Some months back, looking at the growing trend many of my friends suggested me to invest in Bitcoin. I didn’t take it seriously at the time and in the last month it saw a 30% decline in the crypto-currencies. From various sources we can conclude that Bitcoin and other crypto-currencies are very volatile in nature. Even though many of the big investors support the development of this digital currency, many are there who call it a bubble waiting to burst.
Bitcoin was actually created as a medium of exchange between two parties and not as a investment tool. But the popularity it gained in May 2011 and Nov 2013 made it possible for bitcoin to reach a different height. However it was just waiting for its first crash, According to CFBP ( consumer financial protection bureau ) the price of bitcoin fell by 61% in a single day in 2013 and while the one-day price drop record was as much as 80%. The lack of guaranteed value and digital in nature inherits several risks, many investors are alerted by the (SEC) Securities Exchange Commision , (FINRA) Finance Industry Rugulatory Authority and (CFPB) Consumer Finance Protection Bureau. To be clear Bitcoin does not have a long term financial history to refer, therefore its unknown about the trends i.e the way it will act to a certain news, and confusing at the same time.
“it is pretty much highest risk and highest return investment that you can possibly make” says Garry Silbert CEO of digital currencies group, which builds and invests Bitcoin and blockchain companies. Looking at several other risk factors one major concerns is the regulatory risks. As we know Bitcoin is a digital cuurency which does not have a centralized authority, which also gives competition to financial agencies of the government. Therefore it is totally within the hands of a nation to regulate, restrict or to ban the digital currency. The reason for this could also be the illegal activities that could be carried out through them, money laundering, paying for illegal goods or tax evasion. The lack of regularity, questions the longevity, liquidity and the universality of Bitcoin.
CRYPTO-CURRENCIES IN INDIA
India’s crypto market is been in works for 2 years now. A bill was supposed to be expected this year during the budget session, It recommended banning of private crypto currencies exchanges and lay a framework for the crypto market in India. It couldn’t be possible due to the second wave of covid-19, which hit the nation in the period of February and march. Nirmala Sitharaman in an interview with hindu businessline said, “We have done a lot of work on it. We have taken stakeholders’ inputs. The Cabinet note is ready. We have to see when the Cabinet can take it up and consider it so that then we can move it” That could mean that the new laws to regulate the crypto-currencies market would be up for debate in the next parliamentary session which is set to kick off on July 29.
A draft legislation was announced in 2018, which banned most crypto-currencies. The debut of the CRYPTO-CURRENCY AND REGULATION OF OFFICIAL DIGITAL CURRENCY,2021 bill is expected to be banning all the private crypto-currencies and build a foundation for Central Bank Digital Currency ( CBDC) or digital version of rupee. A cold-war could be observed between India and crypto markets in the previous years, because of the fact that it is a technology, and it is new have left the government sceptical. In the past Sitharaman had said that india is taking a ‘calibrated’ approach to crypto markets.
According to chinalysis a crypto research firm, investment in the crypto-currencies grew from $200 million in 2019 to 40 Billion in 2020 signalling a huge interest in crypto Market. But the experts are still confused about future of investment in crypto-currencies in India . India ranks 11 out of 154 nations in adoption of large amount of crypto-currencies. Most recently on may 31 RBI issued a statement to the banks not to cite 2018 circular to services to crypto-currencies platform. But since then the authorities have gone silent. The RBI’s regulatory move may be a sign for pulling away for blanket ban; but still the guidelines for the virtual currency is not clear. In the Indian ecosystem of crypto-currencies there are issues pertaining to payment solutions, taxation and legal status. While the global ecosystem is booming, due to the investors, innovators and businesses and offering new job opportunities. Avinash Shekhar co-CEO of ZebPay says that clarity on regulation of virtual currencies will enable crypto-currencies to be a part of the economy as the assest class alongside the sovereign economy. Some believe that the delay comes as the RBI signalled ‘it is very much in-game’ with the making of CBDC. “ All the regulators are connected to the financial domain, but not technology domain. All of a sudden there is a new thing for them, which is financial but deep rooted in the tech world. For them, it is also going to be challenging to regulate this market” said Nischal shetty the co-founder of wazirX
Looking at the Indian market we can imply that, there is a potential for crypto-currencies. From the past trends a huge interest could be seen in digital currency in India. However investor should not forget the risk that comes with these digital currencies, It is definitely not build for a risk-averse investor. The bitcoin or other crypto-currencies are subject to very high volume of buying and selling exchanges, it has a sensitivity to any newsworthy events. Therefore many of the Big players are trying to manipulate crypto-currencies, by leaking headlines in trying to control the market. Although India has not given any guidelines for the exchanges of crypto, many apps and software are available on the internet for trading (under their respective terms and conditions) these altcoins. Apps like binance,Unocoin and coinbase are some of the leading applications. Hence, it is essential for the investor to weigh the advantages and disadvantages before investing in Bitcoin or other crypto-currencies.
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