Bitcoin trades at 20% discount on crypto bill jitters

Bitcoin trades at 20% discount on crypto bill jitters

India’s upcoming ban on private cryptocurrencies has taken a toll on their prices in the country, with bitcoin now trading at a 20% discount to global prices, against a 10% premium until a few days ago.

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, expected to be passed in Parliament’s ongoing budget session, comes after the Supreme Court last year quashed an RBI ban on crypto-related payments.

“Since a cryptocurrency draft bill leading to its ban has got listed in the items for discussion during this budget session, the industry is in panic. We have seen some panic selling as well, which has led to reduced prices of cryptocurrencies. Bitcoin and ether, which used to trade at 10% premium compared to global markets are now trading at 20% discount," said Sathvik Vishwanath, co-founder, Unocoin.

Also Read | The Finance Commission doesn’t rock the federal boat

The bill, however, says certain exceptions to promote the underlying technology of cryptocurrency and its uses would be allowed. On Tuesday, Bitcoin was trading flat after hitting a high and a low of $35,645.87 and $33,150.73, respectively over the past 24 hours. It was trading at $34,713.22 at 9 pm on Tuesday.

The contents of the bill are unknown and have added to the panic, said Unocoin’s Vishwanath. “India is known for following in the footsteps of developed counties when it comes to technical innovation and it is time for governments and regulators to look at how this has played out there more closely before making knee-jerk reactions," he added.

The Reserve Bank of India recently said that it is exploring whether there is a need to issue a digital version of the rupee in the country.

“We’re proud that RBI is exploring a digital rupee built on a blockchain. Blockchain technology not only lowers costs, but it also improves accounting since it is an immutable ledger, which would give the government new tools to fight corruption. However, creating a government currency doesn’t require the banning of non-government crypto assets. On the contrary, safely including all aspects of this new technology will bring tremendous tax revenue and innovation," said Rahul Pagidipati, chief executive officer at ZebPay.

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Bullish Sign for Crypto? USDC and Dai Balances on Exchanges Hit Record Highs

Balances of dai (DAI) and USD coin (USDC) on exchanges reached new all-time highs in the past week, according to data from Glassnode.

The increase may be a bullish indicator for the crypto market as a whole if it reflects buyers’ plans to use the two stablecoins to buy more crypto assets.

Balance of USDC on all exchanges. Source: Glassnode

Balance of dai on all exchanges. Source: Glassnode

The balance of dollar-pegged USDC on exchanges reached over $915 million Friday, while the amount of decentralized stablecoin dai on exchanges went above $81 million on Sunday, according to Glassnode.

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USDC on exchanges “represents almost $1 billion worth of buying power from USDC alone, poised to move into assets” such as bitcoin, according to Glassnode’s weekly newsletter dated Feb 1. “This high figure should increase investors’ confidence in any dips being quickly bought up, making it a bullish signal.”

As CoinDesk reported Tuesday, some analysts see several on-chain metrics for bitcoin’s price pointing in a bullish direction in the coming weeks. For example, a decreased amount of bitcoin held on exchange addresses indicates less pressure on the sell side.

Read More: Bullish Bitcoin Fundamentals Point to Renewed Price Rally Ahead

In crypto trading, traders and investors often use stablecoins to put money into riskier cryptocurrencies; in such cases, buying stablecoins backed by government-issued currencies is seen as the first step necessary before buying other cryptocurrencies.

“The growth in on-exchange USDC reflects the increasing view among traders that USDC is a preferred base currency, as well as the fact that a lot of the new flows into crypto are starting with on-exchange activity,” Jeremy Allaire, co-founder and CEO of peer-to-peer payments company Circle, told CoinDesk through a spokesperson. He noted that USDC issuance in January saw “record levels.” Circle and crypto exchange Coinbase are behind USDC’s governing Centre consortium.

The circulating supply of USDC, which is valued 1:1 with the U.S. dollar, has grown to over 5 billion from just below 4 billion in the beginning of the month, sharp growth after slowing in October, according to data from Glassnode.

Increased exchange activity is also reflected in the significant price rise of exchanges’ utility tokens. Centralized exchanges Binance and FTX and decentralized exchanges Uniswap and SushiSwap all saw their exchange tokens hit new all-time highs in the past week.

As of press time, MakerDAO did not respond to CoinDesk’s requests for comment regarding its dai stablecoin.

Data compiled by CoinDesk shows that tether (USDT) is still the stablecoin king despite recent controversies involving its issuing company. Tether currently has over $27 billion in market capitalization but its balance on exchanges in the past two months has been more volatile.

Source: Coin Metrics, CoinDesk Research, CryptoCompare, CoinGecko

Balance of tether (USDT) on all exchanges. Source: Glassnode

India Minister Suggests Modi Government Not Planning Outright Crypto Ban

The Indian government has hinted how it might move to regulate cryptocurrencies rather than an outright ban.

Talking in the nation’s upper house, the Rajya Sabha, Tuesday, a minister specified that the aim would be to curb illicit cryptocurrency transactions and bar their use in payments.

“The government does not consider cryptocurrencies legal tender or coins and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system,” Minister of State for Finance Anurag Singh Thakur said during a question and answer session.

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The Indian crypto community was alarmed on Friday after a bulletin from India’s lower house (the Lok Sabha) revealed the government’s plans to begin consideration of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, seeking a ban on “private cryptocurrencies.” The bulletin, however, did not define the terms, leaving the doors open for interpretation.

While the latest comments offer some clarity on the government’s plans, the bill’s contents are still unknown.

Also read: India Would Ban Private Cryptocurrencies Under Proposed Legislation

India’s cryptocurrency industry has been resurgent since the central bank’s ban on banking services for digital asset firms was overturned by the Supreme Court last spring.