A COMPREHENSIVE PROJECT ON BITCOIN WITH REFERENCE TO INDIA

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INTRODUCTION
At present most of the currencies in the world including reserve currencies are fiat
currencies. The fiat currencies are issued by a government and if needed, the
government promises to pay the holder of such currencies an equivalent amount in gold.
Therefore, these currencies usually have a central regulatory body which issues them,
and thus called ‘centralized’.
A cryptocurrency is a medium of exchange that uses cryptography to manage the
creation of new units as well as secure the transactions. One of the most striking
features of cryptocurrency is that it weeds out the need for a trusted third party such as a
governmental agency, bank etc. The cryptocurrency system collectively creates the
units. The rate at which such units are created is defined beforehand and is publicly
known unlike the traditional currencies where the government or the authorized banks
control the supply. The fundamental system on which most cryptocurrencies are based
today was created by Satoshi Nakamoto.
According to Nakamoto, the major problem with conventional currency today was that
trust was required to make the system work. While looking at the history of fiat
currencies, one can see that it is full of breaches of such trust. He also stated that banks
use the currency entrusted to them to lend it out in ‘waves of credit bubbles’, with
hardly anything left in reserve. Thus, he introduced Bitcoin as cryptocurrency.

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Bitcoin software would allow its users to send money over the internet directly to each
other without an intermediary, and no outside party could create Bitcoin, entirely
cutting out the role of central banks and governments in online transactions.
As Nakamoto said, ‘everything is based on crypto proof instead of trust’. Furthermore,
unlike banks and governments which can print more money whenever they deem fit, the
bots that are currently creating Bitcoin are supposed to stop doing so in or around the
year 2140 according to their programming itself.
And unlike fiat currencies, whose value is derived through regulation or law and
underwritten by the state, Bitcoin derive their value through the simple principles of
supply and demand – they have no intrinsic value and no backing, and their value
depends entirely on what people are willing to trade for them. Hence, no faith or trust
towards the financers or politicians was required in case of Bitcoin, but only in
Nakamoto’s well-designed algorithms.

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Forms of crypto-currencies/virtual currencies:
The number of crypto currencies available over the internet as of 10 April 2018 is over
1565 and growing. A new crypto currency can be created at any time. By market
capitalization, Bitcoin is currently (10 April, 2018) the largest blockchain network,
followed by Ethereum, Ripple, NEM and Litecoin.
1. Bitcoin – Bitcoin, created in 2009, is a cryptocurrency and worldwide payment
system. It is the first decentralized digital currency, as the system works without
a central bank or single administrator. The network is peer-to-peer and
transactions take place between users directly, without an intermediary. Bitcoins
are the most popular crypto currency in the market.
2. Ethereum – Ethereum is the second most famous name in the virtual currency
market. It somewhat similar to the concept of bitcoins however it possesses
some additional attributes. It is purely a blockchain based platform. What makes
it special is the Ethereum Virtual Machine. The blockchain in Ethereum is used
not to store the data of the transaction but to make sure smooth run of a
decentralized application.
3. Ripple – Ripple is more in the nature of a payment protocol created and
developed by a company named Ripple, which is based on the concept of Real
Time Gross Settlement. It was initially released in the year 2012.

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4. NEM – Similar to bitcoin, NEM is also a peer-to-peer blockchain platform
launched in the year 2015. It uses the unique Proof-of-Importance algorithm, a
way to validate transactions and achieve the distributed consensus.
5. Litecoin – Initially introduced in the year 2011, Litecoin is mostly identical to
bitcoin. What makes it stand out is the use of Segregated Witness and the
Lightning Network.
Blockchain technology:
Most cryptocurrencies are based on blockchain technology. In simple terms, it is a
system to transfer and store data or information that is generated while transacting in a
crypto currency.
Bitcoin miners keep the blockchain consistent, complete and unalterable by
continuously and repeatedly verifying and collecting newly broadcast transactions into a
new group of transactions called ‘Block’. Each block contains a cryptographic hash of
previous block using SHA-256 hashing algorithm.
Blockchain technology is at the heart of how crypto currencies work. It helps to evade
any possibility of fraud and makes any kind of tampering infeasible for the users.

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It is a support system for the encrypted currency, whereby the transactions are recorded
and stored on the ledger. So even if the users are anonymous, it still becomes difficult
for anyone to possibly change the data without involving other members on the
network.
The below chart shows the working process of blockchain:
Figure.1
The above picture depicts how blockchain works. You can observe from the above table
that if a person say A want to send money to B then that transaction is represented in
online as ‘block’. The block is broadcasted to all parties in the network and those who
are in the network approves the transaction as valid. Then the block can be added to the
chain, which provides transparent record of transactions and then the amount is
transferred to B.

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LITERATURE REVIEW:
Though there hasn‘t been any theoretical framework or famous case studies
regarding the investor‘s awareness in bitcoins, following various literatures could
be helpful for us to understand and go further in the research. Different articles
were reviewed in this context and the following summary has been derived under
number of sub headings.
Evolution of Bitcoins Worldwide:
Bitcoin is a cryptocurrency and worldwide payment system. It is the first decentralized
digital currency, as the system works without a central bank or single administrator. The
network is peer-to-peer and transactions take place between users directly, without any
intermediary. These transactions are verified by network nodes through the use of
cryptography and recorded in a public distributed ledger called a Blockchain. Bitcoin
was invented by an unknown person or group of people under the name “Satoshi
Nakamoto” and released as open-source software in 2009.
The receiver of the first bitcoin transaction was cypherpunk Hal Finney, who created the
first reusable proof-of-work system (RPOW) in 2004. Finney downloaded the bitcoin
software the day it was released and received 10 bitcoins from Nakamoto. Other early
cypherpunk supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick
Szabo, creator of bitcoin predecessor bit gold.
In the early days, Nakamoto is estimated to have mined 1 million bitcoins. In 2010,
Nakamoto handed the network alert key and control of the Bitcoin Core code repository
over to Gavin Andresen, who later became lead developer at the Bitcoin Foundation.
Nakamoto subsequently disappeared from any involvement in bitcoin.

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The value of the first bitcoin transactions were negotiated by individuals on the bitcoin
talk forums with one notable transaction of 10,000 BTC used to indirectly purchase two
pizzas delivered by Papa John's.
On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted.
Transactions were not properly verified before they were included in the blockchain,
which let users bypass bitcoin's economic restrictions and create an indefinite number of
bitcoins.
On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated
in a single transaction and sent to two addresses on the network. Within hours, the
transaction was spotted and erased from the transaction log after the bug was fixed and
the network forked to an updated version of the bitcoin protocol.
On 1 August 2017, a hard fork of bitcoin was created, known as Bitcoin Cash. Bitcoin
Cash has a larger block size limit and had an identical blockchain at the time of fork. On
12 November another hard fork, Bitcoin Gold, was created. Bitcoin Gold changes the
proof-of-work algorithm used in mining.
Currently, over 16.95 million Bitcoins are in circulation. Bitcoin algorithm was set in
such a way that the difficulty of mining every next Bitcoin is greater than the previous
one. Expanding complexity will continue until around 2140, when minting will hit 21
million Bitcoins.

