Bitcoin, the best known ‘digital money’ in the world, crossed a record high of 30 lakh rupees yesterday ($40,000). The cryptocurrency has been going from strength to strength through the past year, as the world nosedived into the uncertainty and economic pains of the pandemic. The question then arises: Is it time for the average Indian to consider investing in bitcoins?
“Bitcoin is slowly emerging as a mainstream investment class. Bitcoin is labeled as digital gold by many, and is also seen as more superior to gold in several respects,” says Nischal Shetty, CEO of WazirX, one of India’s leading cryptocurrency trading and exchange platforms. “As a smart investor, people in India want exposure to cryptocurrency based on their risk appetite and have diversity in their portfolio.”
His verdict? For now, it’s a high-risk, high-return investment option.
But before you develop cold feet, consider these facts. At the same time last year, one bitcoin’s price was 5.5 lakh. As of Friday, it is trading at its all-time highest value, so far, of 30 lakh rupees. That’s a growth of 445 per cent since January 2020—totally outperforming other modes of investment like Gold (which went up nearly 25 per cent in the same period), silver (nearly 48 per cent) or the stock exchanges (15 per cent).
And if you are worried about investing in something that is already peaking, think again. According to JP Morgan Chase, one bitcoin could be worth over a crore in the long term, while Citibank is even more ebullient. A recent Citibank report, leaked in the media, forecasts bitcoin to hit as much as Rs 2.19 crore of value—in this year itself!
“We believe that these price predictions are possible since we are seeing a lot of interest from institutional investors in this space,” feels Vikram Subburaj, co-founder and CEO of Giottus Cryptocurrency Exchange. Prominent advocates for Bitcoin include the likes of Twitter founder Jack Dorsey and Robert Kiyosaki, author of Rich Dad, Poor Dad. Mastercard and PayPal are among financial sector entities who have opened up their networks to cryptocurrencies. Countries like Japan, Australia, South Korea and Switzerland have voiced interest in institutionalising this digital mode of ‘money’ which works on blockchain technology.
India, of course, has had an uneasy relationship with bitcoin. Overzealous bureaucrats, in a botched attempt to stifle the growth of digital money, had come up with a ban on banks supporting cryptocurrency trading. The Supreme Court threw the ban out the window in March 2020.
Experts advise a cautious approach to trading in bitcoins. “We suggest keeping investments in cryptocurrencies to less than 20% of their overall portfolio, considering the volatility in this space,” suggests Subburaj, but adds, “But having said that, customers can invest in cryptocurrencies based on their risk appetite.”
And don’t let the skyrocketing value deter you. “You don’t have to buy one whole Bitcoin,” points out Shetty. Explains Subburaj, “Bitcoin is divisible by 8 decimal digits, and the smallest unit is called a Satoshi (0.00000001 BTC) and the current value for the same is 3 paisa! So you can invest (as low as)100 rupees in Bitcoin.”
The one thing to look out for is fraudsters and fly-by-night crypto traders, considering that the field is yet to have proper regulation. The Internet and Mobile Association of India is working on drafting a code of conduct for cryptocurrency companies in India. It couldn’t come soon enough. Earlier today, CoinDCX, a large cryptocurrency exchange, announced that it has frozen 4 accounts used to artificially push up prices of smaller cryptos in a bid to defraud investors lured by Bitcoin’s record surge.