Want to know the best strategy for crypto trading right now? It's simple, 'Don't do it' My answer would be: dont do it. However, if you insist, choose a vehicle that operates as a regulated entity. For example, the US markets have a number of SEC-approved ETFs with holdings in Bitcoin and other cryptocurrencies. Many of these are operated by well-known parent companies like Franklin Templeton and Fidelity
WazirX, a prominent, self-styled crypto ‘exchange’, has discovered socialism. A few days ago, it made an announcement and put up an X post: “In response to the recent cyber attack that led to the theft of $230 million (45% of user funds), we are committed to handling the situation fairly and transparently. We are implementing a socialised loss strategy to distribute the impact equitably among all users.”#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} When the ‘exchange’ makes money from traders, it keeps the money, and it is called capitalism. When the money in the exchange’s custody is stolen, it’s time for socialism, and the traders share the losses among themselves. A few days ago, this ‘exchange’ declared that North Korean hackers had stolen $230 million from its systems. You must have heard of the commonly used excuse, ‘the dog ate my homework’. North Korean hackers have become the dog that eats the homework of companies that get hacked. Just as the teacher cannot go to the student’s home and verify whether the dog did indeed eat the homework, no one can go to North Korea and investigate these hackers. So, after the North Korean hackers have done their job, it’s the turn of North Korean socialism.
I have, of course, no sympathy for those who are foolish enough to trade on these crypto ‘exchanges’. For at least five years now, I have been reiterating in this column that regardless of the merits of crypto, those who are trusting these self-appointed exchanges are taking a huge risk. In 2021, I wrote in this column: “When I buy some stock, I go to a stockbroker. I transfer to the broker some money from my bank account and, in return, I see some numbers appearing on the screen where I’m trading. These numbers claim to tell me that I now own some stock. What is the provenance of these numbers? How do I know that there is any underlying reality connected to these? I know this because the stock markets and all the entities connected to these are minutely regulated. The brokers are members of an exchange and there is a distinct entity, a stock depository, that connects all this to the underlying reality of the existence and ownership of where I gave my money. I get live information about what’s happening to my money from multiple independent entities under intense regulatory scrutiny. However, the entities that call themselves ‘crypto exchanges’ are nothing of the sort in any legal sense. They are businesses that take your money, and show you some numbers and a graph on your screen.”
These exchanges are supposedly audited and monitored, but all of it is done by other companies chosen by the exchange itself. It’s a closed, self-reinforcing loop using words that sound authoritative, but are nothing of the sort. It’s as if someone just puts up a signboard saying ‘bank’, and people deposit their money in it. This is what these so-called crypto exchanges are like.
At this point, those who want to invest in crypto might ask how they should go about doing so. My answer would be: don’t do it. However, if you insist, then for the sake of your own money, choose a vehicle that operates as a regulated entity. For example, the US markets have a number of SEC-approved exchange-traded funds (ETFs) that have holdings in Bitcoin and other cryptocurrencies. Many of these ETFs are operated by well-known parent companies like Franklin Templeton, Fidelity, and BlackRock. Since Indians can invest up to $2,50,000 a year in foreign securities, this route is open to those determined to invest in crypto.
Regardless of how bad the crypto idea is, at least the foreign ETFs have some provenance that’s real. In contrast, a self-declared exchange could be a black hole for your money.
The Author is CEO, VALUE RESEARCH
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} (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
