Now there are three kinds of people in the world. Those who invest in bitcoins, those who are totally against investing in it, and those who have no idea what the hell is happening. And, irrespective of which camp you belong to, you totally can’t deny the fact that bitcoin has shown no sign of slowing down. Its value has grown 900 percent since last year, now it has hit $10,000 mark.
With so much buzz around bitcoins, crypto-currencies, you might be wondering if it’s an investment avenue for you. Wondering if you will miss the bus if you don’t invest or will you be taking too much risk with your money. In short, today many are asking, should you invest in bitcoins? The answer really depends on whom you ask the question to.
Talk to Certified Financial Planners and they say, though they understand the basic concept as to how bitcoin works, the whole crypto-currency universe is still very difficult to understand completely and with very little data available to analyse it, investing in them is as good as speculation.
Ranjit Dani, Nagupr based Certified Financial Planner says, “Bitcoin don’t have the blessing of the regulator. RBI has issued warning against bitcoin in the past. We don’t understand what is impacting the demand-supply of bitcoins. We stay away from what we do not understand. Hence, investor should not invest in bitcoins.”
Similar views are echoed by Suresh Sadagopan, Mumbai based Certified Financial Planners, who says, “Firstly, it’s invented by some phantom figure. It has no regulatory approval in India. There’s no full grasp of understanding of how price works or what can suddenly cause a surge. Even Warren Buffet has said, never invest in a business you cannot understand. It has grown too fast in a short time. It’s speculative, and hence I don’t recommend investing in bitcoins.”
Warren Buffet last month called bitcoin as a real bubble. In September this, JPMorgan Chase, Chief Executive Officer Jamie Dimon called bitcoin “Fraud” “worse than tulip bulbs.” But, not just individuals but even countries seems to be divided on this issue. Firstpost spoke to K. Vaidyanathan, Lecturer Finance at India School of Business regarding bitcoin and crypto-currency in general.
According to Vaidyanathan, “In India, RBI has not recognised it. In some countries it’s illegal. Some countries like China are pro-bitcoins. US is a big market too. If you look at large players (financial institutions), they don’t want the parallel currency to thrive, as it will hurt them.” According to him, it’s very unlikely that bitcoin will stand on it’s own without support from large players or regulators. He not bullish per se, as there’s too much speculation and market is shallow.
Bitcoin itself has forked (split) a number of times into another cryptocurrency called bitcash. Plus there are more than 1,000 cryptocurrencies, every new techie seems to be inventing a new cryptocurrency. Litecoin, Ethereum, Zcash, Ripple, Monero to name a few. According to the professor, number of cryptocurrencies will eventually consolidate to five or six. The future of bitcoins and cryptocurrencies, in general, is very unpredictable even for those who do understand cryptocurrencies.
But not are many who are very bullish on bitcoin. Take for instance, former Fortress hedge fund manager Michael Novogratz, said on CNBC show Fast Money, “Bitcoin could be at $40,000 at the end of 2018.” Even business tycoon Richard Branson is a firm believer of Bitcoin, to such an extent that he backed Blockchain partners with Unocoin in India, according to this report in The Economic Times.
Firstpost spoke to Sathvik Vishwanath. Co-Founder, CEO, Unocoin, India’s Bitcoin Exchange, who says, “It’s movement is not like it used to be. Volatility and growth has been much higher now. People who invest in bitcoin are not those who want to buy low and sell high. They are those who want to buy high and sell higher. There are deep pocket investors. We have seen a lot of investment advisors especially in developing countries tell there clients to invest a very- very small part of there overall assets in bitcoins. Just one-two percent of their entire portfolio. It’s like investing Rs 2, two years ago and now the value has gone to Rs 200."
In short, sellers of bitcoins believe that investing 1-2 percent of your total wealth is an ideal amount to venture into bitcoin. Saurabh Agrawal, CEO and Co-founder, Zebpay, an India bitcoin currency exchange, says, “We are not saying that people should invest their entire hard earned money in bitcoins, definitely it’s risky and there’s high volatility. I, stead start with a very small amount." You can even start with as less as Rs 2500.
Zebpay charges 0.15 per transaction on their exchange, irrespective if you buy or sell. There are a number of reasons as to why bitcoin has rallied to above $ 10,000. Firstly, everyday the understanding of bitcoin (cryptocurrency) is increasing. On Zebpay alone, they have 20,000 downloads of the app, and they see 40-50 percent KYC completions on the app. Secondly, the over all confidence in bitcoin has increased as countries like Japan passed a law recognising bitcoin as a legal tender.
Chicago Merchantile Exchange announced its plans to offer bitcoin futures, starting this December. SegWit2x backers cancelled their plans for bitcoin hard fork. This means there was supposed to be split on bitcoins and that was called off. This increased the confidence in the digital currency and for future of bitcoins, among some investors. These are some of the reasons as to why the recent surge on happened.
So what should you do? Certainly don’t be like man from The Netherlands who sold everything he owned in exchange for bitcoin now lives on a campsite waiting for the ultimate cryptoboom, as per this Business Insider report. Bitcoin exchanges make money on transactions, so they will make money irrespective of you buy or sell, make a profit or loss. Of course, they want you to invest, so they earn a fee. Keep that in mind. Seek the help of your Certified Financial Planner and look into your individual financial situation and only then decide if you want to invest or not. If you plan to do so, make it really a very small amount you can afford to write off, and remember, it would be speculation and your chances would be as slim or fat as betting on a horse. Don’t buy bitcoin if you don’t know how to store them safely. Storing them on your mobile or laptop is very risky. That topic needs an entirely different article alltogether. So keep tracking this space.
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Updated Date: Nov 29, 2017 17:16:19 IST