As Bitcoin hits $16,000 valuation, Indians are rushing to get some

Indians are rallying behind the hot bitcoins despite fears of a bubble.

| Updated on: Dec 08 2017, 18:20 IST
Did you know about Laxmicoin, India’s first virtual crypto currency?
Did you know about Laxmicoin, India’s first virtual crypto currency? (REUTERS)
Did you know about Laxmicoin, India’s first virtual crypto currency?
Did you know about Laxmicoin, India’s first virtual crypto currency? (REUTERS)

Gurudutt Biswal, a young PR professional at a Gurgaon-based company, made his first investment in bitcoin six months ago. He has invested around 25,000 and made profits worth approximately 7,000 in last six months.

"I don't consider bitcoin as part of my asset allocation strategy. I rather prefer to spend the dividend while keeping investments very small to avoid risks," Gurudutt said.

Rahul, a software engineer by profession, had invested around 4 lakh in bitcoin four months ago. Currently, he claims to have two bitcoins, worth about 18 to 20 lakh.

Gurdutt and Rahul are part of a growing number of Indians who are beneficiaries of the recent spike in bitcoin, which raced past $16,000 valuation on Thursday - an all-time high.

Bitcoin's sudden growth has surprised industry pundits. They fear it as a rapidly swelling bubble that could burst any moment.

The fear is not unfounded. The cryptocurrency has not been approved by the majority of banks worldwide, thus keeping the virtual currency from becoming mainstream. ALSO READ: 10 things to know about virtual currency Bitcoin

Steam, one of the biggest gaming platforms in the world, earlier this week stopped accepting bitcoins. Indonesia has imposed a ban on bitcoin trading by fintech firms.

The bitcoin exchanges also have to contended with security concerns. Popular digital currency exchange NiceHash on Thursday reported that it had lost bitcoin worth $64 million in a security breach.

In spite of the security concerns, multiple incidents of scams and heists, and warnings from regulatory bodies, many Indians seem to be interested in trading in bitcoin.

Google Trends, which provides insights on search trends on its platform, reveals a spike in searches for the virtual currency. Search for bitcoins in India has increased in last 90 days, especially after mid-November. According to Google's data, Daman and Diu, Haryana, and Gujarat are top cities to search for the term "bitcoin."

Millenials like Rahul and Gurudutt were able to become early adopters of bitcoins, courtesy a slew of bitcoin exchange platforms operating in India.

Bitcoin exchanges are essentially digital marketplaces where people can buy and sell bitcoins using different currencies.

According to an report, there are more than a dozen cryptocurrency exchanges in India. In fact, these exchanges have formed a body called Digital Asset and Blockchain Foundation of India (DABFI) that aims to bring uniformity among these platforms.

Some of the popular bitcoin exchanges in India are Zebpay, Unocoin, Coinsecure, Coindelta, Coinome and Redipay among others. Most of these exchanges were launched in last three to four years.

Unocoin is a four-year-old Bengaluru-based company that buys and sells bitcoins. The company claims it sees transactions worth 100 crore every month on its platform. The Merchant gateway service provided by Unocoin lets both online and offline businesses accept bitcoin as a mode of payment and OTC (Over the Counter) Trade allows users to trade in bulk. ALSO READ: 10 things you might not know about bubbly Bitcoin

"We had 3,000 customers in the initial six months of our operations, but fast forward four years later we have more 1,800 merchants on-board and has more than 800,000 customers," Sathvik Vishwanath CEO and Founder of Unocoin told Hindustan Times.

Sathvik disclosed that the volume on its exchange has grown by 300% after the surge in bitcoin valuation.

Coinome is one of the new entrants to the bitcoin exchange segment. Backed by Billdesk, Coinome officially launched just two weeks ago.

Vivek Steve Francis, CEO Coinome, said, "It's been just two weeks. I cannot give you definite numbers, but there has been an incredible surge in people coming to the platform. At the moment, we are doing 150-200 bitcoin sales a day."

Vivek, however, cautioned that customers who are interested in buying bitcoin should do thorough research before investing. Investing in bitcoin at the moment will not necessarily mean a person will start making money right away, he added.

"What we are seeing a lot of geeks, tech people and traders who under the fundamentals of bitcoin are joining the platform. But what we have also noticed that a lot of people who don't understand the basics are also investing into bitcoin, mostly to make quick money," he added.

On the issue of security of bitcoin and bitcoin exchanges, Vivek said, "It's definitely a concern. This is why it is very important that people invest in only trusted wallets and trusted exchanges. While there's a lot of effort goes in keeping the exchanges safe, the fact is any system in the world can be hacked."

"We do internal and external security audits to ensure the platform is safe. There's a feature called 'cold wallet' that is essentially like a bank locker and kept away from the currencies that are online, making them inaccessible for cyber criminals."

Even as bitcoin exchange operators seem bullish about bitcoin, the Reserve Bank of India (RBI) has been quite critical of the crypto currency.

Earlier this week, the bank said that it wanted to reinforce its previous message to "users, holders and traders of Virtual Currencies (VCs) including Bitcoins regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with such VCs."

Vivek, however, points out the opacity in guidelines for cryptocurrency.

"RBI or any other regulator is yet to classify bitcoin and we are not sure if this gets classified as asset, currency, commodity, equity or just a digital file. Different countries have taken different approaches already. However, India is welcoming bitcoin as being clearly revealed by the increase in valuation and transactions in bitcoins," he said.

"As the RBI is yet to formalise its stand on Bitcoin and other emerging crypto-currencies, we require ground-level and mass media utilisation in the public interest, conferences, and seminars, to separate myths or speculation from true information. Government should also facilitate a trade body or organisation with some of its members being the bitcoin trading platform and exchange owners who would bring the expertise on the bitcoin technology and even help as a point of implementing regulation or restriction would be a huge plus."

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First Published Date: 08 Dec, 18:18 IST