By Sachit Modi
Bitcoin – World’s Best Performing Currency
Bitcoin, one of the most famous cryptocurrency, has become the world’s best performing currency for 2016, with rates hovering at around $970 per bitcoin (as of 28/12/2016), which is almost a rise of 120% as compared to the start of the year. In India, since the last 2 months, it has been trading at a premium of 10% as compared to the international markets.
Several factors have been attributed to the steep rise of this investment vehicle in the international markets, one of them being the need for currency stability in the highly volatile geo-political scenario of China and U.S. Also, Bitcoins have a relatively lower correlation with international assets classes, thus giving them the status of being an entirely different class.
The Indian Context – Demonetization and Black Money
In India, the monumental move of removing almost 86% of country’s currency out of circulation, taken by the GOI on 8th Nov’ 16 lead to the rise of this lesser known currency. Demonetization may not have had a direct impact, but it has triggered an interest in the citizens towards everything which is cashless and digital, including bitcoins. Also, since bitcoins act as an attractive and viable option of sending remittances from abroad, it has seen a huge spike in demand. Due to these factors, bitcoins are facing demand-supply mismatch, which is being reflected in its trading prices.
There has been a widespread belief that Bitcoins are being used as an alternate option to park cash, post the ban on Rs. 500 and Rs. 1000 currency notes. However, chances of this happening are remote as all bitcoin transactions are completely cashless and are only possible through linked bank accounts and KYC procedure.
In India, there are 4 major Bitcoin exchanges – Zebpay, Unocoin, Coinsecure and BTCXIndia. All of these have seen an increase in queries in the last couple of months and have now been adding 50000 users per month on an average, owing to which they have levied a premium on the prices of bitcoins. However, bitcoins enjoy the benefit of having lower transaction costs (almost 90% less than a typical credit card transaction), which has worked heavily in its favor.
This year has been one of the most successful in the eight-year history of the crypto-currency, and this trend is expected to continue. There has been a widespread increase in the knowledge of bitcoin among the general public, and in India, demonetization has already set the stage for its popularity. It is just a matter of time before Bitcoin emerges as the mainstream payment and investment alternative.