Cryptos and Cryptic trends

A lot of cricket was played in the last few weeks — Test Cricket, Cricket’s oldest and purest format and the T20 format, exciting, recent format that ushered cricket into the 21st Millennium. I watched India-England Test tournament, avoided IPL but am currently watching the world Cup. One thing that was not lost on me (perhaps none watching it from India has missed) is the bounty of advertisements promoting “trading” apps — that allow users to trade in Crypto currencies and some of them in equity stocks — well, they allow investing too. During the first one or two World cup matches that I watched, I found myself spending more time researching these trading companies on my computer than watching live cricket on TV. The ads spoke about how easy it is to make money in Cryptos, and easier still, it is to get started into this — simple installation of an app on mobile phone and a very low entry capital to start trading. Equally simple is to invest in IPOs or buy/sell equity stocks. Wonderful!

This led to a strong sense of Deja-vu. Late 1990s seemed to be back again. I was in my early to mid-20s at the time and used to live in the US. DotCom euphoria was starting to hit the roof. I was aware of the dotCom trend as I learnt of it in news media and also occasionally on my phone calls with few friends of mine. One day, I ended up making an acquaintance with a young man with a largely similar disposition as me (can’t even remember his name now) — man in his early to mid-20s, from India but working in the US, living in Minneapolis. One big difference was that he was deeply clued in and invested in the dotCom boom. He explained trading to me — the mechanics of identifying stocks and buying and selling their stocks; about brokerage costs, day trading etc. I was excited with all that I heard and tried to understand it in more detail but was overwhelmed at its enormity and dynamism. So, apart from getting wowed by this person’s confidence and conviction, I just remained a far-from-ringside spectator to the dot Com era.

Eventually the bubble did burst and there was carnage on the Wall Street and the Subruban Streets. At a personal level, I had come across one or two cases of significant personal financial losses and read about a larger number of such cases on the media. I escaped because I was too slow to be able to get a hang of the trend and also because I was scared to jump into it.

Fast forward to today — I have come a long way. I continue to be slow in picking up trends but improved on the “fright” front. I have increased my knowledge base significantly and consequently am not so afraid any more. However, I continue to keep away from asset classes that I don’t understand. Also, I don’t trade — I just don’t have the temperament for it. I go in with an investing mindset and look to discover and understand the drivers and levers of value generation.

What about crypto currencies? Blockchain technology is great and I gather that it assures authenticity of transactions and players and perhaps brings in a level of transparency. Good but is this all there is to the fundamental “value” premise of the Crypto currency. I don’t think so. Is Crypto currency a dynamic store of value or is it a medium of exchange or is it both. Today’s fiat currencies seem to be either/or and both. So, how are Cryptos different? Central banks control supply of fiat currencies and consequently affect the rise and fall of interest rates and inflation rates. There are no central banks for Cryptos — so, who controls the supply of crypto currencies?

Once more and more people adopt a crypto currency as medium of exchange of value, would its maintenance continue to remain cheap, assuming it is now?

Dictionary meaning of “crypto” is “concealed/secret”. Is this just an innocent coincidence or is there something more to be read here?

In the field of finance where Ponzi schemes and frauds rear their ugly heads time and again, is there a need to regulate Crypto market (contextual reference: Squid Games Coin)?

Too many questions, too little clarity!

I realize that I’m a novice in trading. My knowledge is basic and is perhaps not strongly founded. But given that I belong to the profile that these new age companies are targeting, I’m trying to make sense of it. I will be more than happy to be corrected and will be grateful, if I can be properly educated on this topic. I will continue to keep away from the lure of making easy money without having a sense how the money is made. I fully intend to remain curious about Cryptos but will take action only when I start to understand it.

PS: My objective here is not to sensationalize a currently trending topic but to reflect on some of my recent observations!



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