Crypto hype to continue but you need to ask: Can the lure of quick money control your financial decisions? While there may be regulatory obstacles, these will eventually be overcome. Another surge in value is inevitable, resulting in substantial increase in the wealth of those who have crypto. With each surge, a new wave of unsuspecting savers will put their financial well-being at risk
Dhirendra Kumar
CEO, Value Research
The other day, I received a sales flyer for some Bitcoin exchange packaged with my grocery order. This was new for me because, as far as I know, bitcoin advertising has not reached a level where pamphlets are inserted into groceries. The sales flyer had an AI-generated illustration of a young man running to catch a bus in 2050, while thinking wistfully, ‘Kash, papa ne 2024 me Bitcoin liya hota.’ The reverse side of the pamphlet had a graph of Bitcoin prices, along with the message, ‘Bitcoin prices have surged after every Bitcoin halving.’ As financial advertising goes, it does not get any simpler than this.
However, as readers understand, the reality of Bitcoin and other cryptocurrencies is far more complicated and murky than this marketing material suggests. The promised surges in value are enticing, but crypto’s volatile nature looms over it. Such pamphlets gloss over the fact that the sector is rife with unpredictable regulatory changes, cybersecurity threats, and market manipulation schemes. On top of that, crypto’s lack of intrinsic value and complete dependence on speculative behaviour hardly make it the type of asset you can rely on to ensure that your children do not have to use public transport in 2050.
However, the strangest part of this sales pitch is not what it says, but what it does not. Unlike any other financial product, there is no disclaimer on the pamphlet. In this country, as in any well-regulated market, no one can advertise or promote any financial product without substantial legal vetting and disclaimers. Take mutual funds. Whether anyone has invested in one or not, they would have heard or read, ‘Mutual funds are subject to market risks.’ Yet, Bitcoin can be advertised without any such warning or disclaimer. All that this pamphlet stated was, ‘Indian govt registered’.
In the aftermath of the FTX debacle last year, I was actually happy with the absence of official cryptocurrency regulations in India.
Till a point, one could say that crypto should remain unregulated, allowing individuals who engage in it to face the consequences of their actions. They should have the autonomy to risk financial ruin on their own terms. However, contrary to what one might have hoped for, the FTX scandal has not proven to be the death knell for crypto. This suggests that the cryptocurrency market may be a permanent fixture in the global financial landscape. The FTX incident has shown that a crypto venture can attract billions from investors worldwide, mismanage it completely, and yet, fundamentally, not undermine the core principles of cryptocurrency. The potential for profit is simply too significant and easily attainable.
We have reached a stage where everyone thinks that cryptocurrency is a legitimate asset class. While there may be some regulatory obstacles, these will eventually be overcome. As the sales pamphlet claims, another surge in value is inevitable, resulting in a substantial increase in the wealth of those who have cryptocurrency. With each surge, a new wave of unsuspecting savers worldwide will put their financial well-being at risk. In each wave, there will be a new lot of potential victims. Any speculative asset that can randomly double and halve is well equipped to be exploited to lure in newcomers. Clearly, this is a role that Bitcoin is now playing. Unfortunately, this could go on in the foreseeable future.
The question that we have to answer, as individual investors, is what are we going to do about this? How are we going to save ourselves from this madness? In the end, the responsibility falls squarely on each individual to navigate this treacherous terrain with caution. The relentless lure of quick money cannot be the principle that guides our financial decisions. There are those who will understand this and those who will not. Which group will you be in?
The Author is CEO, VALUE RESEARCH
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
