Cryptocurrency to NFT: Is it safe to invest in digital assets?

Over the last few years, there has been an increased popularity of digital assets globally. Consequently, most people, especially millennials, have shifted their attention from the traditional financial market to the booming digital asset market. A report by Verified Market Research showed that the global digital asset management market size is expected to hit approximately $605 million by 2028. Additionally, India has about 20 million investors who have invested in crypto assets.

Nevertheless, investors in the digital asset market face significant risks and challenges, including security issues and unpredictable government policies. Additionally, volatility and unstable prices are substantial risks of such digital investments. Let’s explore the pros and cons of digital asset investments, how government policies affect such investments, and an overview of India’s future digital asset market.

 

What are NFTs and Cryptocurrencies?

Non-Fungible Tokens (NFTs) and cryptocurrencies are critical forms of digital assets. What is a digital asset anyway? A digital asset is an item, or electronic data file one can buy, sell, and hold online. Often records of ownership of digital assets are stored securely on a blockchain (It’s a decentralized database/ electronic ledger).

So, what exactly is cryptocurrency? It’s a digital currency that uses cryptography to secure transactions using blockchain technology. Since this digital currency is based on a decentralized system, it allows people to make payments directly to each other through an online system. Examples of cryptocurrencies include Bitcoin, Ethereum, Litecoin, Ripple, Stellar Lumen, Binance Coin, Solana, Polygon, etc.
Decoding NFTs: NFTs are simply tokens representing ownership of digital assets, specifically unique items such as art, real estate, music, videos, collectibles, etc. What is special about NFTs? They only have one official owner at a time, and no one can modify the ownership record or copy-paste a new NFT!

Note: Despite NFTs and cryptocurrencies being based on blockchain technology, their difference is that an NFT is non-fungible (non-exchangeable for other items because of their unique properties). In contrast, a cryptocurrency such as Bitcoin is fungible (exchangeable/interchangeable). It means the value of any Bitcoin or a cryptocurrency at any given time will be the same, whereas, in NFTs, every piece is unique and holds a different value.

 

Is it safe to invest invest in Digital Assets?

You probably found your way to this post because you’ve heard about cryptocurrencies and NFTs. Let’s explore why you should invest in digital assets, the drawbacks of investing in this asset, and valuable tips to help you make the best investment in the digital asset market.

Reasons you should invest in Digital Assets without

The digital asset market is gathering a pace in the current digital era in India and across the globe. Subsequently, it presents investors, especially the young people, with benefits and great opportunities. Besides, the aspect of modern wealth is aligning with new technology-enabled investment opportunities. Below are a few reasons to consider investing in digital assets, specifically NFTs and cryptocurrencies.

Impressive returns
The first reason you should invest in NFTs and cryptocurrencies is the promising financial returns. In the digital asset market, investors have a chance to make significant returns (even over 100% profits) within a short period (maybe a few months) depending on their investment strategy.

For instance, India’s biggest cryptocurrency exchange WazirX sold 166 pieces of digital art in the first month of the launch of its NFT platform. However, Ishita Banerjee’s fourth avatar of Vishnu was the highest-paid art, selling at INR 2.66 lakhs. Additionally, another New Delhi-based designer and illustrator, Amrit Pal Singh, earned over $1 million in 9 months in 2021, selling NFTs of his Toy Faces on NFT marketplaces.

Blockchain technology has opened doors for many retail investors without the financial ability to access asset classes. How? The digital asset market offers excellent liquidity, thus allowing retail investors to get into a stable market with low capital. Most importantly, it creates a better trading market at low transaction costs.

Generally, the digital asset market allows retail investors to participate in the market with small portfolio sizes. Isn’t that incredible?

Better control over your investment
Unlike the traditional asset classes, you’ve direct control of your investment in the digital asset market. Digital assets such as NFTs and cryptocurrencies are based on a decentralized system, thus making the entire investment process pretty easy because you hold private keys to your assets as an investor.

Most importantly, you’re not limited to certain trading hours or working under certain centralized entities’ restrictions.

A booming market with a variety of investment opportunities
The beauty of the digital asset market is that it’s booming in India and globally and presenting interested investors (including beginners) with a wide range of opportunities to create sources of income.

According to a post on the BL blog, experts perceive 2021 as a significant year whereby Indian celebrities (actors, designers, athletes, etc.), publishers, and content creators, among others, made a U-turn as they hopped onto the NFT bandwagon. They are creating their own NFTs since this market has allowed them to monetize their digital content. Some NFTs enthusiasts can buy and sell NFTs to earn profits.

