by Priyan Purohit
Edited excerpts of his interview with ETBFSI:
Tell us about your nature of work and association with the crypto industry.
I am basically what people refer to as an angel investor, in the sense that I’m an entrepreneur who works closely with fintechs, in particular. My association with the crypto industry is quite a few years old, and I’ve been investing in crypto currencies like Bitcoin and also in blockchain technology.
How do you think has the coronavirus outbreak affected Bitcoin?
I think, since the coronavirus outbreak, the correlation between Bitcoin and the equities market has increased. For instance, on the 12th of March, the price of Bitcoin fell below $4,000 after the S&P Index in the USA saw a sharp decrease. The reason for this was because there was a sudden flight to liquidity, and so, a lot of investors had margin calls in Equity that had to be covered by liquidating other assets like Bitcoins into cash – to meet those margin calls elsewhere. Though the price has now recovered to around $7,000, it will probably be a while before Bitcoin prices soar up again. There is a lot of uncertainty in how things will pan out and BTC is no exception. Though the correlation seems to be coming off a little bit between S&P and BTC. The problem is that the 12th March liquidity crunch has spooked some crypto investors and some market makers as seen in data from Bitmex. I predict a gradual rise in prices again, and more so post halving as some miners are capitulated (inefficient miners will have to shut down), but it won’t be much because the global economy itself is in one the worst situations.
Is it possible that this rise in prices at a time when most other investment options look unprofitable is because Bitcoin is becoming a safe haven?
Bitcoin is far from becoming a safe haven like gold or silver, even though its current trajectory looks similar. These are monumental changes in the underlying and will only change if the Fiat system itself is under threat. There are various narratives surrounding Bitcoin, but the biggest one still remains the fact that most volumes are due to trading. Some would argue it is gambling of sorts, while some will see a move towards digital gold. The US FED & government has been pumping in billions of dollars into the economy. As long as the dollar remains strong, it will be difficult for Bitcoin to replace that. However, I am a strong believer in the BTC Digital Gold notion and the way governments are indiscriminatly pumping Fiat, a Gold and BTC could play a crucial role – an international currency of sorts.
The Supreme Court has lifted the ban on cryptocurrencies in India. Can Bitcoin become the new darling of investors?
That seems to be very unlikely in view of the current situation. At such times, nothing else matters apart from survival. People want cash and liquid assets; they are not looking for alternative assets like property or even illiquid bonds or illiquid stocks, let alone crypto. It will take some time for India or any other nation to fully adopt BTC. Keep in mind, equities as a traditional assets are looking very lucrative right now.
But Bitcoin is a highly liquid asset compared to equities…
Let me ask you a very simple question. If I give you 1 Bitcoin and at the same time 1 share of say an xyz company, which one would you be able to convert in INR more easily? Bitcoin liquidity is definitely increasing post SC’s decision. Exchanges like WazirX and CoinDCX are doing a great job but volumes and liquidity are nowhere close to what international investors are used to. I welcome SC’s decision but there is still a lot of lack of information and regulation regarding cryptocurrencies in India. Hence, the focus of investors will not shift to Bitcoin anytime soon.
What is in store for Bitcoin, once the world economy slowly recovers?
Coronavirus has had a huge effect on the nascent industry of crypto currencies. We were already dealing with various issues, like regulations, liquidity. scams etc and this has just added to the list of worries. However new companies are building a lot of interesting products but there is still a lot of ambiguity surrounding Bitcoin even today. Though it can fairly be called a mainstream asset now, it is yet to be institutionalised. Governments all over the world need to take bold measures to regulate it and make it easier to buy / sell / hold Bitcoin. Till that happens, the crypto industry will continue to struggle amid all the uncertainty, which has been further highlighted by Corona situation. Hopefully, few years down the line, the change in narrative will be more of a positive one.