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There are three primary ways to obtain Bitcoin:
I. Mining new ones.
ii. Buying on an exchange.
iii. Accepting them for goods and services
Bitcoin Mining:
Bitcoin mining is the process by which transactions are verified and added to the public
ledger, known as the blockchain, and also the means through which new bitcoin are
released. Anyone with access to the internet and suitable hardware can participate in
mining. The mining process involves compiling recent transactions into blocks and
trying to solve a computationally difficult puzzle. The participant who first solves the
puzzle gets to place the next block on the blockchain and claim the rewards. The
rewards, which incentivize mining, are both the transaction fees associated with the
transactions compiled in the block as well as newly released bitcoin.
The amount of new bitcoin released with each mined block is called the block
reward. The block reward is halved every 210,000 blocks or roughly every 4
years. The block reward started at 50 in 2009, is 25 in 2014, and in 2016, this was
halved to the current level of 12.5 BTC. In 2020 or so, the reward size will be halved
again to 6.25 BTC and will continue to decrease. This diminishing block reward will
result in a total release of bitcoin that approaches 21 million.
The difficulty of the mining can be adjusted, and is adjusted by the protocol every 2016
blocks, or roughly every 2 weeks. The difficulty adjusts itself with the aim of keeping
the rate of block discovery constant. Thus, if more computational power is employed in

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mining, then the difficulty will adjust upwards to make mining harder. And if
computational power is taken off of the network, the opposite happens. The difficulty
adjusts downward to make mining easier.
In the earliest days of Bitcoin, mining was done with CPUs from normal desktop
computers. Graphics cards, or graphics processing units (GPUs), are more effective at
mining than CPUs and as Bitcoin gained popularity, GPUs became
dominant. Eventually, hardware known as an ASIC, which stands for Application-
Specific Integrated Circuit, was designed specifically for mining bitcoin. The first ones
were released in 2013 and have been improved upon since, with more efficient designs
coming to market. Mining is competitive and today can only be done profitably with
the latest ASICs. When using CPUs, GPUs, or even the older ASICs, the cost of energy
consumption is greater than the revenue generated.
Bitcoin are mined in units called "blocks." As of the time of writing, the reward for
completing a block is 12.5 Bitcoin. At today's price of about $10,000 per Bitcoin, this
means you would earn (12.5x$10,000) = $125,000.
Bitcoin mining farm. (Figure 2) Bitcoin mining hardware. (Figure 3)

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Ever since its inception Bitcoin's trust-minimizing consensus has been enabled by its
proof-of-work algorithm. The machines performing the “work” are consuming huge
amounts of energy while doing so. The Bitcoin Energy Consumption Index was
created to provide insight into this amount and raise awareness on the
unsustainability of the proof-of-work algorithm.
The continuous block mining cycle incentivizes people all over the world to mine
Bitcoin. As mining can provide a solid stream of revenue, people are very willing to
run power-hungry machines to get a piece of it. Over the years this has caused the
total energy consumption of the Bitcoin network to grow to epic proportions, as the
price of the currency reached new highs. The entire Bitcoin network now consumes
more energy than a number of countries, based on a report published by the
International Energy Agency.
Figure.4

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Bitcoin pricing:
A Satoshi is the smallest fraction of a Bitcoin, that can currently be sent is
0.00000001 BTC, that is, a hundredth of a millionth BTC. In the future, however,
the protocol may be updated to allow further subdivisions, according to the need.
The Satoshi unit is named after Satoshi Nakamoto, published a paper in 2008 that
jumpstarted the development of the bitcoin crypto currency. The paper, “Bitcoin: A
Peer-to-Peer Electronic Cash System”, described the use of a peer-to-peer network
as a solution to the problem of double-spending.
Source: https://awebanalysis.com/en/convert-satoshi-to-bitcoin-btc/

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Converter for Satoshi ↔ Bitcoin and other currencies:
Satoshi 1 BTC = 100 000 000 Satoshi
Bitcoin 1 BTC = 1.00000000 BTC
US Dollar 1 BTC = 10 430.56 USD
INR Rupee 1 BTC = 670872.01 INR
Euro 1 BTC = 8 401.28 EUR
Russian Ruble 1 BTC = 588 373.73 RUB
Hryvnia 1 BTC = 279 119.84 UAH
Belarusian Ruble 1 BTC = 20 443.90 BYN
Pound sterling 1 BTC = 7 434.91 GBP
Yuan 1 BTC = 66 193.16 CNY
Kazakhstani tenge 1 BTC = 3 331 730.50 KZT
Uzbekistan Sum 1 BTC = 85 408 893.72 UZS
Armenian dram 1 BTC = 5 016 475.07 AMD
Thai baht 1 BTC = 326 413.37 THB
1 gram of gold 1 BTC = 238.80 GAU
Bitcoin Cash 1 BTC = 6.76944947 BCH
Dash 1 BTC = 14.55469969 DSH
Ethereum Classic 1 BTC = 301.06154300 ETC
Ethereum 1 BTC = 10.92702593 ETH
Litecoin 1 BTC = 45.13737334 LTC
Source: https://Coincheck.com

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Since pricing in bitcoin transactions is demand based, it is exceptionally volatile.
Volumes of trading happen every second. The price of a bitcoin is largely dependent on
the trading i.e. demand and supply factors. More the demand, higher is the price.
The prices remained under the range of US$ 300 until late 2015.In the following year,
around June 2016, in a positive hunch, the price rose to US$ 755. After March 2017 the
prices have increased to all-time high of $19,783.21 on Dec. 17.
But in a refrain of the moves seen after the all-time highs this year, that close encounter
with $20,000 was followed just days later by a 30% drop that shaved billions of dollars
off of the total cryptocurrency market capitalization. It was one of the biggest market
corrections seen to date, sending bitcoin's price tumbling below $11,000.
Source: https://bitcoincharts.com Figure 5.

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In the above chart you can observe the market price of bitcoin from 2009-2018.
Following the similar trend, price of bitcoin in Indian crypto-market has gained
remarkably in recent years.
Source: https://bitcoincharts.com Figure 6
Chart showing bitcoin price trend in Indian market from 2014-2018.

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After March 2017 the prices have increased to all-time high on Dec. 17. But in a refrain
of the moves seen after many of the all-time highs this year, that close encounter with
RS 13, 00,000 was followed just days later by a 30% drop that shaved off lakhs of
Rupees out of the total crypto currency market capitalization. It was one of the biggest
market corrections seen to date, sending bitcoin's price tumbling below RS 5, 00,000.
Bitcoins in circulation:
Figure 7
The statistic presents the total number of Bitcoins in circulation from first quarter of
2011 to first quarter of 2018. The number of Bitcoins has been growing since the
creation of this virtual currency in 2009 and reached approximately 16.95 million in
March 2018.

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Bitcoin-ATMs:
Bitcoin ATM is an Internet-connected kiosk that allows customers to purchase bitcoins
with deposited cash. A bitcoin ATM is not the same as an ATM backed by a bank or
traditional financial institution. Bitcoin ATMs allow customers to buy and sell bitcoins.
The kiosk connects the customer to an exchange where bitcoin transactions can be
conducted. Transaction records are provided via a receipt generated by the kiosk, much
like a traditional ATM or they can remain digital.
Often, a bitcoin ATM will set an upper and lower limit to the amount of cash that can be
deposited. Since the upper limit may be lower than the price of one bitcoin token,
customers are able to purchase fractions of bitcoin. After a purchase is made, a record of
the bitcoin will appear in the customer’s e-wallet, though this may take several minutes
to process.
Some ATMs require customers to pass these security checks before completing a
transaction. The ATM may require a two-factor authentication. This may involve the
customer inputting a phone number to receive a verification code. The code would then
have to be typed into the ATM. The kiosk may also require scanning a government-
issued identification, such as a driver’s license.
Bitcoin ATMs are not widely available, with kiosks typically only found in major cities.
ATMs are more likely to be owned and operated by companies focused on the crypto
currency industry. In some cases, a bitcoin ATM may be operated by a company that
offers its own trading platform or e-wallet. These companies may require a customer to
have an account in order to conduct a transaction, much like how banks do.

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Customers are charged a service fee for using a bitcoin ATM. This fee is typically
charged as a percentage of the transaction rather than a fixed dollar value typically seen
in traditional ATMs. The U.S. Consumer Financial Protection Bureau (CFPB) has
indicated that fee percentages may be very high, and that the exchange rates offered
may not be as competitive as consumers would find elsewhere.
As on 23 April 2018, there are 2820 Bitcoin ATMs in total and the average fees is
8.45%. The average buy fees is 8.82 % and the average sell fees is 7.56 %. This fee is
calculated based on Bitcoin Average Price Index in respective currency and not
necessarily represent the fee size announced by operators (price feed might be
different).
Figure 8
A two-way Bitcoin ATM in Toronto, Canada, that allows users to buy or sell
bitcoins using cash.

