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Indians flocking to bitcoin after Elon Musk's backing

By Rajesh Bhayani
February 17, 2021 15:36 IST
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Bitcoin has been on fire ever since Musk announced that Tesla had bought $1.5 billion of the cryptocurrency, and that his electric-vehicle company would accept bitcoin from buyers.

IMAGE: Elon Musk. Photograph: Mark Brake / Getty Images.

The price and volume of bitcoin have surged in the domestic market after Tesla Chief Executive Officer Elon Musk’s announcement of investment in the cryptocurrency, according to Indian exchanges.

 

Bitcoin has been on fire ever since Musk announced that Tesla had bought $1.5 billion of the cryptocurrency, and that his electric-vehicle company would accept bitcoin from buyers.

The announcement saw the international bitcoin price cross $48,000 from below $40,000 in just two days. In India, the price has surged from around Rs 28 lakh to about Rs 35 lakh in the last couple of days; it was about Rs 22 lakh on January 27.

However, there is much more happening in the Indian crypto industry after the government announced its intention to come up with a Bill to prohibit private cryptocurrencies.

Initially retail investors sold private cryptocurrencies on this news, leading to the domestic market price of bitcoin trading at a discount of 6-7 per cent to its international price the day after Musk’s announcement.

However, smart investors bought it back, pushing up the price to a marginal premium over the international price. Now, bitcoin in India is 1-2 per cent higher than its international price.

“Information inconsistency due to the proposed government Bill (regulation) has provided a perfect opportunity for sophisticated investors and market makers to make money at the cost of gullible retail investors. They (retail investors) are liquidating crypto assets. Hence the sudden spike in trading volumes across Indian exchanges,” said Gaurav Mehta, founder, National Digital Asset Exchange (NDAX).

With rising volumes, there has been a constant supply of cryptocurrencies in the Indian market but there is hardly focus on “who is providing this liquidity”.

Industry officials say the supply is coming from overseas investors. They add that politicians across parties also have exposure to bitcoin and want the crypto to be regulated rather than banned. This gave comfort to investors to buy cryptos when retail investors sold them recently after the announcement of a proposed Bill a few days before the Union Budget.

Meanwhile, WazirX, one of India’s leading cryptocurrency exchanges, has seen daily trading volumes in bitcoin double to 2,000-2,500 from 1,000-1,250 a fortnight ago. After the news of the Tesla chief buying bitcoin, Gaurav Daheke, chief executive officer of Bitbns, an Indian crypto-exchange, tweeted: “The Tesla model-3 price in bitcoin is now less than one bitcoin”, indicating the interest crypto-players have seen in India after the news.

The volume surge is also reflected in leading exchanges in India facing a huge response and pressure on their support functions.

Coindcx, another exchange, has seen a sharp spurt in volumes and an increase in new investors in the past 24 hours, leading to its support machinery slowing.

Another leading exchange has sent alerts through social media to its investors, stating that their support system has slowed after the increase in investor queries and advised such investors to calm down and gave comfort that their queries will be responded to.

Siddharth Sogani, managing director of CREBACO Global, a research and intelligence company for blockchain and crypto-currencies and providing rating to the industry, said: “Visionary entrepreneurs like Elon Musk investing in crypto are among early adopters. I see Apple, Microsoft, and all the other blue-chip companies moving their funds to crypto as a reserve very soon. Indian investors can also make huge profits if the industry is regulated, or else lose the opportunity.”

He sees bitcoin at $100,000 by the end of 2021, or, maybe even before India introduces the Bill. He says globally too volumes surged three times after Musk’s announcement.

Now several campaigns are also being run to support bitcoin and other cryptos amid talk of foreign funding to fund these campaigns.

#IndiaWantsCrypto, among the oldest campaigns, was started by Nischal Shetty, founder and chief executive officer of WazirX, 831 days ago. Among the recent ones are #IndiaWantsBitcoin, while a website indiawantscrypto.net was floated to support the crypto industry.

Exchanges are telling investors to visit these campaign sites where contact details of all MPs are given and one can select the MP from one’s region to impress upon the latter that cryptos should not be banned. Exchanges are providing templates to investors on what they should be writing to MPs.

Meanwhile, independent law firm Khaitan & Company, along with CREBACO, has proposed a draft Bill and detailed regulations for the Indian crypto industry to all government departments concerned. Copies of this paper have been sent to all MPs to educate them and bring the industry under regulation.

Sogani said, “The government is considering our representation which we made with Khaitan & Company.”

On Tuesday, Union Minister of State for Finance Anurag Thakur said in Parliament the government was considering the cryptocurrency Bill and it would go to the cabinet soon.

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Rajesh Bhayani in Mumbai
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