Cryptocurrencies are still in a nascent trend causing schisms between the technological and the financial community. While the design and technology have intrigued everyone, the financial community questions its feasibility as an asset. Bitcoin, for instance, is considered to be more volatile than most other financial assets, including stocks and shares.
The closest commodity you can think of as analogous to Bitcoin, is gold, owing to its financial behaviour. Both Bitcoin and gold are commoditised as they have functional utility, are limited in supply and still garner enough attention despite the skepticism around their volatility.
Why is the value of Bitcoin so volatile?
Although the value of Bitcoin is known to be volatile, the cryptocurrency does not have an acceptable value of the CBOE Volatility Index owing to the fact that it is still in the nascent stages of its evolution. The volatility of Bitcoin’s value can be attributed to a lot of factors:
1) Perception of Bitcoin’s “store of value” and “method of value transfer” have high variance. A store of value is the function by which an asset can be stored for the future with some predictability. A method of value transfer, on the other hand, is any object or concept used to transmit property in the form of assets from one entity to another. Bitcoin’s current volatility makes it a tad bit debatable store of value, but it promises an almost smooth value transfer.
2) Large holders of the currency do not have a lot of options to liquidate the assets into fiat money. If Bitcoin investors with current holdings above or around $10M were to liquidate their Bitcoin possessions, it would severely move the market. This is because Bitcoin’s volume resembles a small cap stock wherein the currency has not hit the mass market adoption rates required to provide an option value to large holders of the currency.
3) Skepticism about security breaches makes investors react negatively. Bad press and apprehensions around Bitcoin’s security and technological vulnerabilities reflect the level of confidence of investors in the cryptocurrency. The high fluctuation is a result of the general sentiment of the masses investing in Bitcoin.
While a lot of other factors contribute to the high volatility of Bitcoin, a fraction of masses still go for the investment option for its huge returns. For those who prefer making conservative decisions, there are other avenues like Unocoin’s Systematic Buying Plans.
What are SBPs?
Unocoin’s Systematic Buying Plan (SBP) is an interesting financial concept that’s been ported and tailored to the bitcoin market. A systematic payment of a small amount over a continuous period of time, coupled with convenient payment through automated bank transfers makes this a lucrative option for investors. An SBP allows you to enter bitcoin at regular intervals to beat its volatility by averaging out the costs.
Every time a certain amount of money is moved, additional bitcoins are purchased at the prevailing market rate. This is then added to your account. Hence, units are bought at different rates and investors benefit from the concept of Rupee-Cost Averaging and the Power of Compounding. While flexibility on the amount invested and the tenure of the plan, and significant long-term gains are some other benefits of an SBP, its strength lies in mitigation of volatility.
Unocoin launched an SBP to fight the skepticism around Bitcoin
Despite the mystery around Bitcoin, the recent growth of the cryptocurrency from a trading figure of $200 in 2013 to nearly $6,000 in 2017 makes it look like an attractive money-minting machine. Bitcoin, as we all know is difficult to understand. Unocoin attempted to simplify the concept and provide Bitcoin services to the masses. Its mobile apps enable users to purchase and store bitcoin through smartphones and allow them to send bitcoins to each other via the account.
With the dilemma around investing in Bitcoins increasing, Unocoin partnered with Blockchain, thus giving users greater purchasing power directly within their Blockchain wallets without compromising user security or control. In 2016, Unocoin launched its full-featured mobile bitcoin app, with 24/7 access to real-time bitcoin market prices and instantaneous trading transactions on November 28. This came with a Systematic Buying Plan (SBP) to buy bitcoins systematically, instead of buying them in one-go. Unocoin envisions to accelerate the adoption of the cryptocurrency among the masses, particularly among mobile users. This will facilitate trades to be executed in real time with constant monitoring of the bitcoin prices.
The Unocoin-SBP in the app allows people to buy Bitcoin, on a daily, weekly or monthly basis. The dashboard on the app can show historic trends and current prices. The best part of the SBP is that you can enable or disable the plan any time as per the requirement. When enabled, the corresponding amount of bitcoins equivalent to your SBP value (a predetermined amount in INR) are credited to the user-account automatically. One can just disable SBP when he/she does not want to buy any more bitcoins. Users need to fund their wallets with the Indian currency (INR). The minimum investment is only 50 INR per interval.
While Bitcoin’s value amuses investors with its erratic nature, the market has a lot of more stable options to offer. With the financial market’s SIPs rapidly gaining popularity among the masses, Unocoin has decided to merge the best of both worlds by designing an SBP on Bitcoin-assets. This aims to transform the way people look at Bitcoin and improve the sentiment around investing in Bitcoin. Thus, the future of Bitcoin looks a little more stable than what the opinion was a few months ago.