A resurgent bitcoin is rekindling Indian interest in cryptocurrencies with reports suggesting many dormant holders are back to trading.
A report in Livemint is also attributing the piqued interest to a recent Indian supreme court decision to overturn a prohibition that barred banks from dealing with cryptocurrency exchanges. The ban was imposed by the Reserve Bank of India (RBI) in April 2018.
Nischal Shetty, founder and CEO of Wazirx, a cryptocurrency exchange in India, says they are witnessing a renewed excitement.
Shetty said bitcoin’s price, which breached the $11,000 mark on Tuesday, resulted in Wazirx “seeing a big jump in our trading volume.”
Another expert, Sumit Gupta, a co-founder and CEO at Coindcx, another cryptocurrency exchange, offers a different take for the current interest in bitcoin.
According to Gupta, “the surge in bitcoin prices comes amid a rush for safe-haven assets that are considered alternatives to cash and stocks.” The “decreased supply of available bitcoin” following the halving event in May is another factor behind the price rally.
Prior to the halving, the bitcoin block reward was 12.5 bitcoins but this was reduced further to 6.25 bitcoins. This means fewer bitcoins have been released onto the market to date when compared with the same period last year.
Another expert, Ajeet Khurana, a member, Blockchain and Cryptocurrency Committee of the Internet and Mobile Association of India (IAMAI), focuses on market participants in his explanation for the price surge.
The common investor in any asset class is primarily driven by asset price inflation. The trader in an asset class is driven by volatility, and expects to make money on price movements in both directions. For both of these, bitcoin has been a delight in the recent past.
Khurana also believes that crypto investors do not invest in other asset classes. Therefore, the rise in bitcoin prices could fuel a surge in crypto market participants, both investors and traders.
In other words, “the cult-like following of cryptocurrency gets strengthened when there is a rally in its prices.”
Meanwhile, India still does not have a regulatory framework for cryptocurrency some four months after the supreme court ruling. In addition, a draft government bill on cryptocurrencies seeks to criminalize the mere possession of cryptocurrency.
Subhash Chandra Garg, the former Finance and Economic Affairs Secretary of India, told an Indian crypto community earlier this month, that crypto assets should be regulated as commodities. Despite making these comments, Garg says he still stands by the current crypto bill.
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