitcoin club, Pietersen gave his valuable 2 cents on the bitcoin rules one should follow. 

Ricardo Salinas Pliego 

Mexico’s third-richest man, Ricardo Salinas Pliego, has given the bitcoin community a pleasant surprise. 

In an interview last week, Pliego announced that his bank, Banco Azteca, is working towards becoming the first in Mexico to accept bitcoin. He further added that ‘fiat money is fraud’ and strongly recommended the use of bitcoin for the future. 

Though a likely resistance from the Mexican government is expected, Pliego opened up the pandora’s box. The interview exposed the problems with fiat currency and the monetary mismanagement by central banks. 

The Mexican magnate also promoted bitcoin as a better financial asset than gold for the future. “The problem with gold is where you keep it, that is, the custody of gold bars is not an easy thing,” he noted. 

Why Is This Important for Bitcoin Investors?

The recent crypto crash following the Chinese crackdown has left the market in shambles. A massive downward trend has harmed investor confidence. 

Despite bitcoin struggling to cross the $40,000 threshold per unit, the fundamentals have remained the same, with ample scope for an upward trend. Bullish signs displayed by High Networth Individuals (HNI) at times of distress will have a net positive result in the long haul. 

The two key takeaways from the duo’s investment journey for bitcoiners are undoubtedly to look at the larger picture and play the long-term game.

P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.

The National Republican Congressional Committee recently announced that they would start accepting donations in cryptocurrencies. By doing so, they have become the first national political party committee to be taking contributions via cryptocurrencies.

Before this, U.S. political candidates like Emmer and former presidential hopeful Andrew Yang have also accepted crypto donations. However, a national political party engaging in cryptocurrency is a reassuring move, considering the state of Bitcoin in the United States a few years back.

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What Happened?

The NRCC has partnered with BitPay for facilitating all the cryptocurrency donations. They will, however, not hold any cryptocurrencies. Instead, all the donations will be converted to U.S. dollars before it hits the committee’s bank account, enabling more money to flow into their donation trunk.

In 2014, the Federal Election Committee had approved a $100 value for transfers of actual cryptocurrency, but now, since the cryptocurrencies get converted to U.S. dollars, the NRCC can accept individual donations of as much as $10,000 per year bypassing the FEC’s cap.

 “We are focused on pursuing every avenue possible to further our mission of stopping Nancy Pelosi’s socialist agenda and retaking the House majority, and this innovative technology will help provide Republicans the resources we need to succeed,” Axios cited NRCC Chairman Rep. Tom Emmer (R-Minn.) as saying in a statement.

What Does This Mean?

  • The National Republican Congressional Committee soliciting donations via cryptocurrencies may help in boosting people’s confidence around the topic. It has brought a lot of attention to cryptocurrencies, pushing them further towards the mainstream.
  • It is also a forward step towards bringing favourable regulations around cryptocurrencies, which might also translate to other countries following the same path.

If anything, the news indicates the growing familiarity and interest of people and committee’s in cryptocurrencies.

P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.

Before all else, Congratulations to you, Kuberian! The RBI itself has come forward to clear the air around cryptocurrencies 🙂

Over the last few weeks, several banks from all over the country were turning their backs to cryptocurrencies by referring to the 2018 RBI circular against cryptocurrencies. They were doing so because of a lack of clarity on the subject matter. As soon as this caught the central bank’s eyes, RBI took this moment to address the ambiguity.

 They immediately rolled out a fresh circular on 31st May 2021 that said:

It has come to our attention through media reports that certain banks/regulated entities have cautioned their customers against dealing in virtual currencies by making a reference to the RBI circular dated April 06, 2018,” the central bank said.

“Such references to the above circular by banks/ regulated entities are not in order as this circular was set aside by the Hon’ble Supreme Court on March 04, 2020. As such, in view of the order… the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from,” RBI said.

After explicitly specifying that the old circular does not stand valid since March 2020, the Reserve Bank of India suggested that banks may carry on their dealings in cryptocurrencies as they would under existing regulations.

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What does this mean?

