Bitcoin is bae?
Someone who wanted to shift mutual funds to bank FDs in March 2020: “Bitcoin mein invest karna chahiye? A lot of people have invested. I can put Rs 1 lakh and forget it.”
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Firstly, it is important to understand bitcoins and the drama that has unfolded since 2009. In little over a decade of its existence, bitcoins and other cryptocurrencies have witnessed a rollercoaster ride from getting entangled into regulatory issues to a complete halt.

Why has the interest in bitcoins resurrected? As on November 30, bitcoins hit an all-time high of $19,834.93. The last time we saw a similar high was in December 2017. Around the same time, in India, IT department surveyed the bitcoin exchanges followed by ED & other scrutiny.

After RBI's halt, the exchanges took the central bank to court. A delayed judgement left the cryptocurrency exchanges helpless, almost all of them shutting shop. After 2 years, the SC verdict finally came in: it went in favour of the exchanges, reopening cryptocurrency market.

Bitcoins and cryptocurrencies have a vague history. We still don't know who exactly is Satoshi Nakamoto? A person or group of people who invented blockchain and bitcoins? What we know is that it came into existence in 2009 and the first transaction happened in 2010.

After seeing a slow start, around October 2013 bitcoins prices touched $125. In four years, in December 2017, prices crossed $19,000, to then see a sharp drop to about $3,000 in a year (2018).

The volatility continued--in 2019, it crossed $12,000 to later sink to $5,000 in 8 months. Then zoomed past the $19,000-mark. What do these numbers indicated? Clearly, sharp volatility and speculative behaviour.

Reasons for the earlier price movements have been attributed to geopolitical events, news of clamp down by governments and central banks showing interest in cryptocurrency to large volume trade manipulation.

Currently, bitcoin investors predict the prices will cross $1,00,000-$3,00,000-mark by end of 2021, a similar prediction was made in 2017 as well. However, prices, in fact, crashed. Meanwhile, the focus has shifted to the prices movement than on bitcoins itself.

As we know, bitcoins are generated through mining, validating blocks of transaction. There is also only a limited number of bitcoins—21 million-- that can be mined, over 18 million already mined. It also went though a technical update called halving.

The recent uptick in the price has been attributed to interests from across sectors including payment companies, hedge funds and banks. If you are looking to invest in bitcoins, firstly are you interested in bitcoins and finding out how it works?

Keeping a close watch on any development in cryptocurrency is a must. For instance, the regulations around cryptocurrencies continue to witness significant changes which can have a direct implication on your money. Also knowing things like taxation is essential.

Tax experts indicate capital gain tax will be applicable. If you are unable to withstand a correction in your mutual fund, how are you going to deal with the volatility in an instrument like cryptocurrency. Invest in products you understand. Don’t follow the herd.
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