Cracking the cryptic world of virtual currencies
Before you bet on these, brace yourself for high volatility and beware of hackers
It’s rare that an exchange sends out a warning about trading in a particular stock or commodity or crypto currency. On Tuesday, the country’s leading bitcoin exchange did just that — sent out an advisory to investors that said: “Due to high demand and low supply of bitcoins, both buying and selling prices are higher in India compared to international prices. Please be cautious, since bitcoin prices are volatile and trades are subject to market risk.”
The advisory was issued after the crypto currency tumbled around 20 per cent in three days – from $5,000 to $4,030 on Tuesday morning, triggered by China’s crackdown on initial coin offerings or ICOs. Just a day later, on Wednesday evening, it had recovered sharply to $4,595. Indian exchanges were worried because the premium between global and Indian prices had risen up to 20 per cent, clearly indicating Indians are rushing in to buy it.
Crypto currencies have gained significantly in popularity across the world. Around 842 of these (with quoted prices) today command a total market cap of about $166 billion. New ones are being launched almost every day. Japan’s acceptance of crypto currencies as legal tender has contributed immensely to their acceptability. Tech-savvy Indian investors are climbing on to this bandwagon. However, in view of the novelty of this asset class, they need to acquaint themselves with its risks and invest with caution. Surging prices: The primary reason for the growing popularity of crypto currencies is the surge in their prices and the high returns they have garnered in recent times. Bitcoin, the most popular crypto currency in circulation, touched a high of $5,000 recently. It has given its investors a return of around 670