  • Banks can no longer refer to the old circular and flag crypto transactions made by you.
  • They cannot cite the 2018 circular and warn you against crypto transactions.

We are thankful to RBI for bringing about the much-needed clarity to cryptocurrencies. 

After positive responses like this, including the MCA announcement and the government’s keenness to set up a new panel for exploring crypto regulation; It would be safe for us to say that it’s only onward and upwards for cryptocurrencies from here.

P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.

Bitcoin ETFs is to Bitcoin what Mutual Funds are to stocks.

You may have heard this advice at least once, that if you don’t know much about the markets and still want to dip your toes –  invest in Mutual Funds. It’s the same logic with Bitcoin ETFs; investors invest in Bitcoin ETFs to get their feet wet with Bitcoin.

It allows them to relish the returns from Bitcoin’s growth without having to directly invest in it. 

What’s the Difference Between Mutual Funds and ETFs?

The fundamental difference between a mutual fund and an ETF is that an ETF is more simplified. It allows you to invest in specific stocks and markets. In contrast, a Mutual Fund offers a broader range of assets under one bucket. It invests your money across industries and stocks and is actively managed, constantly revising the assets in the fund. 

For instance, an ETF gives you the flexibility to invest in a TATA motors stock or the entire automobile sector. However a Mutual Funds allocates your money between varying stocks of different industries.

ETF cater to an audience that wants exposure to specific assets and sectors, while Mutual Funds is more scattered. Additionally, Unlike Mutual Funds, ETFs can be traded on the open markets.

How Different or Similar Is Bitcoin ETF from the Regular ETFs?

Before we jump the gun and move to explore Bitcoin ETFs, let’s take a step back and first learn what ETFs are. 

What is an ETF?

ETFs or Exchange Traded Funds are investment tools mocking the value of its underlying asset or a group of assets.

The best example to understand this would be gold ETFs. Investing in gold ETFs allows you to put your money in a fund that replicates the movement of actual gold, and the same can be traded on the commodities market.

When you invest in an ETF, you aren’t directly investing in any asset but are investing in a fund linked to the asset.

How Does Exchange Traded Funds Work?

An ETF is managed by an investment firm that buys and holds the assets pegged to the ETFs. 

In the above example, the firm issuing gold ETFs buys an equivalent amount of gold and stores it before listing the ETFs on the traditional markets. Once the ETF is listed, you can buy and sell it just like any other stock.

What Are Bitcoin Exchange Traded Funds ( Bitcoin ETFs)?

Similarly, Bitcoin ETFs also allows you to reap the high benefits of investing in Bitcoins without having to really invest in it.

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The issuing company here buys and stores actual Bitcoins before going ahead and issuing Bitcoin ETF’s. Since these companies are trading on traditional markets, you need not go through an exchange to buy a Bitcoin ETF. You can easily buy, sell and trade Bitcoin ETFs on conventional markets.

Bitcoin ETFs also gives you the option to either invest in a fund holding Bitcoin only or be linked to a fund with a basket of investments, including Bitcoin. A hypothetical example of it would be; a Bitcoin ETF would consist, shares of companies like TATA and Reliance along with a portion of Bitcoin. It allows you to further mitigate the risk.

It lifts off the hassle from investors of owning, storing and protecting their Bitcoin investment.

Advantages and Disadvantages of Bitcoin ETFs

Let’s understand this entire concept of Bitcoin ETF in a more rational sense by weighing the pros and cons.

Advantages of Bitcoin ETFs 

1. Better Than Traditional ETFs

In traditional ETFs, though the ETF is following an assets price, the dividend you receive from investing through an ETF would be comparatively less than what someone would get if they had invested directly.

While in Bitcoin ETFs, since it is decentralised, the question of splitting the profit does not arise. Your ETF will be valued equivalent to Bitcoin’s value, and you can redeem it anytime you want after selling.

2. Convenient

Bitcoin ETFs are comparatively more convenient than actual Bitcoin. You can leverage the asset without having to burden yourself with owning and storing it. Additionally, it can be sold on traditional markets without the assistance of a cryptocurrency exchange.

