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A trust deficit exists today in the world between citizens and central planners, specifically central banks. Common people just don't believe their leaders have their best interests at heart. This trust deficit extends to the world of money too. Central banks around the world have printed so much money; people have begun to question them.
This has led to the rise of virtual currencies like Bitcoin. These currencies are not backed by any regulator, government or central bank. They are used mainly for online transactions. You can hold and trade them on a number of exchanges in the world. They can also be exchanged privately.
Bitcoin specifically is also called a crypto currency because of the complex software process (called mining) needed to create it. It is supposedly more secure than conventional online banking. This perception is due to its software code that has proved impossible to crack so far. Its supply is also limited to 21 million. There are about 14.5 million Bitcoins in the world today.
As per an article in the Business Standard, the level of privacy and security provided by Bitcoin has made it quite popular with the Indian HNI community. Mobile wallets like 'Zebpay' allow users to buy, store, send and spend Bitcoin using only their cell phone numbers! The market is apparently quite liquid. It is also growing very fast. For example trading volumes at Zebpay have multiplied 100 times in a few months to Rs 100 m today.
Presently, one Bitcoin trades at a rate of Rs 23,019 according to the article. Thus, if the Rupee were to lose value to Bitcoin over time, it would make sense to maintain liquidity in Bitcoin as opposed to holding cash. Of course the opposite is equally true.
Before you think of jumping on the Bitcoin bandwagon, do keep in mind that there is no one to gaurentee the safety of your capital. If something were to go wrong, you could lose all your money. Although it is not illegal in India, we believe it using Bitcoin for either making purchases or trading is highly a risky endeavor. Indulge at your own risk.
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