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Market capitalization of Bitcoins:
The market capitalization is the value of all the units of a cryptocurrency that are for
sale on the market right now. Market capitalization can be calculated by using the
formula given below:
MC= N x P.
Where, MC= Market Capitalization; N= No of coins available; P= Closing price of
coins.
It is a strong indicator of demand because it shows you how much money has been
invested in Bitcoin.
The market capitalization of bitcoins can be easily understood with the help of the
following graph:
Figure 11

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The statistic presents the market capitalization of Bitcoin from the first quarter of
2012 to the first quarter of 2018. Market capitalization is calculated by multiplying
the total number of Bitcoins in circulation by the Bitcoin price. The Bitcoin market
capitalization increased from approximately 0.04 billion U.S. dollars in the first
quarter of 2012 to approximately 117.56 billion U.S. dollars in the first quarter of
2018.
Market Capitalisation Volume (24h) Circulating Supply Maximum Supply
$150,574,557,276 USD
16,993,912 BTC
$6,752,870,000 USD
763,818 BTC
16,993,912 BTC 21,000,000 BTC
Source: https://coinmarketcap.com/currencies/bitcoin/ dated 23 April 2018.
Market Capitalization of Bitcoin as on 23 April 2018 has been computed to come up at
USD $150,574,557,276, while the maximum supply in the market is limited to
21,000,000 BTC as of now.

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Bitcoin Exchanges:
Typically, a bitcoin exchange is a business platform that facilitates exchange of bitcoins
for another currency including a fiat currency, thereby allowing the users to trade and
make profit. Bitcoin exchanges quickly spread in the market in early 2011, as more and
more people started exchanging bitcoins, mostly for speculative purposes. Given the
high volatility and a ready market without any regulatory intervention, people find it
suitable to trade, invest and hold and make profits out of the same.
Business Model:
Not much later after the inception of bitcoins, bitcoin exchanges quickly spread into the
market. Since then several bitcoin exchanges in India and elsewhere have come into
picture.
At a preliminary level, a bitcoin exchange is simply a common platform to the users for
the purpose of buying and selling while matching mutual needs, in order to earn profits.
For instance, take an idea of a stock exchange, where a person has an account and he
buys stock, by paying consideration in money, from a person who wants to sell it. Stock
exchanges provide a place for buyers and sellers where they can trade.
On similar lines, a bitcoin exchange works by essentially providing ‘service’ to its
users, however unlike stock trading where a broker may as well come into picture and
charge commission in return for his services, in case of bitcoin exchanges, there is no
third-party involvement, this service is provided by the exchange itself which thereby
charges commission for the trade conducted and earns revenue. A basic business model
of a bitcoin exchange is reiterated in the chart below.

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Figure 12
The model explained above is the basic model adopted by most of the exchanges
operating in the market. In addition to trading services in bitcoins, these exchanges
also facilitate the users to hold or own bitcoins, for which they provide the basic
service of arranging a wallet which is nothing but an account.
Services provided by bitcoin exchanges in India:
Amongst the plethora of services (including core and non-core services and including
those driven by profit or not) provided by different exchanges in India, following are the
services that are common in the market:
Chart: Bitcoin Exchange trading

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1. Storing bitcoin in a bitcoin wallet after deposit/receipt of the same in the wallet.
2. Exchange of bitcoin with other currency like Rupee, Dollar.
3. A Merchant gateway service used to pay to merchants in bitcoins and acceptance by
them thereon.
4. Mobile application providing ease of accessing bitcoin wallets.
5. Sending bitcoins stored in the wallet to another wallet/withdrawing.
Major exchanges operating in India:
Cryptocurrency exchanges or digital currency exchanges (DCE) are businesses
that allow customers to trade cryptocurrencies or digital currencies for other assets,
such as conventional fiat money, or different digital currencies. They can be market
makers that typically take the bid/ask spreads as transaction commissions for their
services or simply charge fees as a matching platform
India has seen a positive growth in the cryptocurrency market vis-à-vis other
countries. In line with recent growth in the global markets, bitcoin exchanges in
India are very much operational and successful. Their business models range from
basic trading platforms to comprehensive service providers.
Listed below are some of these exchanges that have made it big in the
industry:

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Table: List of major exchanges in India.
Name of the
Exchange
Name of the
Company
promoting the
platform
Brief of
Company
Structure
Date of
Set-up of
Exchange
Date of
formation
of
Company
Website Location(s)
Coinsecure Secure Bitcoin
Traders Pvt
Ltd
company
set up as a
private
company
in India
N/a 2014 https://coin
secure.in
Delhi, India
Bitxoxo Bitxoxo
Bitcoins
Online Pvt Ltd
company
set up as a
private
company
in India
N/a 2016 https://ww
w.bitxoxo.c
om
Warangal,
Telangana,
India
Unocoin Unocoin
Technologies
Pvt Ltd
company
set up as a
private
company in
India.
2013 2015 https://ww
w.unocoin.c
om
Bengaluru,
Karnataka,
India
ZebPay Zeb IT Service
Pvt Ltd
Set up in
India as a
private
company,
has an
associate
company
in
Singapore
called
Zeb
Ventures
Pte Ltd.
2012 2015 https://ww
w.zebpay.co
m
Ahmedabad,
Gujarat, India
Bitcoin
India
Bitcoin India
Software
Services Pvt
Ltd
company
set up as a
private
company
in India
N/a 2014 https://bitc
oinindia.org
Hyderabad,
Telangana,
India

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Countries and their legal status on bitcoins:
Country
name
Legal Status Official source
Japan It officially declared
bitcoin as a legal
tender
On April 1, 2017.
https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory
Australia Proposed in budget
speech 2017-18 to
treat bitcoins as
money
http://www.budget.gov.au/201718/content/glossies/factsheets/html/FS
_innovation.htm
European
union
Convertible
decentralized virtual
currency
http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.
pdf
Canada Digital
currency/intangible
https://www.canada.ca/en/revenueagency/news/newsroom/factsheets/fact-
sheets-2015/what-youshould-know-about-digitalcurrency.html
Indonesia Illegal currency https://asia.nikkei.com/Politics-Economy/Economy/Bank-Indonesia-
declares-bitcoin-payment-illegal
United
States
“funds” under
18 U.S. Code §
1960
(virtual currency in
general)
https://cdn.arstechnica.net/wpcontent/uploads/2016/09/murgioorder.pdf

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Figure 13
As evident from the above picture, countries shaded in Green are those that have
permitted the use and trade of bitcoins. while those shaded with Orange are those that
are Neutral. Additionally, those shaded with Light pink have restricted and countries
shaded in Dark pink declared bitcoin as illegal. The countries shaded in grey are those
in which there is no information regarding bitcoins.
Russia Virtual currency
(monetary
surrogate)
http://npaed.ru/images/downloads/translationletterfromthe%20Federal_
Tax Service.pdf
China Virtual commodity http://beijing.pbc.gov.cn/beijing/13200 5/3230072/index.html

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GST on bitcoins in India:
Goods and Service Tax (GST) is an indirect tax (or consumption tax) levied in India on
the sale of goods and services. GST is levied at every step in the production process but
is refunded to all parties in the chain of production other than the final consumer. The
tax came into effect from July 1, 2017 through the implementation of One Hundred and
First Amendment of the Constitution of India by the Modi government. The tax replaced
existing multiple cascading taxes levied by the central and state governments.
Goods and services are divided into five tax slabs for collection of tax - 0%, 5%,
12%,18% and 28%. The tax rates, rules and regulations are governed by the GST Council
which comprises finance ministers of centre and all the states.
Computer Programme:
The system on which bitcoin works, is nothing but software, a set of codes which
may be considered a ‘computer programme’. Indian Copyright Act, 1957 defines
the word ‘computer programme’:
Section 2(ffc): "computer programme" means a set of instructions expressed in
words, codes, schemes or in any other form, including a machine readable medium,
capable of causing a computer to perform a particular task or achieve a particular
result.

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Under GST, if classified as software/computer programme a rate of 18% shall
apply. Accordingly, tax is applicable subject to the basic exemption limit on any
profit made on dealing with bitcoins.
On sale of bitcoins and any resultant profit is subject to capital gains tax under the
Income Tax Act, 1961.
Foreign Ruling on Bitcoins:
The GST implications of transactions involving bitcoin - GSTR 2014/3 – A Goods
and Services Tax Ruling, Australian Taxation Office, Australian Government,
(original ruling dated 17th
December, 2014)
The Ruling summarises following significant points with respect to application of
GST on bitcoins and related implications:
1. The ruling as specified has considered the classification of bitcoin as
‘money’ or a ‘financial supply’ under the GST Act.
2. As pointed out, there must be a ‘supply for consideration’ for there to be a
taxable supply.
3. A transfer of bitcoin from one entity to another is a ‘supply’ for GST
purposes. The exclusion from the definition of supply for supplies of money
does not apply to bitcoin because bitcoin is not ‘money’ for the purposes of
the GST Act.

