Bitcoins hit a record high of above $47,000 on Tuesday, pumped up to $47,493, a rise of as much ad 6.3% in Asian trading before paring some of the gains after Tesla Inc announced a $1.5 billion investment in the largest cryptocurrency.
The fresh highs in bitcoins are purely because of Tesla Inc’s announcement of not only investing but also that the company would begin accepting the digital token as a form of payment for its electric cars.
Bitcoin is a type of cryptocurrency; it has no physicality, only balances that are kept on a public ledger that everyone has transparent access to.
Bitcoins are not backed by any banks or any government, and neither are individual bitcoins valuable as a commodity.
A massive amount of computing power verifies all bitcoins transactions; even though it is not a legal tender, Bitcoins have gained enormous popularity, resulting in the launch of hundreds of other cryptocurrencies collectively denoted as altcoins.
Even though there has been a grey area concerning Bitcoins, and neither the governments nor the banking system has endorsed bitcoins, the announcement by Tesla Inc of investing in Bitcoins and accepting payments as Bitcoins for its electric cars is the most significant endorsement of the controversial cryptocurrency by a mainstream firm.
Elon Musk-led Tesla Inc’s Bitcoin endorsement
The Chief Executive Officer of Tesla, Elon Musk, also the world’s richest man has in the previous few weeks been talking and commenting extensively on and about digital coins. This led to the buffeting of the Bitcoin Prices.
His endorsement and the talks about digital coins has led to massive interest and speculation. Now that one of the world’s most innovative firms has given the go-ahead to accept Bitcoins as a mode of payment, it would signal and lead for other companies to add one by one Bitcoin to their balance sheets, as the endorsement couldn’t get bigger than Tesla.
Hence, if even 100 companies start putting even 1% into Bitcoins, it would lead to an enormous surge in both demand and supply.
The Future of Bitcoins
According to the head of Asia Pacific with cryptocurrency exchange Luno in Singapore, Bitcoins’ future is bright, as more and more corporates mull adding Bitcoins to their balance sheets.
After Tesla’s announcement, a rally was evident in Bitcoin futures, which suggested that shots are throwing in the towel and signaling traders won’t fight the crypto advance.
Both the wider Bloomberg Galaxy Crypto Index jumped to a record. Meanwhile, the Japanese and the South Korean cryptocurrency- exposed stocks rose, tracking U.S. and European peers.
The supporters of Bitcoins suggest that backing from the likes of Elon musk and signs of interest from long-term investors is evidence of a durable Bitcoin rally.
The bitcoin system is largely a collection computer, also referred to as “nodes” or “miners,” that all run bitcoin’s code and store its blockchain. For a layman, a blockchain can be thought of as a collection of blocks. Each block has a collection of transactions.
All computers running the blockchain have the same list of blocks and transactions, which can be transparently seen. As these new blocks fill with new bitcoin transactions and are largely monitored, no one can cheat the system.
Balances of bitcoin tokens are kept using public and private “keys” linked to the mathematical encryption algorithm used to create them.
The public key is akin to a bank account number and serves as an address that is published to the world and to which others may send bitcoins.
The private key is akin to an ATM pin is not for the public but as a guarded secret and only used to authorize bitcoin transmission.
Bitcoins is one of the first digital currencies to use the best in technology; it uses peer-to-peer technology to facilitate instant payments.
Investing in Bitcoins
Many now believe that Bitcoins may indeed be the future digital currency. Many of its supporters believe that bitcoins facilitate a much faster, low fee payment system for transactions across the globe.
Even though it is not backed by any government or central banks of any country globally, bitcoins can be exchanged for traditional currencies.
Its exchange rate against the dollar, in fact, attracts potential investors and traders interested in currency plays.
One of the significant factors in favor of bitcoins and one of the primary reasons for their growth is that they can act as an alternative to national fiat money and traditional commodities like gold.
Since the popularity and investing in bitcoins rose exponentially, IRS in march 2014 stated that all virtual currencies, including bitcoins, would be taxed as property rather than currency.
Any gains or losses from bitcoins held as capital will be taken as capital gains or losses. While bitcoins held as an inventory will incur ordinary gains or losses, the sale of bitcoins that have been mined or purchased from another party or the same to pay for goods and services is taken as examples of transactions and hence taxable.
Bitcoins rules in India
Bitcoins in India are yet in their nascent stage compared to the rest of the world; however, few savvy businessmen trade-in and accept bitcoins as an alternative to real currency on the sale of goods or services.
In India, bitcoins have not been authorized as a mode of payment, and neither is it regulated by any central authority in India.
Furthermore, no guidelines, regulations, or rules have been laid down for resolving any disputes that could arise while dealing with bitcoins.
However, at the same time, one cannot say that bitcoins are illegal since there is no ban on bitcoins in India.
On 25th February 2019, the Supreme Court, in its ruling, required the government to come up with regulation policies in regards to cryptocurrencies.
Also, since bitcoins are still new in the Indian market, the government has not yet developed bitcoins’ taxability in the statute books. However, at the same time, the taxation on bitcoins cannot be ruled out since the income tax laws in India have always sought to tax income received irrespective of the form in which it is received.
Hence, the possibility of taxation on bitcoins can be looked at under certain circumstances.
For now, it seems that the endorsement of bitcoin by Tesla and Elon Musk has given a boost to the cryptocurrency market like never before. It is only a matter of time before bitcoins are accepted as a mode of payment for any goods or services.
The future of cryptocurrencies and Bitcoins is exciting, innovative, environment friendly, and purely technology-driven, perhaps the reason why it has been endorsed by future tech-driven Tesla and Elon Musk.