Contrary to public perception, investing in virtual assets is not complicated. That said, trading in virtual assets and growing your investment are completely different beasts.
Before deep diving into the domain of digital assets, let us get a few other misconceptions out of the way.
- That virtual assets are anonymous and untraceable. In fact, virtual assets and transactions can be traced as they are recorded in ledgers on the blockchain. Privacy may be a better term to associate with virtual assets. Security is also a key feature, which people sometimes mistake for anonymity and ‘untraceability’.
- That virtual assets are unregulated. While there is no recognised international body that regulates virtual assets, there are national and jurisdictional entities to overlook the market for virtual assets. Examples include Europe and the UAE, where since 2018 new legislations have been introduced for exchanges, custodians and other service providers to operate.
- That virtual assets are used for illicit activities. While illicit activities involving virtual assets cannot be completely prevented, their share vis-à-vis the total transactions for virtual assets has fallen to 0.14 per cent in 2021 from 0.63 per cent in the previous year, according to research platform Chainalysis.
Besides the financial opportunities they afford, virtual assets are becoming part of mainstream financial transactions for a growing segment of the global population. In the report ‘Demystifying Crypto: Shedding light on the adoption of digital currencies for payments in 2022A’ by Checkout.com, it is mentioned that over half of the UAE population are using digital wallets for the first time and are keen to use virtual assets for payments.
In the UAE and Saudi Arabia, 45 per cent of 18 to 35-year-olds say virtual assets should be used for payments, not just for investment purposes. Regarding merchants, 70 per cent believe that the speed with which payments and settlements are facilitated has the potential to revolutionize their business models.
The same study revealed that 77 per cent of companies that support payments in virtual assets have seen an increase in cross-border sales.
Risk behind every opportunity
While the reverse may equally be true, it is better to approach investing in virtual assets (or any asset, traditional or digital, for that matter) with caution. New investors tend to invest when the market is bullish and avoid investing when the market is bearish, when it should be the other way around.
Getting started
The first step to take in investing in virtual assets is to choose a regulated exchange. In the region, where the virtual assets market is at its nascent stage, there are not too many. Choose an exchange that has a solid reputation for transparency and has the full backing of regulatory authorities.
Trading fees can also vary, so select the exchange that is, one, transparent with their charges; and two, those that charge the lowest in the market. In addition, it would be worth knowing if the exchanges are able to swap virtual assets with hard currencies.
Once the exchange is chosen, create a digital wallet. This will be the ‘digital space’ where you can store virtual assets. It needs to be fortified with a private key, which should never be shared and stored physically in case this information is hacked or forgotten.
For those just staring their virtual assets investment journey, it is always best to start small and invest only what you can afford. The savviest investors look far ahead and think more long-term rather than go for immediate returns.
