As bitcoin prices rose by 1,600% in 2017, the sceptics of bitcoin ring alarm bells for the current and potential investors. Bitcoin prices rose by astronomical proportions to a lifetime high of $16,000 on Friday after surging nearly 67 per cent in just one week. The surge intensifies the debate about whether the cryptocurrency is a bubble that is about to burst. The bitcoin price has been rising for past one week in the run up to the launch of first bitcoin futures contract at a large derivatives exchange Chicago Board Options Exchange (CBOE) on Sunday. However, not only in the US, one can buy bitcoins in India as well, via bitcoin wallet firms such as Zebpay and Coinsecure, among others. At Zebpay, the buy price of bitcoin is around Rs 10,54,000 while the sell price is slightly lower (at Rs 10,25,000) and at Coinsecure, the buy price is around Rs 10,73,000.
Ten things that bitcoin's potential investors must know:
1. The proponents of bitcoins say that holding bitcoins, just as other cryptocurrencies, is preferable over conventional currencies because they are not subject to any central bank's manipulation.
2. Japan had accepted bitcoin as legal currency and even officially recognized the bitcoin exchanges two months ago. Japan's Financial Services Agency (FSA) officially recognized 11 companies as registered cryptocurrency exchange operators in September this year.
3. The Indian regulators, however, have been warning the investors against trading in bitcoins. Finance Minister Arun Jaitley said bitcoin are not legal tender. Earlier in August, Jaitley had informed Parliament that there are no regulations governing virtual currencies, including bitcoins, in India. Even RBI also warned the bitcoin traders of multitude of risks in trading in bitcoins. Similarly, China's regulators cracked down on the virtual currency in September when the People's Bank of China (PBoC) banned the initial coin sales (IPO of cryptocurrency).
4. Bitcoins are created by a process known as mining and the coins (not in real sense but in the virtual sense) already mined can be traded-bought and sold. The coins can even be used like a traditional currency for buying the merchandise. Some e-commerce companies such as Expedia accept payments in bitcoins.
5. The proponents of bitcoins believe that one of the rationales for the mammoth bitcoin rally is its limited supply, which will eventually be capped at 21 million, and some 16.7 million have already been released.
6. The critics, however, say that the relentless rally is a bubble that has been driven chiefly by speculation, leaving bitcoin vulnerable to a sharp reversal. JPMorgan Chase & Co chief executive Jamie Dimon famously called bitcoin a fraud in September. "Bitcoin remains a major gamble as it is very much an asset that remains in uncharted waters, we've simply not experienced this before," said Nigel Green, founder and chief executive of deVere Group.
"Also, an asset that goes almost vertically up should typically raise alarm bells for investors," he added.
7. Despite criticism from some quarters, analysts said the launch slated for this weekend of bitcoin futures by Cboe Global Markets Inc's Cboe (Chicago Board Options Exchange) Futures Exchange, one of the world's biggest derivatives exchanges, was helping drive up the price on expectations it would draw more investors to the market. The CME Group will launch bitcoin futures one week later, while Nasdaq Inc plans to get into the mix next year. It is not clear to what extent big U.S. banks will participate in the new bitcoin-related activity.6.
8. The value of all cryptocurrencies now stands at nearly $430 billion, according to Coinmarketcap. Bitcoin has more than tripled in price since the start of October, putting it on track for its best quarter since the end of 2013, when it surged above $1,000 for the first time.
9. The cryptocurrency has a gamut of risks that include theft. In 2014, bitcoin slumped when MtGox, then the world's biggest bitcoin exchange, collapsed after saying it had been hacked and had 6,50,000 bitcoins stolen.
10. If you want to buy bitcoin, you do not need to buy a whole one. Bitcoin's smallest unit is a Satoshi, named after the elusive creator of the cryptocurrency, Satoshi Nakamoto. One Satoshi is one hundred-millionth of a bitcoin, making it worth around $0.0002 at current exchange rates.
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