MUMBAI: The seven bitcoins, accumulated over the past many months, have turned big winners in Madhur Todi’s portfolio this year.His other investments , which include stocks, bonds and mutual funds, have underperformed or yielded measly returns in 2016.Todi hit the jackpot when global bitcoin prices surged from $430 to $910 per BTC (unit for bitcoins) in 2016. A gain of over 100% makes bitcoins the best performer when compared with conventional asset classes such as equities, gold real estate and bonds.“Bitcoin has worked the best for me this year… I’ve made three times the gains in a little over two years,” said Todi, a financial planner and owner of an Ahmedabad-based wealth advisory firm, Mera Money Advisors.Todi is among the sophisticated investors across the country who have jumped the bitcoin bandwagon in the last few years.Global bitcoin prices shot up on account of increased participation by Chinese users, geopolitical concerns and sluggish global economic growth. At home, the appetite to some extent was driven by the government’s demonetisation scheme.Bitcoin prices in India are trading at Rs 63,000-levels, marking a clear premium of Rs 1,600 over US prices. This has opened an arbitrage opportunity for Indians, who may buy bitcoins in US (through their relatives in that country), getting the lot transferred into their accounts and selling the batch on Indian bourses at a premium.“There have been only 11 days when Indian bitcoins commanded higher prices than the current trading levels. People who bought bitcoins last few months are all deep in-themoney currently,” said Sandeep Goenka, cofounder of Zebpay, an Indian bitcoin exchange with over 1.5 lakh users.Indian bitcoin investors base their trading strategies looking at US price differentials. When the price differential (Indian BTC price over US rates) widens, Indian investors book profits; when the gap narrows down, they start accumulating bitcoins.“Bitcoins are becoming popular in India as it is more liquid than traditional asset classes, very secure from extraneous intervention and relatively less volatile than many emerging market currencies,” said Goenka.Going by broad estimates, combined bitcoin trading volumes (all exchanges) in India could be in the range of Rs 150-200 crore per month. Roughly Rs 1,200-1,500 crore worth of bitcoins are traded in the country every year.Average transaction size (per user) has also moved up to Rs 1.3 lakh on main exchanges, according to bourse owners.“It’s difficult to punt on bitcoins as prices are determined by several global factors… there’s no guarantee you’ll make money in the shortterm,” said Benson Samuel, founder of Coinsecure, another bitcoin exchange.“But if you stay invested over a longer timeframe, there’s good possibility you’ll pocket good returns… Bitcoin prices double once every four years. Going ahead, bitcoin prices may remain firm,” Benson Samuel added.Indian exchange owners expect bitcoin prices to peak out by first week of January 2017 (around Rs 70,000 – 75000 per BTC levels), post which there could be some months of correction and range-bound price movement.The next rally is only expected in July or October 2017, predicted bitcoin experts. “I won’t be surprised if bitcoin prices breach the Rs 1 lakh mark in 2017,” Goenka added.Conservative wealth managers, whom ET consulted, do not approve of investments in bitcoins. Their worries stem from the fact that bitcoins are not issued or backed by banks or governments. Absence of a regulator makes them wary of recommending bitcoins.“Where will investors go for recourse or relief if there’s no regulator?” quipped the India head of a European wealth management firm. “Also, there’s no clarity as to how gains from bitcoins be taxed in India. We’re not even sure if Indians are allowed to hold bitcoins,” the wealth manager added.At best, one can deploy 3-5% of their risk capital to punt on bitcoins, wealth managers said.A bitcoin is a virtual token that can be freely transferred from one user to another through a secured network. It’s limited in supply as only 21 million BTCs would ever be generated; 14 million bitcoins have been ‘mined’ so far. Bitcoins can be fragmented (into smaller denominations) far more times than a fiat currency.Mining needs a host of powerful computers (bitcoin hardware), uninterrupted power supply and several people working as a team. Once you’ve the hardware, you can join a ‘bitcoin pool’, where several people are working together to validate ‘blocks.’ A ‘block’ is a record of recent transactions carried out using bitcoins. Miners, upon clearing a block, are “paid” in bitcoins (by the bitcoin network) for their services.You have to open (simply download) an account with ‘exchanges’ like Zebpay or Coinsecure. Once the account is opened, the new user is asked to deposit money into one of the several bank accounts of the exchange (using NEFT/RTGS). The money deposited (in the exchange’s bank) would be used to buy bitcoins on the bourse.