‘Follow the trend’.
This is what most people are doing with their finances. Nowadays, Cryptocurrency is the new buzz in the market. There is so much noise in this domain that people just invest in FOMO. Most of them think it is a fast money double scheme. But, should you choose cryptocurrency over stocks? Before answering that, let’s declutter your mind about crypto.
Bade Miyan, Chote Miyan
Bitcoin is the ultimate Bade Miyan of the Cryptocurrency market. It is the most widely accepted cryptocurrency and the movement of the market mainly depends on it. All the crypto coins apart from Bitcoin are called Altcoins, the Chote Miyan. Some popular Altcoins are Ether, Matic, Solana, Ripple, Cardano, etc.
How does Cryptocurrency work ?
Whenever you swipe your card in Mcdonald's, your bank knows you are having a happy meal. Not only banks can see all your transactions but also can pass any entry in your account, and deduct any amount like bank charges. So, here the control of your money is very centralized. What if, this control is in your hands? Instead of bank debiting or crediting your ledger, you and the transacting party can debit or credit your accounts. This is what cryptocurrency does.
Cryptocurrency functions on a blockchain technology in which all the transactions are stored in a digital ledger. Now, this digital ledger is shared with several authorized users. For changing or adding any entry in this digital ledger, the majority of the people should agree. In this way, there are almost zero chances of corruption and false data entry.
Cryptocurrency as an Investment
Although the idea behind cryptocurrency is quite revolutionary, investing in crypto is controversial. The Crypto market is highly volatile. Since there is the least involvement of government, there are many jazzy promises which are hard to fulfill. Be it the stock market or cryptomarket, the prices are decided based on demand and supply. So, before investing, find out whether there is a ‘use case’ for that crypto project. For example, the demand for cryptocurrency ‘Ether’ depends on the demand of the Ethereum Blockchain. This blockchain can be used to create decentralized apps in the areas of banking, insurance, gaming, etc.
Similarly, there is a use case for every crypto coin. If the protocol on which the cryptocurrency is built does not solve a greater problem, you should refrain from investing in it. But, this is just the start of your research, you should see how that particular blockchain is generating revenue, what is the competitive advantage it offers, and many more.
Holding a Cryptocurrency as an Indian
Though the government has announced its digital currency in the budget for 2022, it did not show an encouraging attitude toward holding cryptocurrency. You have to give a flat 30% tax on your crypto gains. Unlike capital gain on shares, you would not be allowed to carry forward any crypto losses next year. Also, 1% TDS would be deducted on crypto transactions so that government can keep a tab on it.
Stocks vs. Cryptocurrency
Now, you have got a broader picture of cryptocurrency and how it works. There is still a long way to go in this market and investing your hard-earned can be quite risky. Stock Exchanges are much more regulated and SEBI intervenes to protect the interest of investors. The fate of cryptocurrency does not only depends on the blockchain it functions but this market is highly reactive to news. The crypto market is highly sentimental. The market reacts from Elon Musk’s tweet to the Squid Game crypto scam which makes it easier to lose money than earn. It is more like a bet, there are chances of winning or losing. In the share market, if a company is fundamentally strong, the share prices are bound to rise in the long term. So, the share market is far less risky than the crypto market.