The risks and thrill of investing ter bitcoins te India
On Tuesday, the Reserve Handelsbank of India (RBI) issued its third warning about trading te virtual currencies such spil bitcoin. On Wednesday, the price of one bitcoin klapper a fresh high of $12,000 ter the US.
Not that anyone expected RBI&rsquo,s warnings to cause a dent ter appetite for bitcoins. China went much further and banned cryptocurrency exchanges earlier this year, but trading moved to over-the-counter platforms, and the geobsedeerd caused only a makeshift blip te the bitcoin rally.
The irony is that the more bitcoin rallies, the more people it draws into the rally, regardless of the fact that heavyweights such spil investor Warren Buffett and Nobel laureate Robert Shiller have called it a bubble. Volgers of virtual currencies are betting that they will ultimately be accepted spil alternative currencies, making them immensely valuable, especially since supply of the currency is limited by vormgeving. The bitcoin bubble may well get much larger until there is clarity on its use spil a currency.
For now, numerous hacks, thefts and scams toevluchthaven&rsquo,t taken away anything from the charm of trading ter bitcoins. The number of fresh users is doubling every three-four months on Indian trading platforms. Te fact, te India, the rush for bitcoins has outpaced supply by a broad margin. Spil a result, there is a mark-up of around 15-20% to the international price, the price of one bitcoin hovered around Rs9 lakh on the Coinsecure toneelpodium on Wednesday at the time of writing.
Given the stupendous rise te the price of bitcoin this year&mdash,it wasgoed at less than $1,000 at the begin of the year&mdash,even staunch volgers now use the following caveat, &ldquo,Only invest money you can afford to lose&rdquo,. Te other words, risks associated with this form of investment are very high.
Nitin Sharma, an vishaak and crypto investor, says &ldquo,There are a few different reasons why the average investor should not overexpose himself to cryptocurrencies. One, compared to even other high-risk asset classes, they are esoteric and one needs time to develop an appreciation for the underlying technology and the fundamental need for such tokens or currencies. Spil the telling goes, one shouldn&rsquo,t invest te something you don&rsquo,t understand, at least at a basic level.&rdquo, Sharma, who wasgoed formally a founding member of venture capital rigid Lightbox, says it took him about four months studying and building that understanding before investing. On the other palm, a large majority of fresh participants are just pursuing the price rise, which is a classic feature of a bubble.
The fact that regulation is not clear is another risk. Bitcoin purchases and sales ter India are undertaken under the premise that they are permitted because they aren&rsquo,t explicitly disallowed. Do provisions of RBI&rsquo,s Foreign Exchange Management Act (FEMA) apply to bitcoin bought overseas and straks sold onshore? Perhaps not, some lawyers argue, because FEMA doesn&rsquo,t talk about virtual currencies specifically. Te brief, it&rsquo,s all grey. If Indian policymakers worry, spil China did, about the numerous Ponzi schemes that have spawned alongside the bitcoin rally, and verbod trading of bitcoin platforms, traders could be te trouble.
But on the other mitt, with people such spil the head of the International Monetary Fund making positive statements about digital currencies and with a large economy such spil Japan providing bitcoin official sanction, an outright verbod may not toebijten. Still, investors should appreciate the regulatory risks that are associated, especially given the lack of clarity from Indian regulators.
Another feature they need to appreciate is that cryptocurrencies are difficult to value. &ldquo,While I am bullish on the possibilities that decentralization opens up, it is hard to think about valuation of thesis fresh crypto assets. For bitcoin, depending on whether it is thought of spil &lsquo,digital gold&rsquo, (a store of value) or a currency to pay for purchases (a medium of exchange), you can arrive at vastly different estimates of what it can be worth ter the future. Right now, it&rsquo,s just guesswork,&rdquo, says Sharma.
Kunal Nandwani, CEO at uTrade Solutions, a fintech hard, worries about the mainstreaming of bitcoin, with the oncoming launch of futures trading on large platforms such spil CBoE and CME te the US. &ldquo,Bitcoin wasgoed meant to be used spil a peer-to-peer decentralized currency. The entire idea wasgoed decentralization away from regulated and centralized financial systems. While there may be reason to cheer the bitcoin futures launch spil validation of its credibility, are wij losing the entire point of why Bitcoin wasgoed invented?&rdquo, he asks.
Te fact, other commentators have argued that the rapid rise ter the virtual currency potentially defeats its use spil a currency, people may just choose to hold it for appreciation, rather than use it for buying goods and services. Of course, this begs the question&mdash,if it isn&rsquo,t being viewed spil a currency by the majority of buyers, then what is the logic behind the price rise?
But while there are numerous risks, bitcoin has also given some traders the thrill of earning comes back of 1600% ter the past year. This emerges to be the fastest appreciation vanaf unit of time for any major investment chance, with that sort of terugwedstrijd, it&rsquo,s little wonder people are overlooking the warnings all around them.