By now, most of you might have heard of cryptocurrencies like Bitcoin and the amazing returns they have delivered this year. As an example, Bitcoin has gone up by more than 1600% in USD this year alone! Also just to give idea of phenomenal rise of Bitcoin, Bitcoin was trading at $413.51 in December 2015, now being traded at $16690, a rise of 404100% within 2 years! In simple words, $1000 investment in Bitcoin in December 2015 would now
be worth $40,411!
Earlier this year, I started to take a keen interest in cryptocurrencies. I looked at the underline blockchain technology to understand what it means and future real-world applications it can have. By design, the blockchain is a decentralized technology.Blockchain technology is like the internet in that it has a built-in robustness. In simple terms, the blockchain is an incorruptible digital distributed ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value such as smart contracts.
Blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved. Above anything else, the most critical area where Blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are
connected through a secure validation mechanism.
I became quite confident of the future of block chain technology. Although it is at a very early stage, I wanted to see how I could financially benefit from the fast evolution of this technology.Bitcoin is the most prominent and the largest cryptocurrency based on theblockchain technology. Bitcoin is being seen as an alternative to traditional ‘safe heaven’ commodities like gold. There are few other upcoming cryptos such as Ethereum, LiteCoin, Bitcoin Cash and Ripple and each one has its own
Already Bitcoin and other cryptocurrencies are being accepted by e-commerce online marketplace such as openbazaar.org apart from Expedia, overstock.com and few more.
I looked at the possibilities of buying and holding these cryptocurrencies. This involved setting up a digital wallet to hold these currencies and with the help of the cryptocurrency e-commerce platforms such as Coinbase to purchase cryptocurrency using your bank account, debit/credit card etc which also allows you to cash out digital currencies.
Another option was to get exposure to cryptocurrencies like Bitcoin, Ethereum using traditional financial trading platforms.I chose traditional trading platforms as they are well regulated. Also, I’m notyet confident of how secure digital wallet are after hearing the news of hacking of digital wallets by cyber criminals.
Over last three months, I invested some money in Bitcoin tracker exchange-traded product ( See https://xbtprovider.com/) through my traditional trading platform in the UK (www.hl.co.uk). Every month I invested some money in this bitcoin tracker product. I tripled my investments just within 3 months. I’ve then sold off half of it and diversified into Ethereum tracker product which has gone
up by 60% in last week alone!
I’m well aware of risks involved in such investments. This is a certainly very risk, high reward investment option.
So clearly I don’t put more than 2-3% ofmy total investments in cryptos. I’ll keep exploring all of these exciting investment options and different platforms available soon!
Rajiv Inamdar | Financial Strategist | The India Desk | Atwal Financial