09 Oct 2017 13:03 IST

Gaining interest: Bitcoin value surges in India

The crypto currency’s volumes have risen sharply on exchanges this year

This year has proved to be a landmark for bitcoin, the most popular crypto currency.

The value of one bitcoin has increased from $968 in January to $4,370 now, giving over four-fold returns. The value of a bitcoin traded on Indian exchanges has also jumped similarly — from ₹68,000 to ₹2,95,000 this calendar.

Rising prices are attracting investors and traders by the droves in India.

“This is our fourth year of operation. Towards the beginning of this year, our customer base was one lakh. In the first nine months of this year, it has gone up by five times, we are about to hit the five lakh customer mark,” says Sathvik Vishwanath, Co-founder and CEO, Unocoin, a bitcoin exchange operating in India.

Zebpay, the largest bitcoin exchange operating in India, has also witnessed a sharp increase in activity this year. Sandeep Goenka, Co-founder and COO, Zebpay, says that the exchange has doubled its user base in the last 3-4 months. The number of users on the platform hit a million recently.

Bitcoin received a major boost when Japan recognised the crypto currency as a kind of prepaid payment instrument from April this year. The credibility of these currencies also got a fillip as a few other countries, including China and Australia, also took small steps to regulate bitcoin exchanges.

This has boosted the market cap of traded crypto currencies to $149 billion from under $25 billion in March this year. While bitcoins account for half the market cap of crypto currencies, others such as Etherium (20 per cent of market cap), Ripple (6 per cent) and bitcoin cash (5 per cent) are also popular.

Viewed against global volumes, India is a minuscule market. While globally $2-4 billion worth of virtual currencies are traded every day, volumes in India are below ₹100 crore per day. But interest in the currency seems to be catching on here as well.

Traders’ profile

Those trading on bitcoin exchanges come from all parts of the country, including Tier II and Tier III cities, according to the bitcoin exchanges. “They are between 25 and 40 years in age. Eighty per cent are male and 20 per cent, female,” says Vishwanath.

There are some who invest small sums, maybe around ₹5,000 to ₹10,000 per month in bitcoins, says Goenka. While the value of one bitcoin is close to ₹3 lakh, an investor can buy a fraction of the bitcoin if he wishes. “Some freelancers get paid in bitcoins, some get bitcoins through mining, these are also traded on these exchanges.”

Bitcoin is viewed as an alternative asset class, but it has a long way to go before it becomes a legal medium of exchange in India. The RBI is yet to give a nod to crypto currencies though it is reported to be toying with the idea of adopting blockchain technology and issuing a digital currency of its own.

The government has also stayed neutral so far, though it is closely watching the developments on this front.

“These currencies can be used on online sites such as Expedia, Dell and Microsoft to make payments. But it is yet to catch on in India. Some sweet shops and other outlets in Mumbai are said to be using bitcoins, but it is more of a marketing gimmick,” says Goenka.

Yes to blockchain

There is, however, consensus that the technology underlying virtual currencies — blockchain — can be a game-changer in future as far as maintaining public records go. This is an open ledger maintained in computer systems all over the world.

Companies such as Wipro and IBM are already working with banks and financial institutions to explore how to improve their systems using blockchains. Experts expect to see results in India by early next year. Many institutions, including banks and insurance companies, are considering adoption of this technology.