Bitcoin has become a mania. Just last week, the Bachchan family got 70 times returns on their investments because an asset of the company they invested in was acquired by another company which provided Blockchain technology empowered solutions. The company’s shares surged not because they were trading in Bitcoin but simply because they had something to do with Blockchain, which people keep confusing with Bitcoin. “It’s crazy… the global euphoria over Blockchain is sweeping the world…no intrinsic value can be attached,” the company’s Venkata Srinivas Meenavalli said.
We will talk about the difference between Bitcoin and Blockchain, but before that let’s talk about why putting money in Bitcoin is not an investment but rather a gambling. First of all, Bitcoin is a private money and nobody controls it. It has no underlying monetary base to support its value and it is totally subject to its demand in the market.
“It’s kind of like ‘Monopoly’ money,” Jim Cramer, former hedge fund manager told CNBC. “I mean honestly, what’s the difference between bitcoin and trying to figure out the Super Bowl? I mean it’s gambling.” Cramer said the cryptocurrency’s velocity is a sign that its surge is “parabolic,” and that could mean the rally won’t last.
Since India has not legitimised Bitcoin, the money you invest in buying a Bitcoin is going to get you a return only until the time there is another buyer who is ready to pay you more for it. Right now, the Bitcoin is rallying because the demand is high, but experts say, once people would start selling, the value will tank and the Bitcoin bubble will burst to hurt.
“Right now we are looking at a financial bubble that is bigger than the tulip craze and I believe that we are headed for a bitcoin crash that will supersede any financial worries of the 21st century,” Eric Shiffer, a veteran entrepreneur and CEO of Patriarch Equity told Express.co.uk.
Bitcoin is not Blockchain
Bitcoin: Bitcoin is an unregulated digital private currency created by Satoshi Nakamoto, which operates on the encryption technique, but does not have a legal backing from the central bank.
Blockchain: Blockchain a technology, in which transactions made in digital currencies are recorded chronologically and publicly. Blockchain as a technology supports Bitcoin trading, but it not synonymous with Bitcoin. Blockchain can be used for a wide variety of applications, such as tracking ownership or the provenance of documents, digital assets, physical assets or even voting rights.
India’s largest lender the State Bank of India is looking to explore the blockchain technology for banking solutions by December. What makes Bitcoin a “fraud” in Jamie Dimon’s word is the fact that the organic nature of the currency and the fact that it is not issued by any central authority — some believe that it may be immune to government intervention or manipulation — makes it an alluring alternative to mainstream currency.
From the US to China to France to Japan, central banks of all these countries have expressed concern over the rising popularity of Bitcoin with it being a private currency. India’s central bank is opposed to cryptocurrencies given that they can be a channel for money laundering and terrorist financing. Nevertheless, the Reserve Bank of India has a group studying whether digital currencies backed by global central banks can be used as legal tender. Currently, the use of cryptocurrencies is a violation of foreign-exchange rules.