Whether you are a novice investor or someone who has been into investing for a while, I would like to ask you something.
What are some of the most obvious investing avenues that come to your mind when thinking about investing?
Let me guess:
They are generally Deposit schemes and Mutual Funds, to begin with, for novice investors. And for somebody with a fair knowledge of investing, Stocks would also come into the picture.
But have you ever had a close look at each of these vehicles to understand how justified their returns are?
I am sure the thought never crossed the mind of most people.
So, let me give you a bird’s-eye view on the same to help you understand better.
Let’s and acknowledge that every investment is attached to some level of risk. However, the degree of risk can vary based on the returns and other factors.
If you look at the returns from Deposit schemes and Mutual funds, the returns are relatively less, and after-tax deduction, little is left. And while stocks have the potential to give higher returns, the risk to returns ratio involved here seems unbalanced.
Whereas with cryptocurrencies, the returns are exponentially high with relative risks involved.
Not only this, but they also stand out in overcoming the complexities and loopholes of the existing financial ecosystem.
Table of Content
Why Invest In Cryptocurrencies In India?
Read on, and you will know:
#1. The Falling Value of the Indian Rupee
Businesses strive to conserve cash, and investors put a pin in their investments when faced with a crisis. And we are in the middle of the pan-global crisis – COVID-19, and the Indian Rupee is taking the fall – literally.
Statistics show an alarming decline of 7.7% in the value of the Indian Rupee, since the commencement of the year 2020. Trends show that it is not just the Indian Rupee, but currencies across the globe have weakened against the US Dollar.
One of the primary reasons for the fall of the Indian Rupee is, without a doubt, the economic uncertainty brought about by repercussions of the Covid-19 pandemic.
Meanwhile, India’s cryptocurrency market has seen a boom, with cryptocurrency platforms observing that the number of new users has almost doubled, and transactions have nearly tripled.
When the value of the Indian Rupee falls, inflation follows.
Inflation refers to the increase in market prices of goods and services in a country and shows that the purchasing power of the country’s currency has decreased.
Market Inflation is still rampant in India due to many reasons, including the demand-supply gap.
According to statistics, India’s inflation rates averaged 6.04% between 2012 and 2020. The highest was 12.17% and a record low of 1.54%. This illustrates a volatile economy that is hard to predict.
Cryptocurrency is also subject to inflation, but it was designed in a way that helps you predict inflation. Bitcoin, for example, was curated such that it’s inflation always undergoes a decrease every four years (Bitcoin Halving).
Fun fact: the inflation rate of Bitcoin, which was at 50% in 2011, is now at 3.8% in 2020.
Overall, cryptocurrency is a better bet in a volatile market and is a safe inflation hedge to protect against falling purchasing power, more so than the traditional inflation hedge gold has proved to be.
#3. Under-banking in an Overpopulated Nation
For a nation with a population of over 135 crores, we are grossly unbanked and underbanked.
Unbanked is a term used to describe households where not a single member has a checking account nor a savings account. Whereas an underbanked household is one that has an affiliate with a bank but sticks to hand-to-hand money transactions without utilizing the bank account for financial services such as bill payments.
This has long-term repercussions, as they might not be able to seek immediate financial aid from banks when the need arises. They will also not have a hassle-free means of keeping track of their monetary transactions nor tracing misplaced or stolen money.
People may be unbanked because acquiring customers is a cost-consuming endeavour for banks. This is not an issue with cryptocurrency as the entire onboarding, and subsequent processes are digitized and require little capital for the platforms offering cryptocurrency.
Some people might also choose to remain unbanked out of choice if they do not trust financial institutions.
In cryptocurrency, this is remedied by the public ledger which keeps track of every cryptocurrency transaction ever made and is impervious to alterations.
Anyone can view every single transaction recorded, and there is no chance of fraudulence.
Cryptocurrency runs on blockchain technology, providing digital identifiers to the unbanked and underbanked. It helps them keep track of their transactions easily.
And irrespective of whether you are unbanked or underbanked, you can create digital wallets and deal with cryptocurrency transactions as long as you have a smartphone and access to an internet connection.
#4. Banks Still Don’t Lend to Majority of SMEs
Small to Medium Enterprises (SMEs) still have trouble procuring bank loans to support their businesses. This is because banks look at the credit history of the business owner since these start-ups do not have business credit on their own.
And if by any chance, the owner has past credit issues, it becomes a basis for denying loans to the SME in question. Being profit-driven, banks also look at the revenue they stand to make at the end of the day, and simply do not wish to make investments they consider risky.
Cryptocurrencies can be a blessing for SMEs in need of loans. You can take cryptocurrency loans easily after you set up and verify an account.
Not just that; cryptocurrency interest rates are much lower than the interest rates offered by banks.
#5. Easy Autonomy Over Your Finances
Cryptocurrencies offer you autonomy over your money.
You are independent of any institution or individual for storing, accessing, or using your cryptocurrency. And don’t need to wait in long queues or waste time on slow transactions. You won’t have to pay any additional holding fees.
Transactions are transparent, and there are no risks of fraudulence. And one of the best characteristics of cryptocurrencies is their liquidity, which makes it easy to buy and sell.
Cryptocurrency is truly paving the way to a decentralized financial system. It ensures that your money remains in your control and never witness cases like the PMC bank crisis where savings of lakhs of Indians is stuck.
And you can be a part of this digital currency revolution from the comfort of your couch; what better?
#6. Fastest Growing Asset Class in India
Financial asset classes are investments that are similar in attributes and are bound by the same rules and regulations.
Once the regulations for cryptocurrencies are defined properly in India, it will take its place at the top as the fastest-growing asset class. Let us look at some facts and figures using Bitcoin as an example to get a better idea.
According to Indian national statistics, the average annual return for real estate is 10% in the last 10 years. For stocks, it is 9.2% in the past 10 years. For gold, it is a whopping 134%, touching a high of INR 56,000 per 10 grams recently.
And as for Bitcoin:
It delivered a 101% return on investment between March and August 2020. It might not seem like it’s more than gold, till you remember that one Bitcoin is currently equal to INR 7,69,559.19.
We have a clear winner. Plus, in the last decade, Bitcoin’s price has doubled several times, making it the fastest-growing asset on earth in terms of ROI.
In a nutshell, investing in cryptocurrency might very well be a good option for your financial stability.
However, get your research right and choose wisely before deciding on which cryptocurrencies to invest in, for they will be your best financial assets in the coming years.
For the reasons mentioned above and more, investing in cryptocurrency will outrank investments in any other financial asset in the coming years. This is not only for the simplicity of handling cryptocurrencies but also since it is one of the fastest-growing asset class in the world.
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.