Bitcoin, the ultimate solution to going cashless, swayed to the moods of the world’s watershed events of the year. From the weakening of the Chinese Yuan in the East to the election of Donald J Trump in the US Presidential Elections in the West, the world’s economic and political climate led to sudden spikes in the value of the bitcoin. With these events the move to adopt cryptocurrency, which has been seen as a fringe movement could become a more viable payment option for merchants and customers.
Sharp spike in value
India witnessed a brief but sharp rise in the value of the Bitcoin in the weeks that followed demonetisation. The value of the bitcoin peaked around the last week of November reaching Rs 68,000 per bitcoin. Elsewhere around the world at the same time the value of a bitcoin soared to about $730 (around Rs 50,000). At the beginning of the year, the price of bitcoin in India was around Rs 28,000. The recent spike was a two year high. The last time the value of the bitcoin was this high was November 2013 when the value was around $1,200, which had made it cross the Rs 72,000 mark in India.
Bitcoin adoption post demonetisation
The Indian bitcoin community has surely grown in the last month. Unocoin, an Indian bitcoin start-up, which has 120,000 users saw about 15% of them joining just in the last month alone. Coinsecure, another Indian bitcoin start-up, saw over a 300% increase in turnover and over 250% increase in their user base for November 2016. Coinsecure has over 90,000 users, 20,000 of whom registered after November 9. The company has sold about 1,100 coins between the second week of November and December 20. “The highest trade volume was on November 25 when around 300 bitcoins were traded,” said Benson Samuel, Founder and CTO, Coinsecure.
Understanding the surge
Cryptocurrency, which is mined and stored online, is a decentralised currency, whose value is decided by market forces. According to Samuel, “Broker houses set a higher price specifically for India, expecting an increase in demand. No other country saw this kind of spike- 20 to 30% increase – during this period.”
The surge in the value of the bitcoin came only two weeks after the announcement from Prime Minister Narendra Modi. “As soon as the demonetisation was announced, people were quite shocked and the money they already had in their bank accounts had other priorities over bitcoin. So, the effect of demonetisation on bitcoins popped up two weeks later. There was an uptrend as people identified cryptocurrency to be another asset class,” said Sathvik Vishwanath, Co-Founder and CEO, Unocoin Technologies Private Limited.
The hike in the value of the bitcoin was short-lived and the value has stabilised now. “India’s bitcoin space is a small fraction of the global market,” said Samuel. He explained that the value would eventually even out. “The increase in the demand did raise the price of bitcoin in India. Although, it again attained the stable value after two weeks,” shared Vishwanath. He also explained that since the market in India is very small, the trading volumes is about 0.05% of that of China and 0.25% of that of the US. Therefore, other factors such as the unexpected election results in the US and continued devaluation of the Chinese Yuan have contributed to the overall spike in the value of bitcoin.
The uptake of bitcoin in the retail sector is still very low globally and in India too. That said, UnoCoin has had about 200 more merchants signing up during the last month. “We expect to see an increase in adoption as this is one of the ways of cashless transactions as well,” said Vishwanath. Samuel’s Coinsecure has signed on two restaurants in Bangalore. “This is where the real difference will be made,” he said referring to the use of bitcoins in everyday dealings and a viable alternative currency. “Bitcoin will soon become a norm because it has strong proof of concept, too much credibility - we have not been hacked even once so far - it is very secure. Many people are now trying to understand it and are beginning to show interest,” he said.
This trend is indicative of a stronger future for bitcoin adoption in India. Currently, India makes up for only 0.05% of the world’s bitcoin trading volume. With multiple Indian bitcoin start-ups launching apps to trade bitcoins and also tying up with leading e-commerce brands like Coinsecure and Amazon, India might be on the brink of becoming a major player in the cryptocurrency space.