The scope of financial literacy is constantly expanding in a world full of risks and uncertainties. This is especially true in India, where crypto assets (cryptocurrencies) are fast gaining popularity and usage.
The cryptocurrency market is far too large to ignore. Consider the following figures: According to CoinMarketCap, the worldwide crypto market cap as of today is USD 2.12 trillion. From April 2020 to May 2021, India’s cryptocurrency market grew by 50 percent every month. According to block chain data company Chainalysis, over 1.5 crore Indians have already invested in cryptocurrency.
People with little financial or technological skills are jumping on the crypto bandwagon in hopes of making quick money as the excitement around crypto grows through social media, word-of-mouth and ads, as well as influencers. Untold numbers of people from tiny towns and villages, many of whom may not have ever had any exposure to assets like stocks and mutual funds, have turned their fortunes around using cryptocurrency. But if you don’t know what you’re doing, it might be dangerous!
Only a well-informed consumer, it is claimed, can make sound financial judgments. According to the Reserve Bank of India’s National Strategy for Financial Inclusion 2019-2024, “financial literacy helps a consumer to have essential awareness about the available products, the ability to choose the correct product, and the accessible procedures to resolve grievances.”
Therefore it is crucial to be financially literate. Incorporating cryptocurrency courses into financial literacy programmes is likely to be a necessity in the near future.
Failure in strategy
The CEO and co-founder of algorithmic crypto trading platform Mudrex, Edul Patel remarked, “Cryptocurrencies are the newest entrants to asset classes. Precisely because of this, many people who invest in cryptos view it as a way to make rapid money. Such an approach is utterly erroneous. As a hedge against many factors, cryptocurrency should be viewed as such. Our experience with the coronavirus pandemic taught us how important it is to have a hedge in the financial markets.”
Think about volatility.
According to Shetty, investors should take into account the volatility of cryptocurrency investments before making a decision to buy. Recently, the price of cryptos has plummeted. Before investing in cryptocurrencies, one should be aware of the market’s volatility and make informed selections. There can be no disagreement about the inclusion of cryptocurrency in financial literacy.”
Why is crypto literacy necessary?
As a result of the Indian government’s consideration of recognising cryptocurrency as an asset class, investor education is more important now than ever before. Compared to regular assets, crypto is more volatile. People must be educated about digital assets in order to avoid Ponzi schemes”, explained Mr Chandra.
We may think of crypto assets as a powerful hedge against inflation and other ‘black swan’ catastrophes, according to Patel.
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