NEW DELHI, Nov 16: After being touted as currency of future, the halo around bitcoins and other virtual currencies appear to be fading and their combined market value has dipped to USD 6 billion, from over USD 11 billion a year ago.
While the number of such currencies has increased substantially to over 500, from about 70 in November last year, their combined valuation has been on a decline after peaking at over USD 15 billion early in 2014.
Nonetheless, the value of many popular virtual currencies including Bitcoin, Ripple, Dogecoin and Litecoin has crashed by 50-60 per cent from their peaks early in 2014, as per data available on various trading platforms.
Incidentally, the number of online platforms where these digital currencies, which are not backed by any government or banking authorities, can be traded has also grown to 1,400, while many of them can be accessed from anywhere in the world including India.
While India is yet to put in place any separate guidelines for bitcoins and other virtual currencies, RBI has already warned against their use due to potential risks associated with such transactions.
According to some traders, a sharp recovery in regular financial markets, including stocks, might have led to ‘hot money’ parked in bitcoins to move outside. Besides, intensified regulatory glare on such currencies might have also resulted in investors pulling out their funds.
Bitcoin and other such currencies have attracted a lot of attention of financial regulators on suspicion of being alleged conduits of ill-gotten wealth. Speculators and gullible investors too had lapped up the idea of a non-fiat currencies that were marketed as promising investments.
Bitcoin currently trades at a price of USD 400 a unit, as against lofty highs of USD 1200 early this year. Other virtual currencies have seen similar trend in their prices.
As per bitcoin traders, warnings from global central banks, the Mt Gox exchange debacle, cases of money laundering and criminal payments via such currencies, and a moderation in the initial frenzy have affected the market.
Earlier this month, the US authorities busted the first bitcoin securities fraud case, accusing a 32-year-old of engineering a bitcoin Ponzi scheme where about half of 100 investors lost all or part of their bitcoin investment in 2011 and 2012.
Bitcoins shot to prominence mainly through underground transactions, while Silk Road and similar websites, which are not visible on the open internet, enabled buyers and sellers to trade using digital currencies, usually Bitcoin.
Low transaction costs and difficult-to-trace nature of transactions have also helped bitcoins. (PTI)
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