IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 22, Issue 4. Ser. IV (April. 2020), PP 56-60
www.iosrjournals.org
Bitcoin A Careful Design of Bubble or Legit Currency: Analysis
Based on Indian Economy
Praveena L
Assistant Professor, Depaertment of Management Studies, KVCET, Kancheepuram
Abstract:-This paper sets outs a brief discussion about the bitcoin being a bubble or legit currency on Indian
economy. The study was mainly focused on the impact of bitcoin and legit currency in the Indian economy and
also the major factors that leads the currency to the growth of the economy The Indian merchant’s uses bitcoin
transaction for the purchases and sale of goods and services. Few people states that bitcoin is not bubble but a
corruption of real currencies. The sudden rise of bitcoin, and the bitcoin market, has examined the currency as
a furor, a bubble, or a scam. Critics also states that there is an absence of central bank advocacy that’s makes
bitcoin a pointless, that shows an absence of considerate about how currency work in the bitcoin market. The
study is mainly focused on Indian economy as whole.Keyword: - Bitcoin, bubble, legit currency, blockchain,
cryptocurrency.
----------------------------------------------------------------------------------------------------------------------------- --------Date of Submission: 02-04-2020
Date of Acceptance: 18-04-2020
----------------------------------------------------------------------------------------------------------------------------- ----------
I. Introduction
Bitcoin is a decentralized virtual cryptocurrency, launched in 2009 by an unidentified person known as
Satoshi Nakamoto. It does not rely on any central services for managing the creation or flow of money. It relies
on cryptographic algorithms in order to prevent abuse of the system. It is abbreviated as BTC and is powered by
a peer-to-peer network in the public domain both in terms of issuing and valuation.In last several years we have
witnessed the Introduction of crypto currencies the digital currencies that rely on cryptography to ensure the
security which can‘t not be accurately defined as either commodity or fiat money. Crypto currency is the only
currency in the world which is being decentralized and has its share of problem in the industry. Crypto currency
with increased consciousness is known as one of the most easy, comfortable and reliable way of making
transactions. The currency faces number of problems even though the world is developed. One of the most
widely used crypto currency is a bitcoin, the virtual currency has gained lot of popularity and a lot of people
have invested in it considering its increasing value, just like other crypto currencies even bitcoin has its own
share of flaws and uses. The blockchain uses economic incentives to drive members of the network to certify
every transaction which differentiates ccs from the digital version of fiat currencies. Currently, the cryptocurrency is neither illegal nor legal in India. The government is considering the introduction of a regulatory
regime for virtual or crypto-currencies, such as Bitcoin, that would enable the levy of the Goods and Services
Tax on their sale. The new regime may possibly bring their trading under the oversight of the stock market
regulator, Securities and Exchange Board of India (SEBI). The idea is to treat such currency in a manner similar
to gold sold digitally, so that it can be traded on registered exchanges in a bid to ―promote‖ a formal tax base,
while keeping a tab on their use for illegal activities such as money laundering, terror funding and drug
trafficking. Crypto-currency is a digital currency that allows transacting parties to remain anonymous while
confirming the transaction is valid. It is not owned or controlled by any institution – governments or private.
There are multiple such currencies — Bitcoin, Ethereum and Ripple are some of the popular ones. Currently,
they are neither illegal nor legal in India. ―One bitcoin today is worth as much as 60 grams of gold. The market
cap for all crypto-currencies has just crossed $100 billion, with most of the increase coming in the past few
months. On April 1, 2017, the total market cap was just over $25 billion, representing a 300% rise in just over
60 days,‖ said a senior government official.