3. Helps you Diversify

As said above, some ETF funds allow you to either fully invest in Bitcoin only or diversify and mitigate your risk by having a scattered fund. Hence, you can either invest in Bitcoin only or allot a portion of the fund to Bitcoin and have stocks as well in the ETF, thus diversifying your investments. 

Disadvantages of Bitcoin ETFs

1. Lack of Ownership

By being independent of third parties, Bitcoin is centred around being in charge of your own money. However, investing in ETFs takes that away from you. Thereby, blockchain’s anonymity and the ability to trade Bitcoin for services or other cryptocurrencies is out of your reach.

2. Higher Fees

Buying Bitcoin ETFs could be expensive; there’s no flat charge that you incur. Instead, your cost varies based on the sum you invest in ETFs and the funds you invest in.

3. Returns will Vary

Depending on the fund that you have invested in, if your Bitcoin ETF is diversified between stocks and Bitcoin, your ETF may not precisely replicate the returns of actual Bitcoin. For instance, if Bitcoin soars 30%, your ETF might not reflect a 30% growth. It will calculate your returns based on the share of Bitcoin in your ETF.

Now that you know the upsides and pitfalls of Bitcoin ETFs, it would be fair to question why have Bitcoin ETFs in the first place and why not directly buy Bitcoin.

Why Not Invest in Bitcoin Directly?

Bitcoin ETFs are for those who don’t want to have the responsibility of owning a Bitcoin. Otherwise, it doesn’t really stand out to be any better than owning actual Bitcoin.

However, an ETF could mean differently for different types of investors.

Bitcoin ETF for Retail Investors?

There is no reason for retail investors to think about taking the ETF route. They already have a very simplified way to invest in Bitcoin. They can set up their account in under 5mins on cryptocurrency platforms like CoinSwitch Kuber that allows them the convenience of storing their Bitcoin on the platform while promising the highest level of security. 

Bitcoin ETFs would just make a simple path complicated and expensive for retail investors. Additionally, you would incur the management fees of ETFs, which might offset all your gains. 

Bitcoin ETF for Institutional Investors?

However, for institutional investors, ETFs makes much more sense because they invest millions of dollars in Bitcoin. They would not want to risk its security, nor would they want to directly get impacted by its volatility. As a result, the fees and ownership aspect of it doesn’t bother them.

Secondly, the whole concept of ETFs is centred around giant investors and not everyday investors. Consequently, over 90% of the ETF’s market is dominated by institutional investors. 

Where to buy Bitcoin ETFs?

Bitcoin ETFs are gaining popularity among legacy banks as more and more companies invest in Bitcoins. With the very first ETF being launched no more than two months back in Canada. Large financial companies and banks like Fidelity and Goldman Sachs have also filed a request with the SEC (Securities and Exchange Commission) for issuing Bitcoin ETFs. India still doesn’t have a Bitcoin ETF yet, but we may see banks offering Bitcoin ETFs pretty soon.

Conclusion

With so many financial institutions worldwide wanting to launch Bitcoin investment-related services, there could be an even large scale institutional adoption of Bitcoin, which will further push its mainstream adoption. It will bring a lot of credibility to Bitcoin and might also amplify its charts. 

P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.

India is the second biggest Bitcoin nation in Asia.

We are actively participating in the cryptocurrency market. We are curious to learn about this new age asset class, and more importantly, there is a wholehearted acceptance of Bitcoin in India. Ever since the Supreme Court retracted the ban on cryptocurrencies, the trading volumes of Indian exchanges have multiplied and continue to grow.

So when we are so into this new financial instrument called Bitcoin, let’s dive deep and learn some essential aspects of it.

Top Risks and Rewards of Bitcoin Investing

Every investment is tied to some level of risks and rewards, and Bitcoin is no different. 

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Risks with Bitcoin Investment

Let’s hop in and look at some risks associated with Bitcoin.

1.  Volatile

Cryptocurrencies as an asset class are incredibly volatile, just like stocks, sometimes more. But volatility is also what makes them the most attractive asset.

