Bitcoin traded on Indian exchanges briefly fell to a low of $5,400 on Friday following an announcement that the country’s central bank had begun a crackdown on digital currency trading.
RBI Issues Statement
The Reserve Bank of India (RBI) issued a statement Thursday forbidding citizens from investing in the digital currency market through state-regulated financial institutions. The central bank’s decision was apparently provoked by underlying “risks” associated with cryptocurrency, particularly around anti-money laundering and capital control requirements.
“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling virtual currencies,” the central bank said in a statement.
According to The Economic Times, the ban on bitcoin became effective immediately.
A single unit of bitcoin could be had for as little as 356,000 Rupees on Friday, which is equivalent to around $5,400 U.S. Ethereum was also available at a steep discount, selling for as little as 19,500 Rupees ($298).
At the time of writing, bitcoin was available for 370,000 Rupees on Unocoin, an India-based exchange. That represents a decline of more than 25% from the previous day. Meanwhile, ether was available for 20,220 Rupees.
All six virtual currencies offered on the platform were down more than 24%.
Broader Market Unaffected
Crypto markets were much calmer internationally, with bitcoin trading around $6,822 at the time of writing. The total market cap for all cryptocurrencies was $257.2 billion, according to CoinMarketCap.
The lack of response from international traders reflects India’s relatively weak standing in the crypto arena. Despite its size, the country is only responsible for a small portion of daily transactions in bitcoin. As Forbes rightly states, the United States, China, Japan, South Korea and Singapore are the largest markets for crypto assets.
Cryptocurrencies are headed for another mediocre week, as choppy trading conditions continued to dictate the market. Gains on Tuesday quickly reversed, leading to overall stagnation in the market. There was no immediate catalyst for the reversal, although signs of an escalating trade war between China and the United States was cited as one possible reasonfor bitcoin’s slump.
There’s also growing speculation – and evidence – that bitcoin is seeing stronger correlation with stocks. This may reflect greater interest in cryptocurrencies among traditional investors who may be buying and selling multiple asset classes at the same time and in the same direction. As we’ve stated before, one of bitcoin’s main strengths is price independence, a feature that has traditionally made it more resistant to correlation.