Should You Be Investing In Bitcoin?

When this crypto currency came into fore around 2010, it was valued at a meager Rs. 2.85 or US$0.06. The sole purpose with which bitcoin was introduced was to provide a stable alternative to the available currencies during the global economic recession of 2008-09. But recently the digital currency surged heavily as the stakeholders reached a consensus on its scaling issue which earlier capped its total production at around 21 million. Earlier this year, it recorded highs of $5000 or appx. Rs 3.2 lakh for the first time.

The currency maintained as well as spent electronically or digitally across the globe is fast gaining popularity not only in overseas markets but also in India. As per reports, despite the warnings issued time and again by RBI, as still bitcoin is not legalized in India, as many as 2500 Indians trade in the cryptocurrency on a daily basis.

Though in times to come it is expected to be a good payment means on the e-commerce platform and also is likely to give a tough competition to local money transfer agents, in the Indian context still there are some drawbacks of the investment option which cannot be ignored. So here's a take on whether or not you should take position in bitcoin.

1. High volatility: With no clear landscape surrounding bitcoins, experts are not able to clearly anticipate its price movement and what governs it. And till date, its price has mainly surged with increase in the number of users or traders in it i.e as it exchanges more and more hands, the price has moved only higher. This is likely to result in bubble formation which would burst at some point in time and result in huge losses for investors.

2. No legal framework regulates bitcoin transactions in India: As against other developed economies, bitcoin in India is still not legalized though a number of bitcoin exchanges have come up. Each of the transaction routed via bitcoin is to be closely monitored as per the guidelines of RBI. So, the tax implications on the use of Bitcoin are also not known. Further whether it should be treated as a currency or a commodity is yet to be made clear as in case the cryptocurrency is treated as a currency then it would result in speculation income as per existing tax laws.

Also, in case of any loss, you do not have an institution or government to approach to for grievance redressal.

3. Risk of Illegal And Anonymous Transactions through bitcoins which become hard to track: As the identity of the user or owner engaging in a bitcoin transaction remains hidden, cybercriminals as well as terrorists are using the digital format to their advantage. "Since there is a lack of information about the trading parties, such a peer-topeer non-regulated system may expose the investors to unforeseen risks including breaches of anti-money laundering and financing of terrorism laws", said an official of a cyber security and risk consultation firm.

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