A highly volatile asset is anything that has the potential to move considerably in value in either direction. When the movement is positive, you seem to make money, but you seem to lose when it is negative.

So as much as it is a risk to invest in a volatile asset like Bitcoin, it can be equally rewarding if not more.

2. Under-regulated Yet 

Bitcoin comes under the broader umbrella of Cryptocurrencies, and, indeed, the market is yet under-regulated.

But you must also factor in that it is built on a revolutionary technology like blockchain. By nature, its functioning and operations are quite technical and tricky, to say the least. This means it is not easy for governments worldwide to define a set framework for their operations.

Nobody has complete control over this technology, and it becomes a challenge for the governments to monitor something they don’t have control over.

So will it forever stay under-regulated? I don’t think so. 

Respective government authorities are exploring ways and means by which they can fully regulate this cutting edge technology and bring in a financial revolution. India, too, is in the process of exploring the adoption of cryptocurrencies in the country.

3. It Is A Software (Sort off & Software can have bugs) 

Bitcoin is essentially a programmed digital currency. It is a set of codes that operate on the internet, and there’s no denying that there is a possibility of bugs in the programme.

However, you must know, Bitcoin is open source and has some of the best developers and miners that help keep it secure. The developers on the Bitcoin network work tirelessly to enhance its functionality. And Miners are responsible for authenticating transactions on the network to maintain transparency.

4. Cyber Theft:

Bitcoin is protected with cryptography; every user has a public and a private key to ensure only an authorised user can access the cryptocurrency. 

However, being a digital asset, Bitcoin is at the risk of getting stolen by hackers. But such instances can be completely avoided if you are diligently taking all the required safety measures like not sharing your OTP’s and Mobile app password with other people, keeping your private keys to yourself and not sharing access to your hardware and software wallets through any means.

Rewards in Bitcoin Investment

Now that we have covered some of the risks involved in Bitcoin let’s also catch up on the rewards that it holds.

1. Asymmetric Returns:

The relationship between the risk and reward in Bitcoin is asymmetric. In simpler words, Bitcoin has the potential to give you a much higher return as compared to the level of risk you take.

For e.g., Over the last three months, Bitcoin’s price has grown nearly 61%; it was valued at close to $30,786 in the first week of Jan 2021 and is now soaring near $52,666. Whereas in the same period it has not experienced a drop of more than 15% at a time

So if you see the risks to return ratio here is quite favourable.

2. No One Can Control It or Seize It:

Have you ever thought about what will happen if the bank you put your money in shuts down one day? All of your money will be seized; you will no longer be able to access them until things are sorted.

Thanks to Bitcoin, it is decentralised, and no one person or authority has control over its operations. This means no one can just come and say that you can’t access your funds.

You are in total control of your money; you can access it anytime, anywhere with a mobile and an internet connection.

3. Superior Store of Value (SOV):

Something can be a good store of value only if it retains and increases in value over time.

For E.g. Real Estate, at the time of purchase, is valued a certain amount and over time not only retains but increases in value. So real estate can be considered a store of value.

Similarly, Bitcoin is also a store of value. Its features like highly profitable (Volatility and Asymmetric Returns) and scarcity have helped it not only retain but exponentially multiply in value. Over the last year alone, Bitcoin grew 800%, so if you haven’t already dipped your toes into Bitcoin, you may want to rethink your decision!

Bottom Line

Over the last year, Bitcoin has turned out to be the most sought after asset from the bouquet of cryptocurrencies. It has had its ups and downs but continues to shine through. 

With so many people being invested in it and a ton looking forward to embracing it, I tried my best to call out the risks and rewards involved in making a choice. Now that the ball is in your court, Happy Investing!

P.S. KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. 

Ten years back, we had nothing called cryptocurrencies. And then, one fine day back in 2009, somebody with the pseudonym Satoshi Nakamoto released the whitepaper of Bitcoin to a mailing list, and cryptocurrencies came into the picture. 

In the initial few years of its existence, only a couple of crypto enthusiasts were involved in Bitcoin and related activities. Gradually, by 2013 as Bitcoin started to gain traction, various other cryptocurrencies followed through. And now we have over 5000 cryptocurrencies in the crypto market.

