Bitcoin is a buzzword in the financial market and different people have different opinions. Some are rushing to invest in this digital currency, technically called a cryptocurrency, others are wary because it’s highly unpredictable. Bitcoin is also referred to as digital gold but not to be confused with digital gold you can buy and sell at Finserv MARKETS which are backed by real gold.
Bitcoin is just one type of cryptocurrency based on blockchain technology; there are other types as well, such as Litecoin, Ethereum, Zcash, Ripple, Dash, Monero and many more. However, bitcoin leads the pack and is the most popular type of cryptocurrency.
The price of a bitcoin on June 20, 2019 was Rs.640,058. The same unit of bitcoin was valued at Rs.49,434 in 2016. More than 12-fold increase in 3 years is enough to attract thousands of investors to bitcoin. But is it really safe to invest in bitcoin? Let’s find out.
What is a bitcoin or cryptocurrency?
Most people have heard about bitcoins but they hardly know how a bitcoin is made, valued and transacted. Sometimes it’s hard to wrap around our head over the fact that a digital currency which is basically lines of computer code can be valued more than Rs.6 lakh per unit.
There is no physical asset or gold to back digital currency but the same is true about the U.S. dollar. Since 1933, at the peak of the Great Depression, the United States cut it ties with gold and started to rely on a fiat money system. Digital currency such as bitcoin is highly valued because it becomes scarce with time and the difference between demand and supply drives its prices.
Bitcoins rate of production which is basically lines upon lines of cryptic binary code is cut down in half every four years. That creates increasing difficulty in obtaining bitcoins over time. Buying a bitcoin is not as simple as buying gold or shares for investment.
Is it safe to invest in bitcoins?
Though bitcoins have given steady returns in the last 3-4 years, investing in bitcoins is fraught with risk, especially in India. Bitcoins are not backed by a tangible asset; hence there are extreme and frequent price volatilities. It’s even riskier in India to buy bitcoins because there are no laws or policies to regulate cryptocurrency trading. In fact, the Indian government is using a wait and watch policy on bitcoin trading and have neither deemed cryptocurrency trading as legal or illegal. Without any laws and regulations in place, investors may have to suffer huge losses if new regulations are formed deeming bitcoin trading as illegal. Even Jamie Dimon, CEO of JP Morgan, has called the cryptocurrency mania a bubble that can burst anytime.
In December 2018, the Reserve Bank of India clearly stated that it does not recognize cryptocurrencies and will no longer provide services to individuals and firms handling virtual or digital currencies. The decision has left nearly 5 million Indian investors who had invested in cryptocurrencies such as bitcoin in the lurch. This meant that though the RBI can’t stop you from trading bitcoins, you won’t be unable to liquidate the money as banks will not accept the transaction. And since there are no regulators, there’s no one to redress their grievances.
A better alternative
The real stuff is always the better alternative. If you really want your wealth to grow with tangible, physical assets without getting at the wrong side of the law, invest in gold or digital gold available at Finserv MARKETS.
Advantages of digital gold
When you invest in gold at a physical store, you have to worry about storage, theft or being duped with below grade gold. When you buy digital gold at Finserv MARKETS, you don’t have to worry about those things at all. Remember that digital gold is not similar to a virtual currency. When a company issues a digital gold, it has to do so against reserves of gold held by the company. In case, you want to redeem digital gold into physical gold, you can do that anytime. Apart from these, there are several other advantages of investing in digital gold. Here are just a few below:
You get 99.5% pure 24 karat gold and all the money is invested on gold as there are no amalgamation and making charges involved.
You can sell the gold anytime you like with a few clicks and receive the money directly to your bank account. You don’t need to maintain invoices unlike buying physical gold.
You can buy gold in small increments, starting at `100. Unlike physical gold you don’t have to invest huge amount of money.
It is a very nifty way to accumulate gold for marriages or as an investment method.
You don’t have to worry about damage or theft.
You don’t have to pay charges for storage unlike a bank locker
Indians love their gold and have traditionally relied on gold as an investment instrument. Gold as a tool for investment and wealth creation will never go out of fashion, whether in India or abroad. With digital gold, it’s even easier to invest in gold because you can start with as little as `100.
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