Bitcoin trades at a nearly 12% premium on Indian exchanges as government scraps high-value notes

The Indian government’s recent move to abolish 1,000 and 500 rupee notes has significantly increased the demand for alternative assets among the Indian people. The premium of Bitcoin in the Indian market has widened compared to the international market.

The government claims that the abolition of high-value banknotes is to curb black money

In order to solve the two major problems of counterfeit money and undisclosed income, the Indian government announced on November 8 that the 1000 rupee (15 US dollars) and 500 rupee (7.5 US dollars) high-value banknotes will no longer be legal tender in India. These banknotes will be replaced by new banknotes. Indians are asked to deposit their current banknotes in banks and exchange them for new banknotes.

People are looking for alternative assets

After the Indian government issued the decision, the demand for gold and other assets among the Indian people began to surge. Traditional jewellers accepted the banknotes to be abolished and sold gold bars and jewellery at a huge premium. Tax authorities launched raids to prevent jewellers from laundering money.

Bitcoin transactions increased by 20-30%

Given that Bitcoin is a pseudo-anonymous currency and its operation is not controlled by the government, the purchase of Bitcoin in the Indian market has increased by 20——30 %. Leading Indian newspapers such as Hindustan Times and Mint have reported on the growth of Bitcoin demand in the local Indian market.

Bitcoin prices in India are trading at a premium due to extra demand

The increased demand for Bitcoin in the Indian market has led to a price gap between Indian and international Bitcoin exchanges, with the price of BTC on Indian Bitcoin exchange Unocoin at around 54,000 rupees (about $800) at press time. This means that the price of the coin on the exchange is nearly 12 percentage points higher than the price on international exchanges. However, the Reserve Bank of India has imposed restrictions on foreign exchange transactions for Indian residents, thus preventing traders from arbitrage.

Fiat Currency

Like all other government currencies, the Indian Rupee is also a fiat currency. It exists because of the government's decree, and from recent examples, we can see that fiat currencies can also end through government orders. As time goes by, the advantages of Bitcoin as a currency are becoming more and more obvious.