Future of Cryptocurrency

From the hundred million crypto investors globally, the world could see more new crypto investors enter the landscape. There is expected to be a rise in the number of crypto investors, both; retail and institutional.

Moving forward, Cryptocurrencies may not be about Bitcoin only; other cryptocurrencies with varied purposes might also pick fire. But not every cryptocurrency will possibly flourish, remember ‘Cryptocurrencies’ is an umbrella term for more than 5000 protocols in the market, and only the best of the best will survive. Hence, while investing, it is important to mindfully analyse and invest.

However, the forecast is based on the current state of the crypto ecosystem in India.

Crypto World | Current State

Cryptocurrencies have been thriving over the last few years, especially in 2020. Over the previous year, the total market size of cryptocurrencies has grown 2X, let alone the double-digit spikes that individual cryptocurrencies like Bitcoin, Ethereum and other cryptocurrencies have experienced.

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It is also one of the years where a new wave of new first time retail crypto investors entered the market. Apart from that, multiple institutional investors have also dipped their toes into the market, including Tesla, PayPal, JP Morgan, MicroStrategy etc.

Additionally, cryptocurrencies are expected to penetrate deeper into the financial landscape, with regulators looking forward to defining a framework for its operations.

Apart from the cryptocurrency market’s valuation boom, multiple technological advancements have also happened over the past. Where earlier Bitcoin was the ultimate cryptocurrency, we are now seeing other cryptocurrencies like Ethereum, Tron, BAT making a significant impact.

In crisp, to accurately foresee what the future holds for cryptocurrencies is a challenge. The ecosystem is very happening, and any event could significantly change your expectations; however, the events look pretty favourable so far. 

Future cryptocurrency to invest in 2021

Knowing how the emotions are swiftly changing and realising that people are becoming more open to other cryptocurrencies. Here are some of the best cryptocurrencies to invest in 2021.

1.Basic Attention Token (BAT)

The Basic Attention Token or BAT powers a blockchain-based digital advertising platform, Brave browser.

 It aims in solving the privacy issues of the prevailing digital advertising industry. There have been concerns around how the existing digital ad companies have been breaching people’s privacy; BAT is working on maintaining user privacy on the internet.

The Brave browser is the first crypto application to have more than one million users.

Greyscale, one of the renowned investment firms, also confirmed their interest in setting up a BAT Trust. Since then, it has been getting a lot of traction.

BAT also announced its roadmap, BAT Roadmap 2.0. They revealed that they are looking to create a decentralised exchange (DEX) aggregator and a Brave Wallet. These additions will extend its reach beyond browsing and expose it to the gigantic world of DeFi.

2.Chainlink (LINK)

Chainlink is an oracle network that feeds real-world inputs to smart contracts, enabling them to execute tasks successfully. LINK has been widely used by some of the leading companies like Google, Aave etc.

They are diversifying into NFT’s and are planning to also enable them to interact with the external world.

Chainlink is also scaling the oracle network by increasing the amount of data the network can transfer. The Chainlink team has developed an Off-Chain Reporting solution that has boosted its scalability capacity by 10X.

LINK has been steadily increasing in value since 2021, with some bumps along the way.

3. Tron (TRX)

The Tron protocol is focused on decentralising the internet; it aims to build a global digital content and entertainment ecosystem. It encourages creators and viewers to participate in creating and sharing content actively.

Similar to Ethereum, Tron is also a smart contract protocol that powers DApps (Decentralised Applications). Apart from that, it also has a super-efficient network speed with the capacity to handle 200 transactions per second. It is one of the fastest-growing public blockchains.

Though Tron hasn’t seen any significant spikes in its value, it has remained pretty sturdy. The objective of the protocol looks promising and is expected to revolutionise the content and entertainment industry.

To wrap it up, I would like to give you a heads up that the above-mentioned cryptocurrencies are just some protocols that excite me, and they may or may not outshine in the future. Hence request you to please make sure you do your research before investing in any crypto.

With that said, Happy Investing!

