Nilesh Shah on cryptocurrencies:Kotak CEO Nilesh Shah warns investors about risks associated with cryptocurrencies Mahindra The asset management company advised them to only invest what they could afford to lose.
“If you are interested in investing in cryptocurrencies, make sure your exposure is such that even if they go down, you can bear that loss,” Shah said in an exclusive conversation with Republic Business.
Watch the full interview here:
“There is no guaranteed solution, there is no regulatory body to turn to if you are scammed. The transaction costs are huge,” Shah said.
Shah said that cryptocurrencies like Bitcoin are not backed by any sovereign guarantee or central authority. Unlike traditional currencies that derive value from government support, crypto operates in a largely unregulated space. He noted: “Cryptocurrency It is not a fixed class, it is not currency. Currency is what is backed by the sovereign guarantee of the government. Cryptocurrency “He doesn’t have anyone’s support.”
One of the main concerns raised by Shah was the absence of a standardized method for determining the fair value of cryptocurrencies. He referenced the “greater fool theory” to describe how many investors hope to sell their holdings at a higher price to the next buyer.
“If I bought cryptocurrencies today at a price x, I think there will be someone else who will buy them at a higher price than me. The day I think I can only sell them at a lower price, the magic of cryptocurrencies will disappear,” he said.
Shah also cast doubt on the long-term sustainability of cryptocurrencies, stating that cryptocurrencies are often used by people seeking to avoid scrutiny from central banks and regulatory agencies. “They allow money to be moved across borders without being detected by regulators. Will regulators allow this to flourish over a long period of time?” Shah asked.
Shah also said that there are reports suggesting that up to 30 percent of all mined Bitcoins have disappeared due to hard drive failures or lost passwords. “The price you are seeing is only that of 70 percent of Bitcoin, which now covers 100 percent of the market capitalization. If you invest in Bitcoin, make sure you store it properly. Otherwise, Bitcoin prices may go up, but you won’t make money like those unfortunate 30 percent Bitcoin holders,” he explained.
In closing, Shah advised those still interested in investing in cryptocurrencies to proceed with caution, ensuring that any exposure is small enough to withstand the potential total loss. “Make sure your exposure is such that even if it goes away, you can take that loss,” he advised.
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