Additionally, those in the crypto market earn income in various ways, such as actively trading the crypto market, buying & holding cryptocurrencies, or mining cryptocurrencies.

Low transaction cost and efficiency
One great benefit of investing in the digital asset market is that you don’t deal with intermediaries or third parties; thus, there is more efficiency and less transaction cost. However, when buying NFTs, a crypto brokerage (such as Coinbase, Binance, Robinhood, etc.) is involved, but the process is pretty smooth.

Deloitte estimates that cross borders payments could be reduced by 40-80% if they’re based on blockchain rails.

Drawbacks of Investing in Digital Asset Market

The digital asset market is no exception from other types of markets; it has its fair share of challenges. However, some of these drawbacks you can proactively counter or minimize their effects (as discussed in the next section).

Below are the drawbacks of investing In NFT and cryptocurrency markets:

Legal and regulatory complexity
Investing in NFTs and cryptocurrencies is a personal decision because you’ve limited legal protection as an investor. Additionally, you might have to deal with issues attributed to NFTs you invest in. For example, currently, NFTs are unregulated, but in the future, if government regulations apply, NFT owners may be subject to national and international obligations.

Volatility
Another significant risk related to NFTs and cryptocurrencies is that their prices are highly volatile. However, digital asset volatility is a double-edged sword because you can buy an NFT or cryptocurrency. In the next few minutes or hours, you’re into significant profits or vice versa. It all depends on your investment strategy.

Prone to scams, fraud, and attacks
Frauds, scams, and attacks have become prevalent in the cryptocurrency and NFT markets. Malicious hackers often use tactics such as phishing, malware, or sending malicious emails to blockchain users to deploy attacks. Among other tactics hackers use is the exploitation of endpoint vulnerabilities.

For instance, Chainalysis reported that in 2022 alone, Indian users visited crypto scam websites over 9.6 million times. Additionally, in 2022, over 900 Indian investors allegedly duped INR 1,200 crore during the Morris Coin Fraud (a website offering a fake cryptocurrency called Morris Coin).

 

How to Invest in Digital Assets Safely

As outlined above, the digital asset market faces a few challenges. However, there are practices/ tips you can utilize to ensure you’re investing safely in this super-growing and promising market.

Tips for Investing in Cryptocurrency Market More Safely

Do your research
An investor, especially a beginner, must first research the market. Understand how you want to make money in the crypto market. Do you want to trade, buy and hold or mine coins? Then understand the basics involved (thanks to Google, where there is vast information for free).

Most importantly, it would help if you understood what cryptocurrencies are more viable, their liquidity and how they work. Also, be wary of a crypto deal promising you a massive return with minimal investments, malicious wallet software, and fake crypto coins in the market.

You may also join a community/forum of enthusiasts such as Tether Community to learn more about cryptocurrencies.

Have an investment strategy
Most people online will tell a beginner that the digital asset market offer “easy money.” However, that’s not the case, and you ought to take a step back from the hype as you begin to have an investment strategy.

A strategy will also put you ahead of the game and help you have a balanced portfolio.

Only invest what you can afford
Often you will hear seasoned investors talk about investing what you can afford to lose. Like most markets, the crypto market also has some risks involved. For instance, the stock market could crash due to various factors, while a particular cryptocurrency may be highly volatile. Thus, set limits on how much you can invest in a specific cryptocurrency.
Knowing how to manage risk is essential and should be part of your investment strategy.

Learn practices of protecting your crypto investments from digital exploits
Having a working ad viable investment strategy is not enough because some malicious hackers long to steal your coins. So, is that the end of your investment road? It doesn’t have to be because there are a few practices you can embrace to safeguard your crypto wallets. They include:

• Use secure internet- use private internet connections and avoid public Wi-Fi networks while trading or logging into your accounts.
• Consider cold wallets
• Maintain multiple wallets
• Have a strong password/passphrase; don’t forget your crypto keyphrase.
• Always use Multi-Factor Authentication
• Secure your device with the latest antivirus and firewall to enhance security

Tips for Investing in NFTs More Safely
It is worth noting that there are many ways you can invest in the NFT market. It includes:

• NFT marketplaces- you can profit from the small commission charged on every transaction on the NFT marketplace platform. You can also take the standard route of buying and selling
• NFTs in the NFT marketplaces.
• NFT stocks- you also invest in NFT stocks such as Funko, Mattel, Twitter, and Cloudflare. Companies have realized the potential of the NFT market place and currently, there many publicly-
• traded NFT companies across various industries, from tech to entertainment.
• NFT tokens
• NFT fractions

Tips for buying and selling NFTs safely in the market:

Have a trusted and reliable digital wallet
A digital wallet is a vital tool you’ll need for storing your NFTs. Choose a wallet that supports the currency you’ll be buying NFTs with or supports marketplaces you’ll buy from. Most importantly, it should be a secure wallet and offer 2-factor authentication. The standard and top NFT wallets include Metamask, Coinbase (best to hold NFTs), Math Wallet, Trust Wallet, and AlphaWallet.

Consider buying or selling in reputable NFT marketplaces
Always consider buying from reputable NFT marketplaces to avoid getting scammed. Platforms such as CryptoPunks and OpenSea are “big daddies in the game.” However, Indian investors may consider platforms such as WazirX, aimed at Indian users and NFT collectors. Other Indian NFT platforms include Jupiter Meta, Bollycoin, BuyUCoin,

Research about available NFTs
If you’re interested in an NFT, research about it to know the team/individual behind it, whether it’s on-chain or off-chain (off-chain NFTs could be lost if the server goes down), cryptocurrency requirements, and how many NFTs are being sold. These are few yet basic things to research before buying any NFT.

Use VPN when transacting
To enhance safety while making NFT transactions, consider using a Virtual Private Network (VPN). It helps you hide your actual IP address and cloak your NFT traffic, thus making it hard for potential hackers to access your digital assets.

 

India’s Laws and Policies on NFTs and Cryptocurrencies

As outlined above, NFTs and cryptocurrencies face many legal and regulatory challenges despite their global popularity and rapid growth.
India is yet to pass any laws regulating NFTs but has attempted to address the issue of cryptocurrencies. Currently, there is no proper classification of NFTs, and some experts in India classify them as derivatives or contracts. Generally, India’s legal status regarding NFTs is unclear.

In February 2022, Nirmala Sitharaman, the finance minister, announced a plan to launch the digital rupee (a CBDC by RBI) during the 2022/23 Budget speech.
The Indian government has removed some uncertainties about the legal status of crypto transactions. The Finance Minister also revealed plans to tax income from the transfer of virtual digital assets at a 30% rate.

From a global perspective, most countries are yet to define their stand and establish regulations regarding cryptocurrencies and NFTs. However, countries such as Japan, Australia, Switzerland, and some European Union have brought “a light” and are regulating cryptocurrencies.

 

 

Future of NFTs and Cryptocurrencies in India

The issue of NFTs and cryptocurrencies have attracted the attention of people of all classes, religions, and races across the globe. India has been a significant player promoter of the digital economy. Issues regarding digital tokens, blockchain technology, and the digital asset market have been a matter of focus in recent years.

According to a report by crypto exchange CrossTower and US-India Strategic Partnership Forum, India’s digital economy has the potential to move from $5 billion as of 2021 to about $262 billion over the next 11 years resulting in a $1.1 trillion contribution to India’s GDP by adopting Web 3.0 and blockchain technologies. It means the digital assets market has an excellent opportunity to thrive.

However, Blockchain Council recommends that challenges such as scalability of the blockchain networks and security be addressed to pave the way for massive implementation of blockchain technology in India. Consequently, this will be a significant boost to the digital asset market.

In a nutshell, blockchain technology has already started revolutionizing India’s digital economy and financial sector. The Reserve Bank of India has plans to launch a digital rupee based on blockchain technology. Additionally, policies, regulations, and compliance issues in India concerning cryptocurrencies and NFTs are gradually taking shape and being mapped out. Notably, the NFT market is rapidly gaining traction in India, with platforms such as WazirX, Diginoor, Rario, Vibranium, and BeyondLife.club accelerating its awareness and adoption.

Share your thoughts in the comment sections.

While investments in the digital asset market are becoming popular and promising, you must never overlook its risks and evolving regulations/policies. Therefore, potential investors must understand how the blockchain and specific assets work. Establish your portfolio using authentic players in the market and research well, and speak to other investors for first-hand experience stories.
Do you plan to invest in digital assets? What’s your experience with cryptocurrency investment? What do you think of India’s NFT market?