P.S. KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. 

Growing up, do you remember thinking you can’t wait to be an adult and doing whatever it is you want in life, imagining living life on your own terms-no rules, no school?

Well, frankly, all I can remember is the disillusionment that slowly sinks in with each passing year. Being an adult is not everything it was cut up to be while growing up. You may not have school or homework anymore, but frankly, tax time can be so much more overwhelming.

Experience will also teach that being an adult isn’t necessarily only about fun and freedom, mainly because it is unsustainable. It sounds boring and simple, but it’s really about doing what needs to be done and doing it on time.

A huge part of enjoying being an adult is about having the time and resources to live life on one’s own terms, which is possible with financial freedom. No matter how much or how little you earn, achieving financial independence is not unattainable. In fact, it can be as simple and straightforward as we want it to be. 

Best Financial Moves Before Turning 30:

Live Frugally (spend less than you earn)

Sounds simplistic, but nothing spells financial ruin like racking up debt faster than one’s ability to earn. Credit cards are a great fix in an emergency, but living life on credit every month is unsustainable. 

The most responsible thing one can do as an adult, or at least one without a trust fund at their disposal, is to live within their means.

Save Regularly (slow and steady wins the race) 

Financial discipline is about living within one’s means and setting aside money for future financial goals. These goals vary among individuals—some may want to save for further education or buy a vehicle or a house, or for wedding expenses or set aside for their folks or their own retirement. 

Goals vary, but what is universal is that not everyone earns well when they start their careers. This is where it becomes essential to set money aside, however little, regularly as soon as one starts earning. 

The younger you are when you start saving, the larger the corpus as the years go. Saving from a young age helps achieve financial goals faster.

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Building an Emergency Fund (no one can predict the future) 

As young adults, we are all guilty of thinking we are ‘bulletproof’. We have our whole lives ahead, and we are energetic and passionate and want to take life by the horns. 

However, as far as clichés go, here’s another for you, life is unpredictable.

Job loss, accident, sudden hospitalisation, unexpected expense that hadn’t been accounted for–none of these situations comes with fair warning. 

However, planning for these can help take off some of the stings when any of these situations arise. Building an emergency fund should be done on priority when one starts earning. This fund should help you cover roughly four to six months’ worth of expenses.

Also, this fund needs to be liquid, i.e. quick to access. It can either be saved in the form of a fixed deposit or set aside in an ultra-short-term debt mutual fund.

Insurance (be prepared)

One of the most common financial planning errors we make as a layperson is meeting our financial goals through insurance products. A majority of us look at insurance schemes as money-making schemes. In doing so, we lose the opportunity to cover ourselves effectively. We fail to choose a financial product most suitable to meet our financial goals effectively.

Insurance products that you should purchase are medical and life insurance. You could buy term life insurance for more effective coverage where the plan cover is at least ten times your annual income. A good thing to remember when purchasing life insurance is that money from the insurance policy benefits your dependents upon your death. It’s not to help you meet any financial goals or save taxes.

Another thumb rule to keep in mind is premiums will be less prohibitive if you were to lock them in at a young age when there are usually lesser health problems to pencil into the premium mathematics.

Public Provident Fund (cause it’s never too early to start planning for retirement) 

Wondering why we skipped other sensible investment avenues, including mutual funds? Well, the reason is the magical concept of compound interest, which is what investing money in a PPF account earns. Not to mention the sovereign guarantee it carries and its tax-deductible status. PPF is essentially a retirement tool. The money you deposit there gets locked up for 15-years with the opportunity to extend the lock-in period in blocks of years.

Financial planning may seem overwhelming on the face of it, but the truth is, the sooner you develop financial discipline, the smoother, more carefree life one can afford going ahead.

Bonus Tip:

The beauty of imbibing financial discipline early in life is that one can afford to take bigger financial risks, which comes with better returns than traditional products and financial instruments. 

Over recent years, interesting financial products such as cryptocurrencies have been gaining popularity. Provided one has a substantial risk appetite, investors can explore them as they have emerged as one of the highest yielding asset classes.

P.S. KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.