Ethereum – The rising star among cryptocurrencies

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What’s going on here?

Looks like cryptocurrencies are grabbing eyeballs everywhere, from the rise of Dogecoins, to Non Fungible Tokens, to Elon Musk’s tweets setting the tone to rise and fall of Bitcoin. There is something else that’s quietly rising up. It’s none other than Ethereum or Ether for short. 

What’s behind the phenomenal rise of Ethereum?

Like Bitcoin, Ethereum is also a cryptocurrency that has remained on the sidelines since 2018. It’s the second-largest cryptocurrency after bitcoin by market capitalisation as well value. 

Ether has raised like a phoenix from the ashes. To put this statement into some perspective, the traded volume for Ether in 2020 was $231 million and it jumped to $2.7 billion in 2021, and the price in 2021 moved up 385%  to $4028 versus 96% for bitcoin. Are you thinking if there is another meme mania behind the rise like the Dogecoin? No, No, there something more substantial with Ether that is commanding that value. 

Here’s what

• Ethereum is based on a blockchain technology that is more scalable and efficient.
• Developers use this to build decentralised apps based on decentralised finance (Defi).
• There is increased interest in building decentralised apps (#dapps). These apps are not controlled by a single entity like Apple or Google for iOS or Android. Dapps are hosted on hundreds and thousands of computers across the globe totally decentralising its control.

In addition

• There are more and more institutions that are accepting the use of cryptocurrency. The European Investment Bank recently issued bonds worth $120m on the Ethereum network.
• The widely popular NFTs which is making the world of collectibles and art go crazy is also based on Ethereum.
• The launch of Ethereum futures on the Chicago Mercantile Exchange has given more credibility and risk management options to Ether investors.

How will the donation of $1billion made by Vitalink Buterin reach India?

The donation announcement made news splashes everyone but then people started wondering about how will this aid reach India without the involvement of the Indian banking system and as you know banks in India do not deal with crypto currency.

Vitalink made the donation to India Covid Crypto Relief Fund. Sandeep Nailwal the man behind the fund said that these currencies would be liquidated over a period of time to avoid a sudden drop in price. There is an entity set up in UAE to convert coins into fiat currency through various exchanges. These funds come into the banking system and are then transferred to FCRA compliant NGOs for carrying out relief work.

You ask – We Answer

Are ELSS investments subject to Long Term Capital Gains (LTCG) Tax? – Rithika Bhargav

Investing in ELSS mutual funds is an excellent way of saving taxes and growing your wealth over a long period of time.

Mutual funds are capital assets. So if you make gains/profit when you sell them, the gains are subject to capital gains tax.  The category of the asset decides the rate of capital gains tax and the period of holding of any investment decides whether the gains are subject to long term or short term capital gains tax. 

For equities, gains on investment held for a period of more than one year are subject to long-term capital gains. As ELSS funds invest majorly in equities and related securities, they fall under the category of equities. As the holding period is more than one year, ELSS funds are subject to long–term capital gains tax. 

Long-term capital gains for equities over Rs 100000 in a year are taxed at 10%. But remember, this ceiling of Rs 100000 is inclusive of all equity investments (direct investments in equities, if any + equity mutual funds). 

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Quiz Bite

Just like ATMs for cash, there are ATMs for cryptocurrencies where you can buy or sell them. Do you know which was the first city in the world to install a Bitcoin ATM? (Leave your answers in comments below)

a. London

b. New York

c. Vancouver

d. Seattle