Bitcoin, which crossed $20,000 at its peak in December last year has been on quite a fall since the past few months. However, while the current Bitcoin prices in the international markets at around $10,000 - a cryptocurrency exchange in India was selling Bitcoins at a price of $4,000 (260,000 INR). This steep drop in the prices was likely due to sudden panic and FUD in the Indian cryptocurrency markets after the budget.
While Bitcoin prices are usually different in every exchange - they are more or less the same with a difference of a few hundred dollars here and there. However, a $6000 difference between a country’s prices and other international markets is unheard of! This was no bug and there was no error on Zebpay’s part - as the prices did crash due to panic selling in India. Let us examine why this happened:
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Why Did Bitcoin Prices Drop to $4000 in India?
Bitcoin prices in every cryptocurrency exchange are dependent upon the demand and supply in that region. It might be possible that this drop in the prices was caused by the fact that the Indian annual budget for the financial year 2018-19 was being announced where the Finance Minister stated that ‘Bitcoin is not a legal tender in India’.
The curious thing here is that the Finance Minister Arun Jaitley has made these statements time and again, at least three times in the past two months itself. However, it is expected that most of these statements went unnoticed because an overwhelming majority of the nation does not watch daily proceedings of the parliament. However, on budget day, hundreds of millions of Indians follow the parliament’s updates.
Hence, Jaitley’s statement had a major impact today. However - the panic likely arose from the fact that people who began to sell cryptocurrencies were not able to interpret the statement of the Finance Minister.
The Finance Minister stated that ‘Bitcoin is not a legal tender in India’, which many people assumed that Bitcoin is not legal in India. This created fear and panic in the markets. However, there is a big difference between being not legal and not being a legal tender. If it was declared not legal, it would have meant that India is imposing a ban on cryptocurrencies (which many people actually assumed). However, what the Finance Minister actually meant was that Bitcoin is not a government backed currency and that the government of India is not responsible for any losses that traders might occur while dealing in it.
It might be this misinterpretation of the Finance Minister’s statement during the union budget that caused people to start selling their Bitcoins on Zebpay and other similar local exchanges. Prices on some other exchanges too went down but perhaps none dropped as sharply as Zebpay, which is India’s largest Bitcoin exchange.
Conclusion: Bitcoin’s Legality in India
Bitcoin has never been illegal in India, nor has it been declared illegal today. However that being said, the government has also refused to declare it a legal tender. What does this mean? It means that all the Bitcoin transactions that are happening in India can be seen as a barter transaction in the eyes of law. There is no backing from the government and people have been advised to be aware of ponzi scams. There is no reason to panic, Bitcoin’s legal status in India continues to remain as it always was.
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Note: Bitcoin price touched 4000 USD (2,60,000 INR) for few moments. It did recover back in few mins.
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