6 Reasons why you should not to get tempted with Bitcoin
The popularity of Bitcoin surges in the recent times, since the Bitcoins has brought whopping 200% 2020. It has captured the interest of the investor who are looking forward for alternative investment.
What is Bitcoin?
Bitcoin is a Crypto Currency ( Digital Currency ) and there are more than 2000 varieties of Crypto Currency as there currently.
You can buy Bitcoins in 2 ways – Buying & Mining
Buying Bitcoins is a simpler process, as you are buying it from someone who are booking profits and exiting. Mining is difficult process as you need to solve complex algorithms and mathematical calculations, with this you can get rewarded with small part of Bitcoin, which is virtually impossible as the creators will never allow individuals to mine it.
The current price of 1 Bitcoin is Rs.27.18 Lakhs as on 11th Jan 2021. As the Mining of Bitcoins has become complex, there is an artificial demand for Bitcoins in the recent times, which pushes its price upwards. What stoked the rally was the participation of larger institution than the retail participation. Unlike gold the supply of Bitcoins are shrinking.
Even though Bitcoins has offered highest return of 200% in 1 year, the retail and small investors should stay away from this high volatile investment because,
- There is no Regulator or Mechanism to govern Bitcoin.
- The clearing system of Bitcoin Exchange cannot guarantee Settlement
- While Supreme court in march 2020 has made it clear that the Bitcoins are no illegal, but there is no legitimate institutional framework to back this asset
- Bitcoins are High Volatile and High Risk investment as in 2017 ( as it fall from 18,000 to 3,200 – Free Fall Crash )
- Possible Cyber Threats and Security concerns with cyber criminals ( If it is stolen, it cannot be recovered )
- Limited Physical Use ( You need to convert Bitcoins to Currency and use it )
If you are retail and small-time investor, stick to your asset allocation to Mutual Funds, Direct Stocks and stay away from high volatile and high-risk investment like Crypto Currencies.
If you still wish to participate, limit your exposure to 5% of your Networth.
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