The trading of the popular crypto currency, Bitcoin, started in 2010 with the earliest Bitcoin exchange listing its value at USD 0.003. By early 2011, each Bitcoin came to cost about USD 1 (approximately INR 44.50 at the time). Today, some 6 years later, the cost of Bitcoin has crossed the USD 10,000 mark for the first time. This means that had you invested approximately INR 4450 into Bitcoins in 2011, today you could have encashed them for approximately INR 7 crore. Stupendous, isn't it? But that has been the frightening yet phenomenal journey of this enigmatic currency called Bitcoin.
What is Bitcoin?
Bitcoin is the most popular and most commonly used crypto currency or virtual currency. It was created in 2009 by an unknown entity and has been used across the globe as a digital payment system. Like all crypto currencies it is not regulated by any administrative system and is traded in virtual Bitcoin exchanges. There are currently about USD 167 billion worth Bitcoins in use across the world - making up about two thirds of all the crypto currencies available (by value). Estimates suggest that there are over 2,500 Indians engaged in Bitcoin mining and trading on a daily basis.
Risks involved
The greatest risk involved in the exchange and trade of Bitcoin and all such crypto currencies is the lack of regulation. Though the use of these is not explicitly banned in the country, the central bank, the Reserve Bank of India (RBI), does not authorise any payments using Bitcoin. Unlike the Indian Rupee which is regulated by the RBI there is no approval or currency control by any monetary authority in the country for the use of Bitcoin. The RBI had, in fact, cautioned virtual currency (VC) users thus – “The creation, trading or usage of VCs including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities”.
In all about USD 300 billion worth of VC are now in use across the world. The ordinary trader looks at the hugely popular digital currency and its lack of regulation as a means of quick earning but it must be stressed here that economists continue to warn us that the Bitcoin bubble is all set to burst. If it does the risks of incurring a huge loss is also very high.
Other digital currencies
There are numerous digital currencies that are being used and traded across the world. In fact some reports suggest that there may be as many as 900 such virtual currencies. Apart from Bitcoin, the following are the most popular virtual currencies in use in India –
- Ethereum
- Litecoin
- Ripple
- Darkcoin (DASH)
- Nem
- Monero
