Not For The Faint Of Heart

Not For The Faint Of Heart

- Devangshu Dattata

Cryptocurrency Bitcoin has created the biggest bubble since the internet. There are 16.7 million bitcoins now in existence, valued at over $267 billion at their price at the time of writing ($16,000 apiece). For perspective, the total value of rupees in circulation, as on December 1, was about $252 billion (assuming Rs 65 = $1). In January 2017, bitcoins were trading below $1,000 and it crossed $20,000 in early December. The 2,000 per cent appreciation has attracted huge trading volumes, and there are now many Indians in the game and many exchanges that allow rupee trades of bitcoins.

The bitcoin is massively price-volatile—20 per cent swings are common in a single session. By comparison, gold has moved about 8 per cent this whole year. The volatility makes it a scary store of value and wildly variable unit of exchange. Today, you can buy a car with one bitcoin, next week it may be two cars or, perhaps, only a two-wheeler. So, if you are trading bitcoin, you’ll be ill-advised to risk your entire net worth on it. Play small.