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4. The supply of bitcoin is not a ‘financial supply’. Further, it is not an input
taxed supply.
5. A supply of bitcoin is a taxable supply and the supply of bitcoin is not GST-
free (for example, a supply to a non-resident for use outside of Australia).
6. A supply of bitcoin in exchange for goods or services will be treated as a
barter transaction.
7. Bitcoin is not goods and cannot be the subject of a taxable importation.
However, an offshore supply of bitcoin can be a taxable supply under the
‘reverse charge’ rules.
The above ruling significantly points out that bitcoin is neither money nor its
supply a financial supply; moreover, it is also not goods. Interestingly, Australian
Government has proposed to exempt bitcoins from tax.

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Status of bitcoins under Indirect Taxation in different jurisdictions:
Country/Region Status
Singapore Profit on trading in bitcoins in ordinary
course is taxable.
Australia Propose to exempt bitcoins from taxation
by treating it as money.
European Union Any exchange of bitcoins for another
currency does not attract VAT or GST, as
the case may be.
USA Treated as property as per Internal Revenue
Service, USA.
Norway As proposed in 2017, no VAT shall be
levied on trading in bitcoins.
Japan In 2017, officially recognised bitcoins as a
means of payment.
Germany Declared as private money; income
received in bitcoins from sales shall be
taxed.
Sweden Sweden Tax Agency ruled stating that
trading in bitcoins is exempt from VAT.

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Advantages of Bitcoin:
1) Anonymity:
There will be greater anonymity for users. Their identity is unscripted but a full record
of every year users and every bitcoin is retained on the publicly available ledger. Hence,
some consider Bitcoin system to be “pseudonymous” rather than fully anonymous and
suggest that there are possibilities to trace user’s real identities.
2) Lower Transaction Cost/Fee:
Lower transaction cost, as there is no third party involved. Till date there is no
comprehensive research on the real size of Bitcoin’s transaction. Few say that average
transaction fees are between 0 and 1 percent whereas; the traditional online payment
charges are between 2-3 percent per transaction. Thus, Bitcoin is likely to be cheaper to
use.
3) Inflation:
Inflation does not affect the purchasing power of bitcoins as the release schedule is pre-
programmed and predictable.
4) Risk free for Merchants:
As bitcoin is anonymous and does not carry any personal information, merchants are
protected from losses that might occur from fraud. Hence, they are able to do business
with bitcoins. It ensures that even if the crime rates and frauds may be high, but the
merchants can be secured through the public ledger.

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5) Faster Transactions:
Bitcoin transactions are very fast if compared to banking channels. A bitcoin transaction
is as fast an e-mail and can be processed within 10 minutes. Also, it can be instantly
processed if they are “zero-confirmation” transactions, meaning that the merchant takes
on the risk of accepting a transaction that hasn’t yet been confirmed by the bitcoin
blockchain.
The confirmed transactions are those which takes at least 10 minutes to process. Credit
Card or digital wallet services also provides instant approved transactions services but
for this they usually charge a hefty fee, which is not in the case of Bitcoin as mentioned
above. Bitcoin has very low transaction fees even for being super-fast in terms of
processing.
Dis Advantages of Bitcoin:
There are several problems associated with the Bitcoins. Some of them are explained
below:
1) Security Threats:
Although, faking of bitcoins is not possible but many cases have been reported
considering other forms of currency, such as security of exchange platforms and
wallets. Cybercrimes are increasing with an increase in number of bitcoins in
markets. There have been problems reported with Bitcoin-based Ponzi schemes.
The hackers are now targeting the bitcoin exchanges as it is outside the banking
system and not backed by any central agency.

34
Some of the examples are as follows:
I. Allinvain:
It’s not a bitcoin service, but honorary mention has to go to Allinvain, a member of
the Bitcoin Talk forums who, in June 2011, became the first person to suffer a
major loss owing to a bitcoin hack.
25,000 bitcoins were stolen from their wallet after hackers compromised the
Windows computer they were using. Even at the time, that sum was worth more
than $500,000; it would now be worth a little less than £10m.
II. BitFloor:
The summer of 2012 was a bad time for bitcoin exchanges. BitFloor suffered its
own break-in in September, losing 24,000 bitcoins when a hacker “accessed an
unencrypted backup of wallet keys “.
The exchange paused operations, with the founder, Roman Shtylman, saying that “I
felt it inappropriate to continue operating not having the capability to cover all
account balances for BTC at the time.” The company eventually managed to pay
most users back, albeit only in dollars.
III. Coincheck hack:
Japanese cryptocurrency exchange Coincheck has confirmed it lost about $524
million after suffering a hack which stole 500 million tokens.

35
In this picture taken on early January 27, 2018, Coincheck president Koichiro Wada
(L) bows in apology at the end a press conference in Tokyo. Japan's government
said on January 29 it would impose administrative measures on virtual currency
exchange Coincheck after hackers stole hundreds of millions of dollars in digital
assets from the Tokyo-based firm.
2) Volatility:
Since its inception, the price of bitcoin has been subject to high volatility. It rose
more than 20 times in value between September and December 2013, but then
lost about 60% of its value in next 3 months.1000 people obtained more than
half of the Bitcoins. This might create an effect on pricing, when there is
shortage of bitcoins in future.
The cryptocurrency market has lost over $100 billion in market capitalisation in
less than 24 hours. From an all-time high of $835.5 billion on January 7, the
market valuation of all cryptocurrencies now stands at $390 billion.
All major cryptocurrencies fell about 15-30% after India’s Finance
Ministry announced the country wants to “eliminate” the use of
cryptocurrencies in criminal activities.

36
Case Study: Mt. Gox Scandal.
Mt. Gox was the largest Bitcoin exchange (controlling 70% of all Bitcoin
trading) where people bought and sold their Bitcoins.
However, serious problems began to arise in February of 2014 leading to the
downfall of the giant. Mt. Gox had locked withdrawals due to a bug that caused
glitches in processing transactions. In the following weeks, the entire website
was taken offline and the CEO of Mt. Gox completely vanished. This sent many
of their stakeholders into full panic mode as their holdings disappeared with the
company.
In a leaked internal document, Mt. Gox reported that 744,408 Bitcoins were
missing due to “malleability-related theft which went unnoticed for several
years.” That translates to more than $400 million in USD being stolen.
Consequently, Mt. Gox filed for bankruptcy as they were now insolvent.
This scandal is an example of the volatility in a digital, decentralized system.
“No regulation” means “no guarantee” and is especially risky in a market
involving finance.
Following the incident, the value of Bitcoins fell by nearly 50% — from about
$820 to $418 USD per Bitcoin. More importantly, it damaged the reputation of
Bitcoin’s reliability and integrity. This could possibly set back the potential
growth and acceptance of cryptocurrencies for years.

37
3) Illegal Activities:
Several incidences have occurred stating that bitcoins have been used for illicit
and illegal activities around the globe. Reportedly, a recent ransomware attack
called “WannaCry” spread on a large-scale basis; the hackers had demanded
payment in respect to ransom money in bitcoins.
This incident has raised questions on the viability of the cryptocurrency.
Bitcoins have also been used in Money laundering, Black money and Ponzi
schemes resulting in huge loss of money for several investors.
4) No Regulatory Authority:
Bitcoins are not backed or regulated by a centralized agency till date, making
them less reliable and also there is no forum, where a user can possibly reach out
for any help or grievance, as a result of which consumers are being exposed to
transactional and informative risk.
5) Lack of Awareness:
Another issue pertains to awareness. Lot of consumers have little or no
information regarding risks associated with Bitcoin lending, which leads them
into unwanted trouble under regulations such as anti-money laundering.

