Trump's move to create a BTC reserve might make crypto lucrative, but should you fall for the hype, and ignore regulatory confusion? While this might signal an incoming crypto rally, do not ignore the market's inherent volatility and risks associated with hype-driven investments. Moreover, regulatory ambiguity around this asset class is another reason you should be careful while investing in this asset
With bears champing at the bit and dragging down the overall market sentiment, an unlikely spike has managed to lift a section of Indian investors. The recent announcement by US President Donald Trump to create a “strategic Bitcoin reserve and digital assets stockpile” has sent the crypto enthusiasts in India into a tizzy. Hoping to cash in on what they believe could be the next big rally, they have led a surge in trading volumes, with CoinDCX reporting a 36% hike and Mudrex registering a 30% spike.#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;} While the reserve will only include Bitcoin, already owned by the US government, not acquired or actively bought, the digital asset stockpile will consist of tokens other than the Bitcoin—Ethereum (ETH), Solana (SOL), Ripple (XRP), and Cardano (ADA), which will also not be acquired. The announcement is significant because it’s the first time that Bitcoin has been recognised as a reserve asset of the US government.
“This sends a powerful message to the world about how blockchain and digital assets are becoming mainstream,” says Sumit Gupta, co-founder of CoinDCX. Agrees Edul Patel, Co-founder of Mudrex: “There is a strong future for crypto and Bitcoin globally, not just in the US.”
Chase hype, pay the price
Cryptocurrency is a sentiment-driven market, and its volatile nature is no secret. In fact, Trump’s earlier promise of such a reserve and ease of regulation had seen the token surge to an all-time high of $109,071.8 in January.While his recent announcement has again fuelled the sentiments, over the years, such bold statements have been used by influential names to sway the market. This event may not be any different. If such a reserve and stockpile are built, there could be a sharp rise in the prices of select coins, with the possibility of market manipulation as well. If big players can move prices with a single announcement or policy shift, it raises serious concerns about fair play.
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Without strict supervision, those with insider knowledge could take advantage of these swings to cash in, while retail investors are likely to be caught off guard. For investors, this means additional risk and volatility because they could end up buying at inflated prices and suffer losses when the hype dies down and prices settle.
Take the meme coin craze and the metaverse hype in 2021. Tech billionaire and a part of Trump’s team, Elon Musk, openly backed Shiba Inu and Dogecoin, triggering a massive bull run in both coins. Around the same time, Meta CEO Mark Zuckerberg’s talk about the metaverse sent coins like Decentraland’s MANA soaring. However, these fizzled out as quickly as they had shot up. Many investors who jumped in due to the fear of missing out incurred massive losses.
Anish Bhilwara was one such investor. The 24-year-old entrepreneur invested all his savings worth Rs. 60,000 in Shiba Inu, Doge, Ripple, BitTorrent and Polymesh in 2021, giving in to the hype of meme coins. “I just wanted to prove myself to my family,” says Bhilwara, who ended up losing 85% of his investment. Hoping to recover his losses over time, Bhilwara stayed invested but lost again when WazirX was hacked.
These are regular occurrences in the world of cryptocurrency, especially those who invest in hype-driven alt coins. Sunil Mahajan (name changed) faced a similar fate. The 45-year-old IT professional saw initial success by investing in Bitcoin, Ethereum, and XRP. “These were long-term bets, and they worked well for me,” he says.
When his friends started pouring money into meme coins, FOMO kicked in. Mahajan invested Rs.20 lakh across various coins. Today, they’re worth Rs.10 lakh. “I invested through WazirX, but now they are going to pay only 60% of the remaining amount (ET Wealth could not independently verify this claim) because it got hacked. I am never investing in crypto again,” says Mahajan, who invested to buy a Mercedes. “Now I can’t even buy a decent car,” he says wryly. Mahajan believes his mistake wasn’t in choosing Bitcoin or ETH, but in letting emotions drive his bets.
This is the reason the Indian government has consistently discouraged crypto investments. The RBI had banned trading in crypto in 2018, but the Supreme Court lifted it in 2020. Despite this, the government has tried to ward off enthusiastic investors by taxing crypto gains at 30% and not allowing losses from crypto trading to be set off against profits from other trading.
The 2025 budget has tightened the screws further. “Virtual digital assets, including cryptocurrencies and NFTs, are now categorised under undisclosed income, subjecting these to higher tax rates,” says Akshat Pande, Managing Partner, Alpha Partners.
Bitcoin volatility over the years
The high volatility posed a risk for investors.
What should you do?
In line with most experts’ opinion, ET Wealth doesn’t recommend investing in cryptos since it remains a high-risk option, and the US creating a reserve could add more uncertainty. “Crypto may not be a good investment idea unless there’s clarity on its overall regulatory acceptance,” cautions Rohit Shah, Founder and CEO, GYR Financial Planners. Until the regulatory landscape is clearer, investors would be better off restraining from cryptos.If, however, you wish to experiment or are curious, stick to blue-chip coins. Though these, too, are volatile, they are cyclical in nature. If you end up losing money, you may earn it back if you stay invested for a long time. Other coins are sentiment-driven and more like a gamble. The top five blue-chip coins include Bitcoin, Ethereum, Binance, Solana, and Ripple. However, be careful of the amount you invest. No more than 2-5% of your portfolio should be allocated to crypto currency. Or only as much as you can afford to see go up in smoke.
Before you invest in crypto...
To minimise your losses, consider these tips while investing.Invest via fiu-ind platform
The registration with Financial Intelligence Unit, India, shows the exchange’s commitment to following the Prevention of Money Laundering Act (PMLA) guidelines. Opt for compliant platforms to protect your assets.
Beware of fake apps, websites
To avoid scams, verify the authenticity of a website or app and check if it is regulated by a reputable authority.
Research & understand
Research the underlying technology, use case, and adoption potential of the coin. Do not fall for hype-driven coins that lack real-world utility.
Have an investing cap
Avoid taking loans or using emergency funds; invest only the amount you can afford to lose. No more than 2-5% of your portfolio should be in cryptos.
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This story originally appeared on: India Times - Author:Faqs of Insurances
