Bitcoin crashes after beating gold, falls to Rs 70,000 on Indian exchanges

On Indian exchanges, it falls to Rs 70,000, after hitting a high of Rs 79,000

Bitcoin, a form of digital currency, has seen one of its sharpest rallies and equally sharp falls in the last 24 hours of trading. This digital currency crossed the price of gold and traded at more than $1,200 in early trades on Thursday on China’s Huobi exchange, Beijing, whereas gold was quoted at around $1,177 per ounce on international commodity exchanges.

The Bloomberg data show Bitcoin has crossed its all-time high price of $1,137 notched on November 29, 2013 and reached a high of $1,155 on Thursday afternoon on the last few days of heavy speculation. From there it fell very sharply and is at present (India evening time) quoting at $890 as per the Bitstamp index and Bloomberg was also showing a price of $890. The last $200 fall was in just in one hour. Currently, it is trading around $970.

On Indian exchanges, bitcoin in the early morning was trading above Rs 79,000 but fell to Rs 70,000 on Zebpay and the difference between the buy and sell quotes was Rs 7,000 with the sell quote being Rs 63,000. The price movements confused investors. Later difference narrower to only two per cent when international market stabilised.

The price of Bitcoin has been riding chiefly on speculation. Since Donald Trump was elected US president on November 9 last year, Bitcoin has risen almost 60 per cent. The rise in January has been more than 15 per cent. However, all gain of January washed out on Thursday.

It transpired in a Fed meeting last month that speculation had pushed up the prices of all assets including gold and Bitcoin. The Fed had indicated, in the minutes of the meeting, that there were uncertainties about the impact of Trump's victory on the economy.

The inflation rate is going up on rising crude oil prices at a time when China is restricting the outflow of the yuan, which is depreciating, and imposing controls on gold, which is selling at a three-four per cent premium. 

Demonetisation in India, which has created uncertainties, and a similar piece of action by Venezuela figure in any discussion on Bitcoin prices. 

No one controls Bitcoin, which is not printed. It's produced by people and, now increasingly, businesses. Its supply is limited and is programmed in a way that a maximum of 21 million units of Bitcoin can be mined. The speed of mining gets reduced every four years and it will take 100 years to complete the mining of 21 million Bitcoin units. So far a little more than 16 million have been mined. This is seen as another reason for the spurt in prices. 

Sandeep Goenka, co-founder of Zebpay, an exchange on which Bitcoin is traded, says the currency will have a bullish year in 2017. 

“Bitcoin demand continues to increase in each and every country in the world since the supply is limited. Bitcoin has uses as a global currency, a payment network and a store of value. Recently Airbnb got maximum requests on Twitter to add bitcoin as a payment option. I expect Bitcoin prices to touch an all-time high in 2017 and end the year in the range $2,000-3,000. Everybody who is concerned about money should give Bitcoin a try. At Zebpay, you can buy Bitcoin for amount as low as Rs 1,000.”