«It’s all over, but I still don’t get it,» said a colleague’s wife recently as she scrolled for information on crypto, which has been making waves. She isn’t alone, experts say that even some investors don’t understand it. Cryptocurrencies, which ballooned during the pandemic, have lost over $1 trillion in market cap in a couple of months. Bitcoin’s value has nearly halved from its November 2021 peak of $69k. The government was scheduled to present a bill to ban ‘private’ cryptocurrencies in December — but the matter was left pending. However, that did not stop the finance minister from bringing crypto under the tax net in the latest Budget. Here is a low-down on the highly volatile asset:What are cryptocurrencies?Cryptocurrencies are a digital form of money that represent financial freedom and privacy. Unlike traditional currencies, they are not issued by central banks. They also aren’t controlled by any individual or institution and are instead governed by a code. They enable secure transactions free from government or corporate influence. Due to encryption, it is not possible to issue counterfeit currency or double-spend.Why have they become popular?Cryptocurrencies were born in the wake of the global financial crisis when people were disillusioned with the banking system. Initial backers were those who understood the technology. However, in the pandemic, high liquidity and low interest rates led to demand for riskier assets. Institutional investments and backing by tech billionaires like Elon Musk gave it a boost.
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