Suppose you wish to “put” some money in cryptocurrency (or cryptocoins), say Bitcoin, altcoin, litecoin, fartcoin etc. would you trade or would you invest? It is obvious that due to poor liquidity, the crypto market is volatile. So instinct would tell us caution is necessary. So trading (frequent buying and selling) with regular profit booking seems like an obvious choice to make some quick money rather than investing (buy and hold with periodic investing). In this post, I discuss the fundamental difference between the currency market and capital markets and if something can be discerned about cryptocoin risks.
As I sat down to write a post on “cryptocurrencies: should you trade or invest in them?”, I received an email from my classmate asking me to explain if the most popular cryptocurrency- the bitcoin is a Ponzi scheme? A pyramid scheme? or bubble? Since the two topics are closely related, I thought let me do my best to address this question.
If you are new to cryptocurrencies, try this first: Bitcoin: Should we use it as a currency or as an investment?
In this post, I discuss why I will not (never?) invest in Bitcoin or any of the 900+ cryptocurrencies in “circulation”. This is a refinement of an earlier post: Bitcoin: Should we use it as a currency or as an investment? in which I had stated my unease with it as an investment even though the concept is rock-solid.
Note 1: this post is about “using” and “investing” in Bitcoin and not about getting a taste of crypto. This means having an exposure of at least 10% or more in the portfolio. A person earning 1L a month with a SIP in an equity fund for Rs. 5000 is an equity taster and not an equity investor. The same applies to many (if not most) Indian Bitcoin “investors”. It should be obvious that such a taste hardly means anything in terms of wealth. Perhaps this post can shed some light on whether it is worth the trouble.
On August 1st, 2017, Bitcoin is expected to fork (split into two). In this post, I discuss my learning about cryptocurrencies with an emphasis on Bitcoin and Bitcoin fork and why they may be a reasonable choice of currency for those who have a set of specific requirements but does not (dare I say, should not) represent an instrument for investment.
I started reading about cryptocurrencies (at last count 900 of them exist!) rather late and as I sit down to write this, the cryptocurrency with the largest market share – Bitcoin – is on the verge of significant change. In this post, I shall often use the Bitcoin as a synonym for cryptocurrency (depending on the context)