38
Future of Bitcoins:
Though, Bitcoin provides the vision of new era in the financial world, Bitcoin’s future
as a currency remains far from certain. Increase in regulation and increased compliance
demands will raise Bitcoin’s transaction costs and reduce ambiguity of its users. Lack of
acceptance by financial system and lack of protection are major threats for gaining trust
and stronger support in the society. By purchasing bitcoins in a debt-ridden economy, it
allows people to protect themselves from the possibility of sudden drop in the
purchasing power of their money. Many argue that the current system is not able to
handle the possible increase of transactions.
One of the failure of Bitcoin’s future as a currency is that they may create strong
incentive to heap bitcoins rather than circulate them. Thus, limiting the amount
available for trade rather than investment. Bitcoins collapse in value when economy is
growing. A vast majority of users keep bitcoins for price prediction. Economists claim
that speculative and slow deflation will not be fatal to Bitcoin. Analysts believe
Bitcoin’s real impact is the innovation in payments technology it has brought.
Future of Bitcoin in India:
Bitcoin was introduced in India in 2014.Future of a vibrant crypto currency
economy is seen in a developing country like India. Mobile phones helped India in
advancing the technology. Similarly, Bitcoins can help India skip the current
generation of financial infrastructure and move India directly to future of finance.
Bitcoin is free to join just like internet. Bitcoin network is the fastest, Cheapest and
easiest way to send money from one person to another. But according to RBI recent
circular, we can assume that there would be no future for bitcoins in India as it
restricted all financial institutions not to perform any transactions related to VCs.

39
Will Bitcoin Replace Physical Currency?
Money and Currency share the following properties:
(1) Both are units of account, accepted as a medium of exchange and portable.
(2) Both are divisible, durable and fungible.
Bitcoin transactions are irreversible in the same way as the cash transactions are
irreversible. Regardless of the illegal issues, bitcoin has still continued, according to
Bitcoin Analysts it has reached its saturation that will protect it from dying in near
future. Due to its decentralized nature, governments need not pay any additional cost
to switch to digital currencies.
Paper/Physical money needs a constant checking of bills, printing coins and notes
etc.; whereas, there is no cost to maintain digital currencies. Thus, the digital
currency is more environmental and financial friendly. According to many analysts,
digital currencies will fully replace the physical currencies in nearly 10 years.
As the digital currency is on growth and getting popular, regardless of so many
problems, there still remains a security while holding the currency in hand. The fear
of viruses, hacking and malware attacks on the financial wallets might make the
process of adopting the currency slow.

40
Do Traders in India Prefer Bitcoins?
Bitcoin is neither a currency nor a commodity nor a service in India. Bitcoin does
not have any definition in India. India does not have centralized bitcoin exchange,
but users can purchase and sell coin through various websites. Approximately
23,000 Indian users have bitcoin wallets where the crypto currency is stored.
On December 24 2013, RBI issued a press release related to all crypto currencies,
stating the creation, usage and trade of virtual currencies as a medium of payment,
which is not legalised by any agency or bank. However, RBI has cautioned traders
and users to various security related risks such as Hacking, Malware attacks, etc.
Till date, RBI has not accepted bitcoin as the value of bitcoin is speculation. It has
been noticed that bitcoins are traded on a platform whose legal status is not clear.
Many reports have been published about the illegal activities related to bitcoins.
One of the main reasons of violation of bitcoins can be bitcoins can be because of
peer to peer pseudonymous system. However, Bitcoin has a number of benefits; it
significantly reduces transaction costs, enables growth and security of e-commerce
and physical transactions etc.
From past few months, Bitcoin activity in India has seen a sudden rise. Partnership
between bitcoin exchange ‘UNO COIN’ and payroll service provider ‘BIT
WAGE’ may help to continue that growth. This partnership will allow free lancers
or employees in India to get better rate on the payments they receive from abroad.
Freelancers in the country are already making profits by asking their employees to
pay via Bitcoin rather than PayPal or Paytm. On the other hand, Bit wage is making
the process easier by getting payments via bitcoins from the remote areas of the
country.

41
In one of the interviews, Unocoin chief executive officer Sathvik Vishwanath said
“the price of bitcoin in India is more than International price because there is high
demand but limited supply for bitcoin among Indian traders.”
Some of the Indian Merchants who accepts Bitcoin as payment are as follows:
Figure 14

42
Arbitrage opportunities in India:
Bitcoin exchange rates in India have been much higher than the rates found in
largest exchange markets like china or United States, due to the lack of liquidity in
the India. The digital asset traded at 20% premium compared to rates in other
countries.
Sunny Ray, the President and co- founder of Uno coin said,” The reason that the
price in India is so high because company like ours are not able to settle against
foreign exchanges due to capital controls, which means that we are unable to send
large wire transfers every day or two.”
Arbitrage will eventually disappear because people from abroad will buy bitcoin and
then send them to people in India till the market normalizes. The person can buy
bitcoin with their bank account and on the other hand receive bitcoin in e -wallet.
Bitcoin is easily converted into Indian Rupees. Hence, the workers do not need to
hold the digital money for very long.
The employees also get benefit from the partnership of Bit wage and Uno coin. If
the employee is receiving $1000 from US, he receives 8% more when paid via Bit
wage rather than using other sites like PayPal, since any agency does not fix these
rates. Profit of 4% is usually made by the workers in India who are paid via Bit
wage.

43
Bitcoin Futures:
Futures are an agreement to buy or sell an asset on a specific future date at a specific
price. Once the futures contract has been entered, both parties have to buy and sell at the
agreed-upon price, irrespective of what the actual market price is at the contract
execution date.
There are two positions you can take on a futures contract: long or short position.
If you take a long position, you agree to buy an asset in the future at a specific price
when the contract expires.
When you take a short position, you agree to sell an asset at a set price when the
contract expires.
Futures are not just for physical assets; they can be traded on financial assets as well.
With Bitcoin futures, the contract will be based on the price of Bitcoin and speculators
can place a “bet” on what they believe the price of Bitcoin will be in the future. In
addition, it enables investors to speculate on the price of Bitcoin without actually having
to own Bitcoin.
It has two major consequences:
First, while Bitcoin itself remains unregulated, Bitcoin futures can be traded on
regulated exchanges. This is good news for those who are concerned about the risks
related to the industry’s lack of regulation.
Second, in areas where trading Bitcoin is banned, Bitcoin futures allow investors to still
speculate on the price of Bitcoin.

44
A Bitcoin future will work on exactly the same principles as futures on traditional
financial assets by anticipating whether the price of Bitcoin will go up or down,
speculators will either go long or short on a Bitcoin futures contract.
For example, if an individual owns one Bitcoin priced at $18,000 (hypothetically) and
foresees that the price will drop in the future, to protect themselves, they can sell a
Bitcoin futures contract at the current price, which is $18,000 close to the settlement
date the price of Bitcoin, along with the price of the Bitcoin futures contract, would
have dropped. The investor now decides to buy back the Bitcoin futures. If the contract
trades for $16,000 close to the future settlement date, the investor has made $2,000 and
therefore protected their investment by selling high and buying low.
This is a basic example of how Bitcoin futures work and the exact terms of each future
contract may be more complex depending on the exchange, which will include
minimum and maximum price limits.
CME: CME Group Inc. (Chicago Mercantile Exchange & Chicago Board of Trade) is
an American financial market company operating an options and futures exchange. It
owns and operates large derivatives and futures exchanges in Chicago, New York City,
and exchange facilities in London, using online trading platforms. On November 1,
2017, CME announced they will begin trading in Bitcoin futures by the end of 2017,
pending regulatory approval. Bitcoin price surged immediately breaking above the
$7000 benchmark. The CME follow was launched on December 17 set to trade Dec 18,
2017.

45
CBOE: Chicago Board Options Exchange (CBOE) Futures Exchange, LLC (“CFE”)
launched trading in XBT futures on December 10, 2017, becoming the first U.S. Bitcoin
futures contract. XBT futures are U.S. dollar-denominated, cash-settled futures
contracts that are based on the auction price of bitcoin on the Gemini Exchange. XBT
futures are designed to reflect economic exposure related to the price of bitcoin and
settle to a single, tradeable auction price. A Sample Bitcoin futures exchange contract
comparison between CME and CBOE:
Figure 15

46
What do Bitcoin futures mean for the Bitcoin price?
In the short-term, it pushes the price upwards as the overall interest in the
cryptocurrency spikes.
The day after Bitcoin futures were launched on the Chicago Board Options Exchange
(CBOE), for the first time on a major regulated exchange, the price jumped by almost
10% to $16,936.
Figure 16
In the above figure, period is represented on x-axis and value on y-axis. The figure
depicts that the price of Bitcoin with the introduction of Bitcoin Futures increased by
10% to $16,936.

