Amid the ongoing uncertainty in the cryptocurrencies, Gaurav Dahake, co-founder and CEO of the crypto exchange Bitbns, said that volatility in the space is a feature, not a flaw and investors may consider buying the dip. In an interaction with Business Today, Dahake further shared the way to spot quality crypto. Edited excerpts:
Business Today (BT): Total market capitalisation of cryptocurrencies have tanked by over $1 trillion in 2022 so far. Which factors do you think have dampened sentiment?
Dahake: The aggressive raising of interest rates by the US Federal Reserve has been commonly viewed as a recession indicator that led to the massive downfall of the crypto market. Secondly, the cumulative impact of the meltdown across markets is also building a cascading effect on the crypto market.
Additionally, the US-based platform Celsius Network freezing users' withdrawals and transfers also had a huge impact on the market. These factors had a snowball effect on the crypto industry globally and India which is currently the largest hub of crypto investors was no exception. However, crypto has a bearish outlook till mid-Q3 but usually revives post-Q3.
BT: What is your advice to investors who have been stuck amid the ongoing fall?
Dahake: Volatility in cryptocurrencies is a feature, not a flaw. Despite its extreme volatility, the business has endured for more than 10 years. It witnessed interest from investors from all walks of life and survived multiple steep losses. On the other hand, it offered stability during the economic crisis. The cryptocurrency industry has withstood everything - from pandemic to weakened supply systems to rising market volatility.
Given the classic financial saying, “buy at dip”, investors may now seek a piece of the crypto market as it represents a short-term slump rather than a long-term bear market. Therefore, investing during the market fall can be a wise move. Prices are cheap, and the potential for enormous gains is quite significant.
BT: How do you see cryptocurrencies in the second half of the calendar?
Dahake: Usually, crypto is expected to rebound post the third quarter. However, it will also depend on the global policies towards crypto. That will more or less shape the investor sentiments.
BT: Do you think cryptocurrencies are falling-knife or there is an opportunity to invest now?
Dahake: If we look at multiple scenarios, most sectors and markets are down, not just cryptocurrency, and the economic forecast for the next few months might be challenging. But we believe it is a cycle, and it is all set to revive as we move ahead. For existing and new investors, it is the best time to invest or enter the crypto market.
BT: In stocks, we do measure quality based on management background, balance sheet, ratios etc. How do identify quality in the cryptocurrency space?
Dahake: The quality or the authenticity of the cryptocurrency ecosystem is usually evaluated based on the following factors:
• Trading history of the currency: While analysing the trading history of the coin, one may notice the reds and greens. In an ideal situation, a steady and slow increase over time signifies the coin's stability and is a positive sign of the asset's long-term potential.
• Market capitalisation: Market capitalisation is usually the valuation of the total cryptocurrency in circulation. A large market capitalisation implies that the asset is a trusted source and drives more investors towards it, strengthening its market cap. An investment with a low market cap is probably new and risky, and there would be investor aversion.
• Project objective: Visit the cryptocurrency project’s website and social media pages to learn more about the project, the team, and the community and get a feel of how socially engaged it is. The website for the project should be user-friendly, functional, and publicly provide information about the project, the team working on it, and its white paper and roadmap.
• Trading volumes: As a gauge of how readily a crypto asset may be purchased or sold, a low trading volume might be a warning sign. The higher the number of cryptocurrencies traded, the higher will be the liquidity for a given coin or token and therefore trading volumes should be considered before investing.
BT: Bitcoin has plunged over 50 per cent year-to-date. What is your view on the popular crypto?
Dahake: It is speculated to rise from the current price point and may shoot up to a new high. An SIP sort of an approach works best. However, it is imperative to do thorough research on risks and rewards before delving into investing in crypto assets; additionally, bitcoin is not relevant for intraday trading. It will reap benefits only in the longer run.
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