A virtual trade commodity which is more valuable than gold. Sounds like a science-fiction script, but it’s happening now, for real. Bitcoins are a form of cryptocurrency, which only have a digital existence, and can be transacted online peer-to-peer. There are only 21 million Bitcoins in existence. So, as they get rarer, the value goes up. Just like gold? Technically, in value propositions, it’s faring better than gold. Why? Here is an explainer.
What are Bitcoins?
The Rise and Rise of Bitcoins
The value of Bitcoins has risen to Rs 39,040 currently from Rs 30,000 on 22 May. To put this into perspective, the value at the beginning of the year was in the range of Rs 27,000-28,000. Around the same time last year, a Bitcoin was valued at Rs 18,000. This means a growth of almost 114 percent in a year. Beat that!
Why the Gold Rush?
What’s pushing up Bitcoin prices?
A Bitcoin is limited in number – 21 million to be precise. Out of this, 15 million have already been mined. With growing awareness about this virtual currency and the added advantage of anonymous transactions, the cryptocurrency is now highly sought after for international trade. China, reportedly, trades Rs 10,000 crore worth of Bitcoins every day!
Another short-term reason is the ‘halving’ of the Bitcoin cycle which is expected on 10 July this year. What’s ‘halving’? So, after every few years, as the number of miners grow, and the coins gets rarer, the award for a successful Bitcoin mine gets halved. Currently, if you are successful in mining a Bitcoin, you are awarded 25 Bitcoins. But after 10 July, that amount will get halved to 12.5 Bitcoins. So yes, the heat is definitely on to make the most of the summers.
A Word of Caution
Just like every other investment, buying a Bitcoin is entering speculative zone. The digital currency is subject to online market risks and also possible technical hacks. So, make hay while the sun shines. It’s a digital leap of faith.
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