Bitcoins have seen a steep correction, and were hovering at around $6,350 a bitcoin on 6 February 2018. This is a 66% decline from 18 December 2017, the time it had peaked to $18,674. Global developments and media reports seem to be the key reasons for this correction. Here is how:
Experts say that the Union Budget announcement is not the reason for the correction in bitcoin prices. “The price correction has nothing to do with the Union Budget. Indian market decisions don’t impact global prices," said Praveen Kumar, chairman and chief executive officer of Belfrics Global SDH, a company that operates bitcoin exchanges in Singapore, Malaysia, Bahrain, Japan, Kenya, Nigeria, Tanzania and India.
In fact, companies are taking positive cues from finance minister Arun Jaitley’s speech and expecting regulatory guidelines to come out soon. Belfrics, which had temporarily shut operations in India, is planning to re-enter the market. “We are looking to restart operation in India post the Budget announcement. Nowhere in the Budget has the government called it illegal. We expect regulations to kick in soon," said Kumar.
On 3 February 2018, Mint reported that Subhash Chandra Garg, secretary, department of economic affairs, Ministry of Finance, Government of India, said that there will certainly be regulations by the end of this financial year.
Bitcoin exchanges say that the fall in price has a lot to do with the negative news. “Not much positive news has come yet, to instill confidence in bitcoin. (While) there have been multiple media reports that are dampening the sentiments. A recent one is that is China planning to block access to websites that offer cryptocurrency services," said Benson Samuel, chief technology officer and co-founder, Coinsecure, a bitcoin exchange based in India.
According to an article published in Financial News, a publication affiliated to the People’s Bank of China (PBOC), to prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or initial coin offerings (ICOs).
There has also been no major technological development in the cryptocurrency world to boost sentiments. “A very small development in Ripple has happend where a bank has accepted transactions using it. But other than that there has been no technological advancement or use as of now for cryptocurrencies," said Kumar. He further added that the regulatory stance from all the economies is also not favourable for the cryptoworld. “Markets will wait for some regulatory changes from other countries," said Kumar.
Bitcoin prices have declined sharply since last 1 month. In January 2009, when bitcoin was first created and launched, the idea was to use it as an alternative to fiat currency. The idea was to use it for making payments and transactions. However, by 2016 and 2017, the approach shifted from it being an alternative currency to it being an investment asset. But, most countries, including India, refused to accept bitcoin as a currency and have said that it is not legal tender. The future of bitcoin continues to remain uncertain.