―The discussion on whether crypto-currencies should be banned or regulated has been on for some
time. The pros and cons for both aspects were put forth in the meeting chaired by Finance Minister Arun Jaitley
last month,‖ the official told The Hindu. A proposal to ban such currency altogether was also considered at the
meeting, but found few takers among top officials from the Ministries of Finance, Home Affairs and IT as well
as SEBI, the Reserve Bank of India, the State Bank of India and NITI Aayog. Bitcoins were in the news recently
when during the two global cyber ransom ware attacks Wanna Cry and Petya attackers sought about $300 in
bitcoin as ransom. Crypto-currency can also be used for a lot of legal activities depending of which retailers
accept such currency. Even as economies like Japan and Russia move to legalize the use of Bitcoins, India,
despite being at the cusp of a digital revolution is yet to officially recognize the cryptocurrency. India's central
DOI: 10.9790/487X-2204045660
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Bitcoin A Careful Design of Bubble or Legit Currency: Analysis Based on Indian Economy
bank, the Reserve bank of India or the RBI, which regulates Indian rupee, had earlier cautioned users, holders
and traders of Virtual currencies (VCs), including Bitcoins. "The creation, trading or usage of VCs including
Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory
approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on
such activities," the central bank had said In March, RBI Deputy Governor R Gandhi warned against cryptocurrencies such as Bitcoin. "They pose potential financial, legal, customer protection and security-related risks,"
Gandhi said. "Payments by such currencies are on a peer-to- peer basis and there is no established framework
for recourse to customer problems, disputes, etc. Legal status is definitely not there," he added.
II. Background
Launched in 2009 by a person or group known as Satoshi Nakamoto, bitcoins are encipher sets of
digital data produce past transaction. Supply of bitcoin is through internet which raises at percentage known to
all people in advance and cannot exceed the specified limit. These bitcoin can‘t be changed by the government,
political bodies and it can‘t be inflated or deflated. In India there is no central authority that issues bitcoin each
and every transaction are in a straight line between the two parties who are involved, there is no financial
mediator so that the transaction cost is very less. The reason why bitcoin is popular in India is because the
expenses are irrevocable; of those made by predictable methods of debit or credit cards. In April 2012 there was
almost 11 million bitcoins in subsistence and in every 8 minutes bitcoins were added as on 11 April 2012. In the
present reports 2140 there will be around 21 million bitcoins. The currency has seen a large interest from March
2012, the worth of the bitcoin was around $100 as on 1 April 2013 up from $13 at the beginning of the year.
When the demand increased and the supply got limited the digital currency increased sharply before it had to be
crashed.
III. Bitcoins
India being a technology advanced country the use of smart phones and internet availability which
allows flowing the information at a much faster rate. The technology start-ups are mainly interested in Bitcoin
because it can be integrated into almost any software and can be monetized. In India there are about 2000 active
bitcoin users. Most of the users are individuals who want to scrutinize the possibility of an investment
opportunity. Bitcoins in India are not accepted by the ecommerce websites many Indian admirers use these
payments system for the trade of goods and services from other online websites. The demand for bitcoins is
mainly from venture expecting to gain from the growing value of the currency. The bitcoin economy is currently
all traders rapture because the coin does not attract VAT (value added tax). The scammers and fraudsters find
the bitcoin transaction so useful because bitcoin transactions are irreversible. Bitcoins are increasing its gain in
India. Observing at the number of downloads, India has moved to 16th rank in the world. Indian government is
employing a wait and watch policy for bitcoin. RBI has clearly advised general public not to buy or sell virtual
currency. Reserve Bank of India feels Bitcoin will help to spread black money internationally, as it is very
simple to conduct without leaving any traces. 1.It is unacceptable and uncontrolled in Indian financial system.
The Bitcoin community is small in India and they want RBI to step in to create policies to improve the 2.safety
of the consumer. They have also suggested to the government to set up its own exchange, just like the stock
exchange, where all Bitcoin traders can trade, as they trade with other currencies of the world. RBI along with
central banks of the world is unable to track economic activities of this crypto currency. They are much worried
about this unpredictable and unregulated form. It is impacting the banking, fin:
IV. Why Bitcoin Isn’t A Legit Currency
Bitcoin is not considered as a legal currency until it gets a centralized state. It is not yet considered as a
legal currency because not all countries, world bodies have 3.accepted or recognize it. Bitcoin is not a legit
currency; it is not centralized and regulated and also not created and implemented by the government, so it
cannot be legalized. People across Indian Territory do not accept bitcoin as legal recognition. Anonymity is a
factor which causes bitcoin not to be a legal currency in the Indian 4.economy. In Indian economy, the bitcoins
are used in criminal activities as medium of payments. To be accepted as currency there are 2 main factors the
first factor is it is difficult to profitably counterfeit. And the second factor is people have to believe it is
valuable. There are 3 main reasons why bitcoin is now a legitimate (legit) currency.