47
Similarly, in the run-up to the launch of Bitcoin futures on one of the world’s biggest
exchanges, CME, the Bitcoin price broke through the $20,000 barrier.
Figure 17
In the above figure, period is represented on x-axis and value on y-axis. The figure
depicts that the price of Bitcoin with the introduction of Bitcoin Futures by CME broke
through $20,000 barrier.
The long-term price impact is harder to predict, but in all likelihood, it will continue to
boost the price of Bitcoin.

48
Where can you trade Bitcoin futures?
There are two separate markets where Bitcoin futures can be traded.
The first option is on selected cryptocurrency exchanges. Cryptocurrency exchanges
have been offering this option for quite some time now, where the trade of Bitcoin
futures remain largely unregulated.
The second option is on publicly regulated exchanges. This is a recent phenomenon
and part of the reason why we have seen the Bitcoin price hike during December.
It started with CBOE’s Bitcoin futures launch on the 10th of December. The Chicago
Mercantile Exchange (CME) follow with its launch Dec.17 set to trade Dec.18.
Brokerage firms like TD Ameritrade and JP Morgan have also expressed their interest
to allow access to these markets.
TECHNICAL ANALYSIS OF BITCOIN FUTURES:
Technical analysis is a trading tool employed to evaluate securities and attempt to
forecast their future movement by analysing statistics gathered from trading activity,
such as price movement and volume. The data used for technical analysis is taken
from the past 1 month.

49
Figure 18
From the above charts you can observe that:
a) In oscillators only 1 is ready to sell and 1 is ready to buy and remaining 9 members are neutral, which indicates
the investor to be neutral.
b) In Moving Averages only 1 is ready to sell and 9 is ready to buy and only 1 is neutral, which indicates that there
is huge demand in the market due to which there will be increase in the price which provide profits to the seller.
c) Thus, Technical analysis helps the investors to evaluate their investments and to forecast their future movement
by analysing statistics gathered from trading activity.

50
Status of Bitcoins Post Demonetization in India:
Reserve Bank of India has warned people several times regarding the risks
associated with the bitcoins. Many people believed in those warnings and
considered not possessing bitcoins in India. In the present scenario, bitcoin does not
hold a legal or an illegal position in the country. But, with the Government’s
overnight decision to demonetize high value currency notes, two largest
denomination notes: INR 1000 and INR 500 lost the status of legal tender on
November 8, 2016. As a result, the Indian bitcoin community saw many new
players who decided to reduce their dependency on the country’s legal tender,
making bitcoin the best choice. Since then, the country’s bitcoin community has a
sudden expansion. Concerned about the negative impact of virtual currencies such
as bitcoins on the consumers, government recently held a meeting to dig deeper into
the ways of regulating the fast-growing segment to control money laundering or
terror funding.
On Tue, Nov 14 2017,
A bench of Supreme Court Chief Justice Dipak Misra and justices A.M. Khanwilkar
and D.Y. Chandrachud issued notice to the ministries of finance, law and justice,
information technology, market regulator SEBI and the RBI, on the plea which also
sought setting up of a panel to frame a mechanism to regulate the flow of bitcoin.

51
On Wed, Dec 13 2017,
Multiple teams of tax sleuths Wednesday, investigating virtual currency Bitcoin's
investors and transactions, conducted raids at nine cryptocurrency exchanges in
Delhi, Bengaluru, Hyderabad, Mumbai, Kochi and Gurugram.
This action was taken under section 133A of the Indian Income Tax Act for
“gathering evidence for establishing the identity of investors and traders, transaction
undertaken by them, identity of counter-parties, related bank accounts used, among
others,” according to the quoted officials.
The raids come a month after the Supreme Court issued notice to the Centre and its
agencies, including SEBI, Income Tax Department, RBI and ED to appraise it about
their stand on Bitcoin and other cryptocurrencies and how to regulate them.
In Ahmadabad, ED officials shut down trading platform buysellbit.co.in, which was
found to be in violation of the Foreign Exchange Management Act and could
possibly face charges of money laundering.
After the continuous issues of bitcoins and other virtual currencies being raised, the
finance ministry has decided to come up with rules and regulations to govern it.
Hence, the finance ministry has asked a committee to provide with suggestions
related to consumer protection, money laundering and terror funding. As a result,
the department of economic affairs under the finance ministry has constituted an
inter disciplinary committee chaired by special secretary (economic affairs) and
representatives from different departments, like, Economic Affairs, Financial
services and some government organisations like NITI Ayog, State Bank of India.

52
The responsibility of this committee was to look into the existing framework. The
existing committee took a closer look into the present status of virtual currencies in
India and World, examined the existing global regulatory structures governing
bitcoins and suggested measures for dealing issues related to terror funding and
money laundering.
As per the recent CNBC India report, the committee has come closer in legalising
the virtual currencies in India. The following rules would be implemented, if
bitcoins are legalised in India:
1. Bitcoins would fall under the purview of RBIs 1934 Act.
2. RBI will issue Guidelines regarding investment and purchase of Bitcoins.
3. Bitcoin investors would be taxed.
4. All the foreign payments made through Bitcoins, will fall under the FEMA Act.
On Fri, April 6 2018,
Surprising all the traders of cryptocurrency or virtual currency, recently, RBI issued a
circular bearing the number DBR.No.BP.BC.104 /08.13.102/2017-18 on 6 April 2018.
According to that circular all Commercial and Co-operative Banks /Payments
Banks/Small Finance Banks/NBFCs / Payment System Providers and other entities
regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating
any person or entity in dealing with or settling VCs. Such services include maintaining
accounts, registering, trading, settling, clearing, giving loans against virtual tokens,

53
accepting them as collateral, opening accounts of exchanges dealing with them and
transfer / receipt of money in accounts relating to purchase/ sale of VCs.
Figure 19
Source: https://rbi.org.in/Scripts/Notification
By this Circular, all the cryptocurrency traders got panicked and started selling their
investments. One of the leading crypto exchange zebpay has issued mails to its
customers regarding the services to be provided by them and restrictions, disruption in
banking services etc.

54
Figure 20
Kali Digital had approached the High Court of Delhi on April 16, 2018 challenging
RBI circular dated April 6 2018 “Withdrawing Banking Support to Virtual Currency
Exchanges.”
The company requested Hon’ble High Court to issue an appropriate writ, order or
direction quashing circular bearing reference number
DBR.No.BP.BC.104/08.13.102/2017-18, dated April 6, 2018 issued by RBI to be
arbitrary, unconstitutional and violative of Article 14 and article 19 (1)(g) of the
Constitution of India, 1950.
Kali Digital in its petition has also included Union of India and Goods and Service Tax
Council as respondents along with the RBI. Union of India, represented through the
Secretary, Ministry of Finance (Department of Economic Affairs) has granted power to
RBI to issue the impugned circular while GST Council have failed to introduce
appropriate regulations with respect to cryptocurrencies in the Goods and Services Tax
law.

55
Accepting the petition filed by Ahmedabad-based cryptocurrency start-up Kali Digital
Ecosystems, the Delhi High Court has now issued a notice to the Reserve Bank of India
(RBI), The Union of India through Secretary, Ministry of Finance and GST Council.
Window period of 3 months:
The Circular provides a window of three months from 6th April, 2018, to exit the
existing relationship(s) with such entities or individuals, for the regulated entities that
are already dealing with VCs or persons which deal in VCs. Effectively, the said
window is also available for those dealing in such currency to choose to exit the market.
Impact:
Easier said than done, the timeline is limited and the aim is too far-fetched for the
business and investor community in the virtual currency market. To comply with the
outright instructions, the banks will either freeze or close the accounts of crypto-
currency exchanges. Such exchanges will either have to deal in cash or close their
businesses. There are close to about a thousand such exchanges dealing in crypto-assets
in India. Seemingly, dealing in cash may not even be the last choice for such businesses
as their entire operations are purely electronic, including all their dealings in crypto-
currencies. While the exchanges will be at loss, more importantly, the investors will
have the worst hitch to face. Dissension among the investors is likely to lead to
oppositions.

