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Is investing in Bitcoin safe? Get the basics first!

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India has not legitimized bitcoin, hence investment returns are totally based on demand i.e. you get your return only if there is another buyer in the market who is ready to pay you more for it. Currently the high-value of the digital currency owes to its high demand, but once people start selling, there is a possibility that rates will drastically fall. Pixabay
India has not legitimized bitcoin, hence investment returns are totally based on demand i.e. you get your return only if there is another buyer in the market who is ready to pay you more for it. Currently the high-value of the digital currency owes to its high demand, but once people start selling, there is a possibility that rates will drastically fall. Pixabay

With the fussy mania of Bitcoin going around and past, your eyes and ears, in the news and peer discussions, you must be having some basic questions about it: What is bitcoin? Is it legal? How can I get it? But most of all, you must be thinking, ‘Is investing in Bitcoin safe?’

Let’s find out!

Pluto Exchange has launched first app that will trade in bitcoins in India
Pluto Exchange has launched the first app that will trade in bitcoins in India. Wikimedia commons

ALSO READ: Bitcoin Worth Millions Stolen Days Before US Exchange Opens

Clearing the basics

  • Bitcoin is the first ever cryptocurrency that existed, it was invented in 2009 by Satoshi Nakamoto.
  • Cryptocurrencies are nothing but computer codes that have monetary value. No Government has any control over them.
  • Bitcoins ‘self-contain’ their value i.e. there’s no need for any bank to move or store the money.
  • Bitcoin currency is completely unregulated and decentralized.
  • Bitcoins are mined, and they can be mined by anyone in the general public who has a strong computer. However, only 21 billion of bitcoins in total can be mined. Currently, there are around 11 million in circulation.
  • Bitcoin has no underlying physical monetary base to support its value, and it is totally subject to its demand in the market.

What are the risks?

  • Low demand: India has not legitimized bitcoin, hence investment returns are totally based on demand i.e. you get your return only if there is another buyer in the market who is ready to pay you more for it. Currently, the high-value of the digital currency owes to its high demand, but once people start selling, there is a possibility that rates will drastically fall.
  • Unregulated: There is no bank or government tax agency that can track your money and its movement. Hence, it can become a tool for money laundering.
  • Irreversible transactions: There is no insurance protection of your bitcoin wallet i.e. if you lose your wallet’s hard drive data or even your password, your wallet’s content is gone forever.
There is no insurance protection of your bitcoin wallet i.e. if you lose your wallet’s hard drive data or even your password, your wallet’s content is gone forever. Pixabay
There is no insurance protection of your bitcoin wallet i.e. if you lose your wallet’s hard drive data or even your password, your wallet’s content is gone forever. Pixabay

ALSO READ: How can you trade in Bitcoin in India?

Status of Bitcoin in India

Finance minister Arun Jaitley highlighted in a statement that cryptocurrencies are not legal tender and have no regulatory permission or protection in the country.

However, there was no announcement banning or imposing any curbs on the same. The government panel is also awaiting a report on tackling cryptocurrencies in India, Jaitley said.

The government has recently cautioned investors to be wary of virtual currencies like bitcoin, saying they are like Ponzi schemes with no legal tender and protection.

“One of the features of cryptocurrency is that there is lack of dependence on the state. It functions with a degree of anonymity. It operates within a virtual community which is created and enjoys the trust of that virtual community,” Finance Minister Arun Jaitley told the Rajya Sabha.

“The government is examining the matter. A Committee under the chairmanship of the Economic Affairs Department Secretary is deliberating over all issues related to cryptocurrencies to propose specific actions to be taken… Instead of taking any knee-jerk action, let’s wait for the report of this committee.” Jaitley added

Next Story

Bitcoin Slumps More than 10% as Fears of Crackdown of Cryptocurrencies Grew

Bitcoin fell 11.1% from Friday to $9,855 early on Monday, its lowest since July 2

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Bitcoin, Fear, Cryptocurrencies
FILE - Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah. VOA

Bitcoin slumped more than 10% over the weekend to a two-week low as fears of a crackdown of cryptocurrencies grew on mounting scrutiny of Facebook’s planned Libra digital coin.

Bitcoin fell 11.1% from Friday to $9,855 early on Monday, its lowest since July 2. The original cryptocurrency slumped 10.4% on Sunday alone, its second-biggest daily drop this year.

It was last up 1.3% at $10,319.

Politicians and financial regulators across the world have called for close scrutiny of Facebook’s Libra coin, with concerns ranging from consumer protection and privacy to its potential systemic risks given the social media giant’s global reach.

Bitcoin, Fear, Cryptocurrencies
Bitcoin slumped more than 10% over the weekend to a two-week low as fears of a crackdown of cryptocurrencies grew on mounting scrutiny. Pixabay

In a sign of widening U.S. attention, a proposal to prevent big technology companies from functioning as financial institutions or issuing digital currencies has been circulated for discussion by Democratic lawmakers, according to a copy of the draft legislation seen by Reuters.

U.S. President Donald Trump had last week criticized bitcoin, Libra and other cryptocurrencies, demanding that firms seek a banking charter and subject themselves to U.S. and global regulations if they wanted to “become a bank”.

Bitcoin, which initially shrugged off Trump’s Tweet, fell sharply after U.S. Federal Reserve Chairman Jerome Powell called for a halt to Facebook’s project until concerns from privacy to money laundering were addressed.

“Together they have increased the tail risk that the U.S. will look to crack down on it in some way,” said Jamie Farquhar, portfolio manager at crypto firm NKB Group in London.

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Underscoring the growing attention on Facebook’s plans, Japanese authorities have also set up a working group to look at Libra’s possible impact on monetary policy and financial regulation, government sources told Reuters.

European Central Bank policymaker Benoit Coeure is due to deliver a preliminary report on the matter at a meeting of G7 finance ministers this week in Chantilly, north of Paris.

Bitcoin climbed nearly 55% in nine days after Facebook unveiled its plans for Libra on June 18, touching an 18-month high of nearly $14,000. The project has boosted hopes among some investors that cryptocurrencies could gain wider acceptance. (IANS)