Bitcoin, a cryptocurrency, is not a new phenomenon. It has been there for around 21 years, starting in the year 2009. However, over the past 12 months its value has surged more than 370 percent. This was even before Tesla’s investment in Bitcoin. And this is not the first time Bitcoin has been in the news for a meteoric rise in its price. In the calendar year 2017, Bitcoin surged from USD 785.40 to USD 19,345.50, giving absolute returns of a whopping 2,363 percent.
Originally perceived as a digitally encrypted currency alternative to the traditional currencies controlled by central banks, Bitcoin is now attracting traction from even mainstream investors. Given the gains, should you park your money in it? Let us understand what Bitcoin is all about and how it works, including its journey from 10 cents to USD 47,545. It would then be interesting to explore the subject of whether it is worth investing in Bitcoin while studying the associated risks and rewards. Bitcoin may be here to stay but the question is whether it would be worth adding to your portfolio.
Defining Bitcoin
Bitcoin was created in January 2009 as a currency which is in a digitally encrypted form. This was in the wake of an idea set out by a pseudonymous Satoshi Nakamoto in a whitepaper. The original identity of the person or persons who created the technology is still a mystery. The whole idea behind Bitcoin was to lower transaction fees when compared with traditional online payment mechanisms. Moreover, unlike government issued currencies, this currency is operated by a decentralised authority. Bitcoin is known as cryptocurrency.
This story is from the March 01, 2021 edition of Dalal Street Investment Journal.
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This story is from the March 01, 2021 edition of Dalal Street Investment Journal.
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