56
RESEARCH GAP
There are a lot of studies on Cryptocurrencies, their market capitalizations but there
are not many studies conducted on Bitcoin futures and technical analysis. .
Therefore, the present study helps in filling the research gap by presentation of
information on Bitcoin futures and technical analysis.
Need for the Study
Study of customer’s perception towards the performance of the Bitcoin trading and to
know that what a trader was expecting from the bitcoin market. This study helps us to
understand the trader behaviour in decision making while selecting a particular currency
for their investment in the crypto currency market and to find out the trader’s selection
process. This study is carried out to bring out a specific currency from all other
currencies which was highly demanded by the traders and to know the factors that
influence the trader to select that particular cryptocurrency.
It also concentrates to get a clear understanding about the Bitcoin market and helps to
understand what is going on both in India and Rest of the countries. It helps to get the
idea on the factors affecting the trader to invest on bitcoins and also from where the
investor is getting advices regarding the investment in Bitcoins.

57
OBJECTIVES OF THE STUDY:
1) To understand the concept of Bitcoin.
2) To study the people (educated and investors) Perception towards the
Crypto currency market.
3) To analyse the Investors Investment patterns due to fluctuations in Bitcoin
prices.
4) To study the position of bitcoin and view around the world and India.
5) To analyse the various factors which influence the performance of Bitcoin.
6) To understand and analyse the risks and vulnerabilities in bitcoin transactions.
7) To Study the regulatory concerns regarding the bitcoin.
Scope of the study:
This study was made to evaluate the level of awareness regarding the Cryptocurrency
among the residents of India and Other countries. The basic purpose is to determine the
awareness and enhance the Bitcoin purchasing skills. The report gives a clear view of
the perceptions of both investors and non-investors regarding the Bitcoins.

58
CHAPTER-II
METHODOLOGY/RESEARCH
DESIGN

59
TYPE OF PROJECT:
The study is about “BITCOIN: A FIERCE CRYPTOCURRENCY” which is
undertaken with the help of descriptive method.
RESEARCH METHODLOGY:
Research can be defined as a systematic search for information on a particular topic.
Research is an academic activity and such the term should be used in a technical sense.
A design of specification of methods and procedures must be made for acquiring the
information needed, structurally to solve the problems. The purpose of any research is
to find conclusion of a problem in systematic manner in view of various types of
respondents. The research methodology includes the following:
a) Sources of data.
b) Sampling.
a) Sources of Data:
Data is collected from two types of sources – primary and secondary data. Primary data
is which is collected for the first time and without any reference and data collected from
past record is known as secondary data. Both sources are used for collection of data.
 Primary Data
This data is collected through interviewing the personnel concerned with the trading and
also people who are not trading bitcoin.

60
 Secondary Data
This secondary data collected through several articles, websites, social media groups
and forums.
b) Sampling Method:
Questionnaire method was used to collect primary data from the 100 respondents.
Well balanced and structural questionnaire was used as a tool for the present study.
Random and purposive sampling has been adopted for the present study. The
questionnaire with questions of general to specific aspects on Bitcoin and its trading
are used to get the relevant information from the respondents.
Limitations of the study:
 The information regarding cryptocurrency bitcoin is vast, so only main topics
are highlighted.
 As Respondents are very busy and unable to share their opinions on Bitcoin,
thus the survey demands more time but the survey is restricted to less time.
 Questionnaire method is used to determine the awareness and investment
pattern of respondents on Bitcoins. The conclusions drawn from the above
analysis cannot be generalized.
 The respondents feel reluctant about the survey conducted.

61
CHAPTER-III
DATA ANALYSIS AND
INTERPRETATION

62
1. GENDER
Table.4.1
S. No Particulars No of Respondents Percentage
(%)
1 Male 60 60
2 Female 40 40
Total 100 100
Source: Primary data
Chart no: 1
INTERPRETATION:
Here the total respondents are 100. From the above table it is inferred that, 60% of the
respondents are Male and 40% of the respondents are Female.
MALE
60%
FEMALE
40%
MALE FEMALE

63
2. AGE
Table.4.2
S. No Particulars No of
Respondents
Percentage
(%)
1 18-25 79 80
2 25-45 18 18
3 45-60 2 2
4 Above 60 - -
Total 99 100
Chart no: 2
INTERPRETATION:
Here the total respondents are 99. From the above table it is inferred that 80% of the
respondents are between 18-25 years ,18% of the respondents are between 25-45years,
2% of the respondents are between 45-60 years and no respondents above 60 years.
80%
18%
2%
18-25 25-45 45-60 Above 60

64
3. COUNTRY
Table.4.3
Respondents
Percentage
(%)
1 India 98 98
2 America 2 2
Total 100 100
Chart no: 3
INTERPRETATION:
Here the total respondents are 100. From the above table it is inferred that, 98% of the
respondents are from India and 2% of the respondents are from America.
98%
2%
INDIA
AMERICA

65
4. OCCUPATION
Table.4.4
Respondents
Percentage
(%)
1 Employee 24 24
2 Profession 2 2
3 Businessmen 2 2
4 Student 71 72
Total 99 100
Chart no: 4
INTERPRETATION:
respondents are Students, 24% of the respondents are Employees,2% of the respondents
are Professionals and 2% respondents are Businessmen.
24%
2%
2%
72%
EMPLOYEE PROFESSION BUSINESSMEN STUDENT

66
5. ANNUAL INCOME:
Table.4.5
(%)
1 BELOW RS50,000 43 54
2 RS 50,000 - 1,00,000 11 13
3 RS 1,00,000- 3,00,000 11 14
4 ABOVE RS 3,00,000 15 19
Total 80 100
Chart no: 5
INTERPRETATION:
respondent’s income is less than RS. 50,000 per annum and respondents with annual
income ranging from RS. 50,000 to 1,00,000 and RS. 1,00,000 to 3,00,000 was 13%and
14% respectively and respondents whose annual income above RS. 3,00,000 are 19%.
54%
13%
14%
19%
BELOW RS 50,000 RS 50,000-1,00,000
RS 1,00,000-3,00,000 ABOVE 3,00,000

67
6. PERFORMING BITCOIN TRADING?
Table.4.6
(%)
1 YES 19 19
2 NO 81 81
Total 100 100
Chart no: 6
INTERPRETATION:
Here the total respondents are 100. From the above table it is inferred that out of 100
respondents only 19% of the population performs trading activity in Bitcoins and
rest 81% of the respondents may not perform trading activity in the bitcoins.
However, it can also be assumed that these respondents may be trading in the other
cryptocurrencies apart from the Bitcoins.
19%
81%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
YES NO

68
7. IF YES, DURATION OF TRADING?
Table.4.7
(%)
1 BELOW 1 YEAR 23 74
2 1-2 YEARS 5 16
3 2-3 YEARS - -
4 MORE THAN 3
YEARS
3 10
TOTAL 31 100
Chart no: 7
INTERPRETATION:
respondents were trading from past 1 year;16% of the respondents were from past 1-
2 years and 10% of the respondents were into trading for more than 3 years.
74.00%
16.00%
0
10%
0.00% 20.00% 40.00% 60.00% 80.00%
BELOW 1 YEAR
1-2 YEARS
2-3 YEARS
ABOVE 3 YEARS

69
8. IF NO, REASONS FOR NOT TRADING?
Table.4.8
(%)
1 NO PROPER INFORMATION 37 44
2 BEING RISKY 9 11
3 NOT INTERESTED 24 29
4 OTHER 13 16
TOTAL 83 100
Chart no: 8
INTERPRETATION: Here the total respondents are 83. From the above table it is
inferred that 44% of the respondents claimed that they have no proper information
and 11% of the respondents stated the reason of being risky; 29% of the respondents
are not interested and 16% of the respondents said reasons other than stated.
44%
11%
29%
16%
NO PROPER INFORMATION BEING RISKY
NOT INTERESTED OTHER

70
9. BITCOINS USED FOR PURCHASING GOODS AND SERVICES?
Table.4.9
(%)
1 YES 7 7
2 NO 93 93
TOTAL 100 100
Chart no: 9
INTERPRETATION:
respondents only 7% of the population has actually purchased goods and services with
the help of Bitcoins. Rest 93% of the respondents never bought any goods and services.
7%
93%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
YES NO

