Read This Before You Jump Into The Bitcoin Surf: Is Investing In The Cryptocurrency A Safe Option Yet?


The excitement over the unbelievable assembly in bitcoin rates (up to 18x this year) has made many regret in not investing in the virtual currency. Some are inquisitive about getting in on the action at least now, assuming that bitcoin will climb further.

However, Madhur Todi, an Ahmedabad-based certified financial planner and bitcoin investor, has this to say to them:

It’s a very risky and volatile asset class. I would say to not get into it to make a quick buck. There are no benchmarks because the ecosystem is new.

Todi considers an investor should not put beyond 1-2% of his net worth in bitcoin.

You should be prepared to lose it.

Todi initially purchased the currency at around Rs 20,000 per bitcoin in 2015; now it is around Rs 11 lakh, and he is bullish concerning its future.

Bitcoin is a cryptocurrency which does not slip under the overseeing of a central authority. It operates on a technology called blockchain, which is a record of all transactions on a decentralised network of computers worldwide.

But this is all a matter of chance and that is how it should be treated. Investments in bitcoin are not like investments in a listed company (in India, any shareholding higher than 1% has to be revealed) or in a startup at a certain cost. And it is tough to calculate who has how many bitcoins or any other cryptocurrency.

Besides, there are serious issues being raised about the fate of this cryptocurrency. India’s Finance Ministry and Apex bank have both arisen cautions on the same.

The Securities Exchange Commission (SEC) of the US in a statement, earlier this week, said:

Cryptocurrency markets span national borders and significant trading may occur on systems and platforms outside the US.  As a result, risks can be amplified, including the risk that market regulators, such as the SEC, may not be able to effectively pursue bad factors or recover funds.

It also warned investors on initial coin offerings, in which entrepreneurs raise funding in cryptocurrency.

While it is inebriating for any one government to clamp down on dealing in bitcoin, given that it is immune to national boundaries, Vishal Gupta, a bitcoin advocate, said that the government could end up regulating bitcoin exchanges.

Notably, China has already asked its bitcoin exchanges to wind up their processes.

If India were to follow the action, it could dispirit investor interest. The Income-Tax Department has recently gone on a raid-slew and is investigating bitcoin exchanges to amass information about their transactions.

Aside from whether the bitcoin is an effectual purchase, there is the fundamental question of whether businesses will hold this as a method of payment for their products and services. There are anomalies but the ambiguity over its rank as legal tender will stop most merchants from espousing it. In such a scenario, taking an acquainted call on bitcoin is keen-witted.