The demand for Bitcoins has increased across the world, leading to a surge in its price to all-time highs. In India, with thousands of new users flocking to Bitcoin every day, exchanges have been overwhelmed leading to downtime and slow processing of transactions.
The unprecedented demand for Bitcoins has come in the background of the government requesting feedback about virtual currencies from users.
Exploding demand, high premium
"Zebpay, one of India’s Bitcoin exchanges, has over 500,000 downloads of its mobile app and is adding about 2,500 new users every day."
The scarcity of Bitcoins in India has resulted in Bitcoin being traded at a significant premium. The Bitcoin price in India touched INR 225,000 (~$3,500) before declining slightly. International users cannot arbitrage the demand for Bitcoins in India due to capital controls and foreign exchange regulations.
Exchanges overwhelmed
So how are exchanges coping with this overwhelming demand?
Zebpay urged investors to be cautious while buying Bitcoins, citing the high volatility
Zebpay tweeted “Bitcoin prices are very volatile right now. Please use caution when investing. This is a new technology innovation on a global but early stage. Your investment should match your knowledge. Be safe!”
However, this didn’t have the intended effect on Bitcoin investors. Zebpay later introduced a daily limit of INR 50,000 (~$780) on Bitcoin purchases.
Zebpay tweeted:
“Dear user, we have put temporary buy limits of Rs 50,000 per day due to the shortage of Bitcoin stocks. These limits are temporary and will be revised as market conditions change.”
The situation was no different at other Bitcoin exchanges. Coinsecure, one of India’s leading exchanges was down, citing the exponential growth of users causing stress on the Company’s systems. The company expects the downtime to continue over the next few days. Visitors to the website were greeted with the following message.
Government watching
The unprecedented demand for Bitcoins has come in the background of the government requesting feedback about virtual currencies from users. This consultative process has been initiated by the government before it takes a stand on regulating/banning virtual currencies. If the exploding demand for Bitcoins in India is any indication, Indians are definitely supportive of virtual currencies.