Bitcoin attracts institutional investors:-According to market capitalization, bitcoin is the top currency;
small investors are adopting bitcoin to expand their investment portfolio. As a conditional investment, risk is
involved because of the high uncontrollable nature of bitcoin prices in this economy. This also indicates that to
buy bitcoin and sell them at higher price the risk involved for anticipating price fluctuations
Bitcoin as haven assets: - bitcoin has achieved a status. The main reason is based on the law of supply
and demand. The supply of bitcoin being fixed and limited, demand explode so this increase in price for the
bitcoin, which decreases supply.
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Bitcoin A Careful Design of Bubble or Legit Currency: Analysis Based on Indian Economy
Impending (approaching) bitcoin Exchange Trade Fund decisions:- the rise in bitcoin prices rises due to
speculation about the securities and exchange commission decision .The Exchange Trade Fund would boost the
legitimacy of bitcoin and make it accessible for individuals and fund managers ance, and economies of the
world. These are the backbone of every country‘s.
V. Objectives Of The Study
The study was mainly focused on the impact of bitcoin and legit currency in the Indian economy
To study about major factors that leads the currency to the growth of the economy
VI. Impacts Of Bitcoin
2016 was the year of bitcoin, and there was a growth up to 79%, the world principal currencies. As a
result it emerged as a better stake for investors. There are many reasons why the impact of bitcoin is relevant
today.
Reduce to allowance: - The government is implementing confined list of policies which hold back the
amount made from other countries or vice versa either by made from other countries or vice versa either by
increasing the charges and implementing new guidelines. The fear not transacting money to the family
members.
There is a control over the capital: - many selfgoverning currencies and their practice outside home
country is being supervised and blocked, there by propulsive the demand for bitcoin.
Better acceptance: - today in India more people are using bitcoin because of this more business and
companies have started accepting bitcoin in India as a mode of payment. The online customers and investors are
using bitcoin regularly.
Corruption: - digital cryptocurrency such as bitcoin have much usage because of the crackdown on
corruption India also banged their uppermost value and still circulating bank notes in order to pay wrong
activities and make accumulated black money useless. This led to the demand for bitcoin, enabling them to
make payments without having any control of any authorities.
VII.
Present Scenario And Future Growth
Bitcoin was created in 2008 global financial crisis to operate outside the Governments, central banks
and financial institutions. Then, bitcoin take many challenges to bring this under control. This led many
countries in banning it or makes it illegal while in some other countries, it remained observant and regulated its
operations. We need to understand about bitcoin and cryptocurrency in general in the economy. Compared to
fiat currencies, cryptocurrencies are also used as a means to transfer value. There are several advantages like
accessibility, immutability, faster settlement, lower/ negligible transaction fees, prevention and anonymity.
There are some other factors that drive growth of bitcoin and cryptocurrencies in the economy. Higher visibility
and adoption: Bitcoin has been recognized as a legal method of payment in countries like Japan. They treat it
has an asset not as a currency. Bitcoin has a great demand in Japan and in economy.
Political instability and mistrust: In terms of politics, economic instability and uncertainty has
recognized a lot in the economy. Bitcoin became a heaven for many people. There are huge bitcoin
opportunities in India. 1.Economic growth in India creates more demand and opportunity for bitcoin .the effect
of bitcoin in India. Bitcoin is a decentralized virtual cryptocurrency .after the bitcoins invention, online
transaction can be done without any intermediary in the economy. Bitcoin has a solution for the problem of
double spending without any influence of the third party. In bitcoin economy every transaction has a block and
contains information about the block forming a blockchain .this is to verify that whether the bitcoin being
transacted has been previously spent or not.
