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Cyptocurrency investment


Trichromatic

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2 hours ago, bharathh said:

How does this work wrt tax declarations?

 

Been too wary to do anything wrt crypto. Any recommendations on some good research material from a trading pov? Never understood how these things are traded

Depends on the nature of your investment. Do you hold the crypto-currency as currency to be sold or as an asset instrument?

If you hold the cryptocurrency for more than 36 months, any transactional gains would be taxable as long term capital gains at a flat 20%.

Else short term capital gain taxed at 15%.

 

If its an asset instrument it would be taxed as a business income.

 

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I have done some research on this and have started a long term investment (rather than trading) on these currencies over the past couple of weeks. I wish I could understand the basis for the speculation of these currencies - but I guess there is none at the moment other than intangibles atm.


Still I'm just investing on currencies based on their unit price (I'm targeting the 10-50 INR range) hoping that over the next couple of years they will increase exponentially.

 

Using the WazirX exchange. I've invested in:

 

WRX - WazirX (I made this as a test investment - I don't think I will invest anymore though as it has a withdrawal fee) 

DOGE - Dogecoin (Made famous by Musk. No real basis for investing in this. It has shown the best returns so far though)

CVC - Civic (A new coin based on Solana that is used for Identity management. Looks promising)

CELR - Celer Network (Platform that sits atop other base Blockchain platforms that can be customized for targeted uses. Also new) 

 

I'm investing like a SIP on these currencies. 

Edited by bharathh
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On 9/9/2021 at 1:42 PM, Mariyam said:

Depends on the nature of your investment. Do you hold the crypto-currency as currency to be sold or as an asset instrument?

If you hold the cryptocurrency for more than 36 months, any transactional gains would be taxable as long term capital gains at a flat 20%.

Else short term capital gain taxed at 15%.

 

If its an asset instrument it would be taxed as a business income.

 

long term capital gains are more than short term for cryptos? Am I reading it right?

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Just now, Singh bling said:

How these currencies move up and down . In share market we hope business model  is good so stock price go up . What we expect in cryptocurrency

That is the million dollar question atm :)

 

Currently I don't see any technical analysis on this.

 

Some currencies are by-products of actual products/platforms - like Civic and Celer that I posted above... so the sales of these platforms or the projected value of these should be a good indicator. Some are tethered to currencies like USDT which goes up and down based on the value of the currency. 

 

However, for others like Dogecoin or Shibu there doesn't seem to be anything other than investor sentiment based on intangibles.

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Etherium - a popular platform had a major bug discovered - which caused it ( and associated currencies) to go down in value for a bit. The Chinese declaration of outlawing Cryptocurrencies for transactions also caused the values of popular currencies like Bitcoin to fall. Similarly some countries like El Salvador have officially accepted Bitcoin as an accepted currency - which has made this value jump up again. 

 

But on the whole - I do not know of any underpinnings that cause the values to change. Anyone that can shed some light on this? 

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I had written a short write up on Blockchain and Crypto a few years back for those interested in reading

 

Blockchain and cryptocurrencies such as Bitcoin have been two of the most popular buzzwords of 2017. While people bandy around these terms, you will be hard-pressed to find many who can explain what they really mean. Despite the myriad articles, videos etc. that exist on the internet today it is hard to find a simple explanation for these terms. Hence, my two paise...

Blockchain

Blockchain - simply explained - is a transaction register/ledger that is ordered by time. A set of transactions during a particular time period is encapsulated in a block. A transaction is something atomic - an action or set of steps that started at time A and stopped at time B - between two or more groups of entities (people, organisations, machines, etc.). A transaction could be as simple as a text message sent between two people to a complex settlement instruction or legal agreement between two or more parties. Blockchains guarantee the authenticity and timeline of transactions housed within it.

An analogy to a blockchain in the physical world could be a museum - where exhibits of a particular age are typically housed in a section/room of their own. Museums can typically be relied on for the authenticity of their exhibits thanks to experts who validate the date and veracity of exhibits.

This digital register/ledger (blockchain) is maintained by a network of distributed servers that constantly sync with one another and prevent any unauthorised/incorrect changes to the ledger.

One can use a blockchain for any use-case. Need something to track every single run scored in test cricket or perhaps need something to record all the chats of your Whatsup groups? You can create a blockchain for that. However, some of the most common uses of blockchain tech has been in the financial industry. Tracking payments between people and entities for example is a popular raison d'etre for blockchains.

What is a Bitcoin?

We stated that blockchains sort transactions by time. I won't get into the technical part of it (a good video for some technical gyan below). However, I will say that before a transaction can be placed into the correct (time) block in a chain of blocks, the transaction (along with the authentication of the entities involved in the transaction) is validated mathematically through cryptography by a network of computers (more accurately computing power).

These computers are rewarded for the task of validating transactions by solving these mathematical puzzles and placing them into the correct block with some unit of reward (such as Bitcoin). Every unit of time (such as a second) will typically release x amount of crypto-currency into circulation. For example, until 2020, 0.2 new Bitcoins is generated into existence every second. If 10 transactions are validated during that second, each successful computer is rewarded one-tenth or 0.02 of a Bitcoin. These computers are also referred to as miners. Since these computers are typically run by some entity, the reward is added to the entity's Bitcoin wallet (for instance). This is a big business now - with many organisations dedicating super-computers to mine currencies such as Bitcoin, Ether etc. These rewards are known as cryptocurrencies.

Although Bitcoin is perhaps the best known cryptocurrency, other cryptocurrencies in existence include Ether (Ethereum), Litecoin, Dash, etc. The video below talks a little more about Bitcoins. The blockchain mentioned in the video below is for Bitcoin transfers between two or more people. Each transaction is a Bitcoin transfer.

 

 

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Will chime in: 

 

  • Crypto trading is not like trading shares where you can follow a company's performance
  • Crypto trading is by and large done by analyzing charts and keeping an eye on rumors/news
  • Much like any market, macro factors can impact Crypto market 
  • The market can be manipulated by whales, which are accounts with 1,000 or more bitcoins (Elon Musk is a whale for e.g.) 
  • While Bitcoin is seen as stable relatively speaking, Altcoins are considered risky and can lose 99% of their value 
  • Bitcoin market operates in cycles so if it is a bear market nothing much happens (you accumulate during this time), in the bull market, the price would shoot up. 

 

Why would you invest in Bitcoin? Because it is a store of value. 

 

You can be in crypto for the long term or short term. If in for the long term, you can set a day and time of a week to buy Bitcoin to build your portfolio (Dollar cost averaging).  

 

One good exchange is Phemex 

 

 

If you want to be more involved in this, I would suggest setting yourself up on the 4 hour and daily charts (a longer time frame is more reliable). Use tools such as Bollinger bands, EMA 21, RSI, Stoch RSI, and MacD. 

 

 

At the time of this post (the information can change and am not a financial advisor so use your own judgement) - Bitcoin needs to close (the body of the candle not its wick) around $62K on the 4 hour chart. Once that happens, it can (not will) ride up in the short term. 

 

 

Edited by zen
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