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cryptocurrency | IST

Bitcoin on a tear: Want to start investing in cryptos? Read on

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The listing of Bitcoin Strategy ETF is big news for the industry. Now, institutional investors can invest in this intellectual property-led asset. But investors should evaluate bitcoins, as they would stocks, before walking in, Ashish Singhal, Founder and CEO, CoinSwitch.

Bitcoin hit an all-time high of $66,900 this week and is up 120 percent in 2021. The reason behind this big rise was that the US has approved ETF trading in Bitcoin. For the Bitcoin Strategy ETF that was listed, the volume topped $1 billion on Day One.
Now the big question is what does this mean for cryptocurrency and how do you approach it in case you missed the bus? CNBC-TV18 caught up with Ashish Singhal, Founder and CEO, CoinSwitch, to answer some of the questions around cryptocurrency investments.
The Bitcoin Strategy ETF getting listed in the US is a big moment for the crypto industry because so far the industry has been retail-driven. This is the first step towards institutionalising cryptocurrencies in general, he said.
Why are ETFs so important?
If you wish to buy gold, you have to go to a jeweller, buy physical gold, put that in a locker, work on the security of that locker, and make sure nobody breaks in to steal the gold. And that is why big institutions cannot buy gold because they have to build storage, making sure of the physical security of the asset, said Singhal. With ETFs in Bitcoin, investors now don't have to worry about the security and management angles. They can simply speculate, working on the underlying asset.
Large institutions would now be able to access the Bitcoin market, which was previously unavailable to them. And that is why this listing of Bitcoin ETF is such a big news for the crypto ecosystem. It is natural for prices to have risen, he said.
According to Singhal, the entry of Bitcoin ETFs in India is still be a long way off, because India is today at a point where the US was probably four years ago. "So, the first step would be the classification of cryptocurrency, then regulations, and then probably we can expect ETFs to come out in India as well," he said.
How to get started on investing in cryptos and what to look for while investing in it?
Singhal said evaluating bitcoin is similar to evaluating a stock. Stocks are evaluated through the company's Profit & Loss (P&L) account, fundaments of the company, the people leading the company, the products it is building and selling, and the demand and supply of that product, going forward.
Similarly, crypto too needs to be evaluated in a certain way. Crypto is a very new industry . There are no quarterly reports, or P&L accounts because they do not exist. However, the investor can evaluate the team, the use case that they are trying to solve on the blockchain using that crypto, the manner in which their incentive mechanisms are aligned, the backers of the project and the initial success of the launch. These are some of the criteria that you should look at while evaluating any cryptocurrency.
“I equate cryptocurrency investment to start-up investment — how investors look at a start-up and look at an amazing team, amazing product, amazing traction, to see what the future can hold for them. This is similar to how you should evaluate any cryptocurrency that you come across,” said Singh.
For the entire discussion on the investments into cryptocurrency, watch the video