Investment in Bitcoin: Should You Ride The Wave?
Cryptocurrency saw enormous interest in 2017 largely due to huge surge in the valuations along with expectation of phenomenal growth in the future. However, the new form of virtual currency exists in multiple forms making it difficult for the layman to understand the dynamics of the cryptocurrency. Even the absence of Centralized Authority and proper legislation governing the transactions makes it is highly vulnerable investment option. Furthermore, Peer to Peer based network intended to eliminate the intermediaries makes it difficult to identify the source of transactions. Bitcoins is one of the most popular cryptocurrency among other virtual currencies.
Regulators across the Globe are still in the process of formulating a structured framework to regulate virtual currency related transactions. As the entire system is decentralized it is very difficult to establish the parties involved in the transactions. The use of Peer to Peer network makes it difficult to figure out the originating transaction source.
Apart from Governance, Cryptocurrency is also plagued by other issues such as use of virtual currency for money laundering, tax evasion and other illicit activities. Creation of cryptocurrency is also a tad complicated, as it involves complex algorithms which require huge technology resources and the cost is rising steadily for the same.
The most popular among the cryptocurrencies is the Bitcoins. It came in to existence in 2009. The decentralized structure intrigued individuals and institutions alike. Slowly but steadily the Bitcoin has come a long way since then and currently, value of one Bitcoin is worth few thousand dollars (prices prone to market fluctuations).
One may refer to my earlier post on Cryptocurrency, wherein I have discussed in details about the virtual currency and other aspects related to it. The link is shared below:
History of Bitcoin
Bitcoin came into existence in 2009 and is believed to be created by a Japanese Satoshi Nakamoto. However, not much is known about the creator of the 1st popular cryptocurrency. Bitcoin had a sedate start as it was not recognized as potential substitute of the fiat currency. But soon it started to gain recognition. Bitcoin is a grey area for Regulators as well as Government agencies, in the present times.
Currently, Bitcoin is accepted as a payment option in quite a number of platforms. However, given the concerns and speculation surrounding the Bitcoin, It is still far from being the accepted form of legal tender.
Investment In Bitcoin
Bitcoin from the onset has been extremely volatile in nature. It saw massive surge in prices in 2017 but has been pretty sedate in the following year. The prices have dropped significantly and with many nations imposing heavy regulations on the use of Bitcoins, I believe the valuation is expected to see more corrections in the near future.
Currently, Investment in Bitcoin is not advisable due to lack of Legal and Regulatory framework.
Legal Status and Tax
Legal Status of Bitcoin varies from country to country. Few nations have recognized Bitcoin as legal tender but quite a number of nations have imposed restrictions or complete ban on use of it. Concerns regarding transactions related to Bitcoins are growing as more and more countries are imposing regulations on the use of such virtual currency. Regulators are worried about such transactions as it may involve illicit activities and probable tax evasion.
Nations wherein Bitcoins is legal, Capital Gain Tax is being imposed on the Transactions.
Future of Bitcoin
In my honest opinion, it is important to structure a comprehensive regulatory framework for the cryptocurrency market. This will help in compliance and provide a clean platform for investment. This is further help in establishing Bitcoin or any other cryptocurrency as widely accepted legal tender.
Therefore, Cryptocurrency’s fate will be primarily dependent on the decision taken by the Regulators. Along with the way investors perceive the digital asset for investment.
Valuation of Bitcoin
Bitcoin does not have any physical value. It is a digital currency.
Bitcoin valuation has been very volatile and it is very hard to predict the future valuation of such cryptocurrency. Valuation is impacted by the measures and decisions surrounding it taken by the Regulators. Also the demand for Bitcoins determines the price fluctuations.
Bitcoin was valued at around $900 at the start of 2017 and touched $18,000 by the year end.
India’s Take On Bitcoin
India has not outrightly declared trading in Bitcoin as illegal, for the time being. Although, time and again, RBI has issued warnings to the investors against trading in any form of cryptocurrency. The Government is still awaiting recommendations from the expert panel before taking a stand on the status of cryptocurrency in the country. However, the Government has refused to recognize virtual currency as legal or lawful tender. Income Tax Department too is concerned about the transactions in Bitcoins. However, one will need to wait for the final verdict on Cryptocurrency.