VIII. Models
We have referred the agent-based artificial crypto currency market model to study the bitcoin market in
Indian economy. It analyses the mining process and the bitcoin transactions followed by an agent-based
approach in the Indian economy. We then used a proposed model to 2.analyze the mining process in the Indian
economy and how this affects the bubble in the economy. This model helps us to know the bitcoin transactions
and the bitcoin price in the economy. It affects the bitcoin market as well. In this paper we have referred to
Hymn Minsky Model. .He says on his theory financial fragility, it came forward in 2008 crisis. In his model,
there are five stages namely displacement, boom, euphoria, profit-taking and panic phase. In displacement phase
of the bubble came after Satoshi Nakamoto. He is the person or people credited with creating bitcoin, released
the white paper on the first digital currency. Bitcoin was ruled by its hard core proponents known as bitcoin
evangelists. In boom phase, it has been less of an enigma. This phase is characterized by price rising slowly at
first. Then, it increased its value in the economy. In euphoria phase, the van der burgt said that when people
launch to borrow their investments comprehensively to finance 1118% of the dynamic bitcoin investors have
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Bitcoin A Careful Design of Bubble or Legit Currency: Analysis Based on Indian Economy
financed their investments by credit card .In short; it also says that it increases its value in the economy. In
profit-taking phase, it begins to head for the exits, leaving only one step left before the bubble pops. It increases
profits to the economy. In the panic phase, the van der burgt said that when reality sets in and bitcoin‘s price
would substantially crash.
IX. Theories Related To Bitcoin Bubble
The Greater Fool Theory is been referred in this paper. The theory focuses on the buying of bitcoins
because of many reasons and rising in price in the Indian economy. Bitcoin has reached a new stage. The stock
market has been trading at high valuations based on long –term standard of profits in the market and in the
economy. The results shows that the rise in the bitcoin bubble chart indicates more demand and the outlay will
go up in the bitcoin bubble value in the economy, so more people will trade in bitcoin. The greater fool theory
also says that people are buying bitcoin because they anticipate other people to buy it from them at a higher
price.
X. Controversies
Mr.skwirczynski says that ―I would not call it as a bubble, the way I see this is a reflection of the
corruption of real currencies so if anything I think the real currencies are a bubble‖. He had stated this after the
bitcoin smashed and he recorded in the last several months. By multiplying its value several times in the last
year hitting a new record high of nearly $ 20000 after starting 2017 at less than $ 1000. The volatility has
claimed the crypto currencies as a bubble and it is not a good investment in the mere future of commerce. The
sudden raise of bitcoin, and in exacting of and the bitcoin market, has examine the currency as a furor, a bubble,
or a scamUntil 2013, bitcoin was used more by drug dealers and others shady elements than the law abiding
mainstream and now adoption of bitcoin by people that‘s only grown exponentially and today bitcoin is a part of
historical association with drugs and crime.
Commoners and financial institution, In June 2011, a hack leads to manipulation of the asking price for
bitcoin resulting in the sale of bitcoin prices as low as one percent – Mt.Gox.
An external agency determines the value of the money you hold and mismanagement can lead to give
crises as a recession.
XI. Discussion
Bitcoin acts as both a currency and a payment system like good commodity, as an asset. The bitcoin or
the blockchain change the records of the economy if it is kept or made. In present literature is concentrated on
the Indian economy which is going to be affected or being benefited from bitcoin bubble. The Indian merchants
who uses bitcoin transaction through the famous website known as unicon. The use of bitcoin is to purchase bus
tickets, meals, e-shopping vouchers and having a haircut. The largest merchants include sapna online, ETravel
smart, mobile DTH data card reload, in soft and CYberis, tecdoc365 .
XII.
Conclusion
Bitcoin does not have any use outside of being a medium of exchange. The reason in which bitcoin and
cryptocurrencies have in general is that the supply of cryptocurrencies is unlimited and is called a bubble.
Bitcoin has a growing trend in the Indian economy. Bitcoin integration with the payment system is one which
has sparked a renewed interest in the currency among people in the Indian economy. There are many benefits of
using bitcoin in India as it reduces the transaction fees, no charge backs, there fraud prevention and getting paid
quickly. Bitcoin creates more demand and opportunity in the Indian economy. Bitcoin is too volatile so, it is
difficult to be a present value over a bunch of account this indicates the bitcoin is a bubble not a legit currency.
Bitcoin can be accepted as a medium of exchange if it fulfil RBI regulations it can be taken as currency or
securities in mere future. Bitcoin is not governed by any agency or country, it is just a peer to peer system. It
lives with people faith there will be more bitcoin more than the currency. This lacks due to the lack of
knowledge about technology and bitcoin, the bitcoin is been in a stable position, not too high nor demolished
yet.
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