Bitcoin surge: Why should you still not invest in cryptos? These are 7 key reasons
Deribit DVOL index, a measure of expected price volatility of bitcoins over the next 30 days, has surged to 76%. In 2023 alone, bitcoin jumped by a whopping 160 percent.
After breaching $68,800 i.e., hovering its all-time high, bitcoin pared some of the gains on Tuesday in the international crypto markets to trade around $66,700.
According to data shared by Crebaco, a cryptocurrency research firm, trades on Indian exchanges CoinDCX, WazirX and BitBNS hit $2.6 million, $3.4 million and $7.8 million, respectively, in February clocking their highest ever volumes since June 2023.
Bitcoin had reached its all-time high of $68,990 in November 2021.
There are still some experts who continue to believe that cryptocurrency is not a safe investment and one should stay away from it as a credible investment option.
“Amidst the recent Bitcoin price surge sparked by the introduction of the Bitcoin ETF, investors are advised to remain cautious. Regulatory uncertainties in over 190 countries, exemplified by Nigeria's recent crackdown on cryptocurrency transactions, pose significant challenges for investors,” says Gaurav Mehta, Co-founder and CEO, Catax- Simple Crypto Taxes.
“While developments like the approval of the Bitcoin ETF in the US may grab headlines, the practical realities of navigating regulatory landscapes vary widely from country to country. Indian investors, therefore, are urged to prioritise local regulations and the government stance has been indirect but clear,” he adds.
Here we share some key reasons for which one should stay away from it:
1. Lack of regulations: In India, cryptocurrencies are yet not regulated. As capital markets regulator Sebi regulates investments in stocks and derivatives, banking transactions are regulated by the RBI; crypto transactions do not have any regulator as yet.
2. Volatility: Price rise is a function of volatility. When bitcoin can spike because of it, it can – conversely – pare gains at the same time at the same pace. Bitcoin has moved from $68,000 to $28,000 to return to $68,000 between Nov 2021 to March 2024. In 2023 alone, bitcoin jumped by a whopping 160 percent.
Deribit DVOL index, a measure of expected price volatility of bitcoins over the next 30 days, has surged to 76%, highest since Nov 2022, CoinDesk reported.
3. Critical views: Time and again, India’s banking regulator Reserve Bank of India (RBI) has been overly critical of cryptocurrencies such as bitcoins.
In a press release, RBI had even stated that any user, investors, trader, etc dealing with virtual currencies will be doing so at their own risk.
4. Intrinsic value: One argument that often goes against cryptocurrencies is that they have no intrinsic or tangible value.
“Think of any store of value – they are either currencies, or financial assets or commodities which are tangible and have intrinsic value (works of art like paintings also have historical, aesthetic and scarcity value). We have seen that cryptocurrencies are none of these. Notwithstanding their current valuations, if a threshold number of people decide to opt out, the entire values can easily collapse to nothing,” the statement by T Rabi Sankar, Deputy Governor, Reserve Bank of India on Feb 14, 2022, reads.
P Vasudevan, executive director at RBI also echoes similar sentiments. “Cryptocurrencies cannot be called currencies as they don't have any underlying value,” he said during a panel discussion last month.
5. Greater fool theory: Warren Buffett, known as a legend of investing, too, have strong views on bitcoins. The Oracle of Omaha once remarked that if all the bitcoins in the world are made available for $25, he will still not buy them.
Microsoft co-founder Bill Gates once called NFTs and cryptos to be 100 percent based on the greater fool theory.
6. Frauds galore in past: Remember Sam Bankman-Fried’s FTX crypto exchange in the US? The exchange went bankrupt, and Bankman — poster boy of cryptocurrrencies in America — was convicted of seven counts of fraud, conspiracy and money laundering. Sam was ironically included in the 2021 list of Forbes 30 under 30.
A similar fraud was reported from Canada where one of the largest crypto exchanges Quardriga went bankrupt and crypto assets worth $119 million of 1,15,000 customers went missing.
7. High taxes minus legitimacy: In 2022, Finance Minister Nirmala Sitharmaan introduced 30 percent capital gains tax and 1 percent TDS on crypto transactions but this did not construe as a green signal to crypto transactions.
Ms Sitharaman has often stated that any set of regulations in virtual digital currencies would require global consensus.
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