71
10. DO YOU HAVE BITCOIN WALLET?
Table.4.10
(%)
1 YES 20 20
2 NO 80 80
TOTAL 100 100
Chart no: 10
INTERPRETATION:
respondents only 20% of the respondents are having Bitcoin wallet and remaining 80%
of the respondents doesn’t have Bitcoin wallet.
20%
80%
YES NO

72
11. DO PRICE OF BITCOIN CHANGES IN NEXT 12 MONTHS?
Table.4.11
(%)
1 YES, THE VALUE WILL RISE ALOT 11 11
2 YES, THE VALUE WILL RISE MODERATELY 23 23
3 THE VALUE WILL REMAIN CONSTANT 10 10
4 NO, THE VALUE WILL FALL ALOT 10 10
5 NO, THE VALUE WILL FALL MODERATELY 19 19
6 NO IDEA 27 27
TOTAL 100 100
Chart no: 11
11%
23%
10%
10%
19%
27%
YES, THE VALUE WILL RISE A LOT YES, THE VALUE WILL RISE MODERATELY
THE VALUE WILL REMAIN CONSTANT NO, THE VALUE WILL FALL A LOT
NO, THE VALUE WILL FALL MODERATELY NO IDEA

73
INTERPRETATION:
respondents:
Around 11% of the respondents believe that the value of the bitcoin will rise a lot in
next 12 months.
Wherein 23% of population believes that the value of the bitcoin will rise moderately.
10% of population believes that the value of the bitcoin remains constant.
10% of population believes that the value of the bitcoin will fall a lot.
19% of population believes that the value of the bitcoin will fall moderately
and 27% of the population have no idea regarding such forecast.

74
12. OPINION ABOUT BITCOIN TRADING?
Table.4.12
(%)
1 RISKY 42 42
2 LESS RISKY 9 9
3 HIGHLY RISKY 22 22
4 NOT RISKY 7 7
5 I DON’T KNOW 20 20
TOTAL 100 100
Chart no: 12
INTERPETATION:
Here the total respondents are 100. It is found that 42% of the population believes
Bitcoin trading is risky, 9% of the population believes trading is less risky,22% of the
population believes trading is highly risky,7% of the population believes trading is not
at all risky but 20% of the population answered as I Don’t Know.
42%
9%
22%
7%
20%
0% 10% 20% 30% 40% 50%
RISKY
LESS RISKY
HIGHLY RISKY
NOT RISKY
I DON’T KNOW

75
13. SOURCES FOR BITCOIN INVESTMENT ADVICE?
Table.4.13
Respondents
Percentage
(%)
1 BITCOIN NEWS WEBSITES 22 26
2 BITCOIN EXCHANGES 16 18
3 CONSULTANTS 15 17
4 SOCIAL MEDIA GROUPS 33 38
5 OTHER 1 1
TOTAL 87 100
Chart no: 13
INTERPETATION:
The respondents mostly prefer Social Media with a preference rate of 38% for getting
the investment advices, Bitcoin News Websites goes in the second position with a
preference rate of 26% and goes the consultants, bitcoin exchanges and others, with a
rate of 17%, 18%, 1% respectively.
0.00%5.00%10.00%15.00%20.00%25.00%30.00%35.00%40.00%
BITCOIN NEWS WEBSITES
BITCOIN EXCHANGES
CONSULTANTS
SOCIAL MEDIA GROUPS
OTHER
26.00%
18.00%
17.00%
38.00%
1.00%

76
14. SOURCES FOR BITCOIN NEWS?
Table.4.14
(%)
1 bitcoinnews.com 28 40
2 cryptocoinsnews.com 25 36
3 bitcointalk.org 14 20
4 others 3 4
TOTAL 70 100
Chart no: 14
INTERPETATION: It is understood that most of the respondents prefer
bitcoinews.com, next best websites they refer is cryptocoinsnews.com, bitcointalk.org
and other websites with a rate of 40%, 36%, 20%, 4% respectively.
40%
36.00%
20%
4.00%
bitcoinnews.com cryptocoinsnews.com bitcointalk.org others

77
15. DO YOU MINE BITCOINS?
Table.4.15
Respondents
Percentage
(%)
1 YES 4 4
2 NO 50 50
3 DON’T KNOW WHAT MINING IS 46 46
TOTAL 100 100
Chart no: 15
INTERPETATION:
From the above table it is inferred that only 4% of the population mine bitcoins, 50% of
the population do not mine bitcoins and 46% of the population actually doesn’t know
the concept of mining.
4%
50%
46%
YES NO DON’T KNOW WHAT MINING IS

78
16. IF YES, HOW LONG DO YOU MINE BITCOINS?
Table.4.16
(%)
1 >15 HRS PER WEEK 5 9
2 < 15 HRS PER WEEK 1 2
3 I DON’T MINE 51 89
TOTAL 57 100
Chart no: 16
INTERPETATION:
From the above table it is inferred that only 5 miners often spend more than
15hours per week to mine bitcoins, 1 respondent mine less than 15 hours per week
and 51 respondents don’t mine.
9% 2%
89%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
>15 HRS PER WEEK < 15 HRS PER WEEK I DON’T MINE

79
10%
15%
15%
23%
37%
GOVT REGULATIONS DEMAND FOR OTHER CRYPTOCURRENCIES
RISK ASSOCIATED I DON’T KNOW
ALL OF THE ABOVE
17. WHY DOES BITCOIN VALUE FLUCTUATE VERY OFTEN?
Table.4.17
(%)
1 GOVT REGULATIONS 10 10
2 DEMAND FOR OTHER
CRYPTOCURRENCIES
15 15
3 RISK ASSOCIATED 15 15
4 I DON’T KNOW 23 23
5 ALL OF THE ABOVE 37 37
TOTAL 100 100
Chart no: 17

80
INTERPETATION: From the above table it is inferred that 37% of the respondents
believed that all the above factors cause fluctuation and 10% believed that are caused by
Govt regulations and 15% demand for other cryptocurrencies and 15% for risk
associated. Rest 23% couldn’t state the reason for fluctuations of bitcoins.

81
18. DOES ONE CURRENCY FLUCTUATION AFFECT THE OTHER ONE?
Table.4.18
(%)
1 YES 45 45
2 NO 7 7
3 MAYBE 48 48
TOTAL 100 100
Chart no: 18
INTERPETATION:
From the above table it is inferred that 45% of the respondents believe that one
currency fluctuation affects the other cryptocurrency, while 7% of the population
didn’t believe and rest 48% of the population couldn’t state the absolute answer.
45%
7%
48%
YES NO MAYBE

83
Summary of Findings: -
1. From this project it can be observed that the number of respondents who are male is
60% and the female respondents are 40%.
2. From this project it can be observed that there are 79 respondents of the age between
18-25, 18 respondents of age between 25 - 45, 2 respondents of age 45-60.
3. From this project it can be observed that 98% of respondents are from India and
2% of them are from America.
4. From this project it can be observed that only 19% of the respondents perform
Bitcoin trading and 81% doesn’t perform trading.
5. From this project it can be observed that 74% the traders are trading below 1 year,
and 16% of the respondents are trading from past 2-3 years and only 10% of them
are trading more than 3 years.
6. From this project it can be observed that 45% of the respondents are not having
proper information regarding Bitcoins, 11% of them felt risky and 29% of them are
not interested.
7. From this project it can be observed that only 7% of the population used bitcoins
for the purchase of goods and services.
8. From this project it can be observed that Only 20% of the population actually has
a bitcoin wallet.
9. From this project it can be observed that there existed different opinions on the
raise/fall in value of bitcoin in the next 12 months.
10. From this project it can be observed that 42% of the population believed that
there is a risk in the investment of bitcoins.
11. From this project it can be observed that most of the people prefer Social Media
for the investment advices.

84
12. From this project it can be observed that Bitcoinnews.com is a highly preferable
news channel to get the information regarding the bitcoins, updates, trends news etc.
13. From this project it can be observed that 46% of the population doesn’t know
about the concept of mining the bitcoins.
14. From this project it can be observed that half of the population believes that one
cryptocurrency fluctuation is due to the fluctuation of another cryptocurrency.
15. From this project it can be observed that Bitcoin was in a bubble state till 2018
Feb, but finally the bubble busted. The value of the bitcoin fell from Rs.13,00,000 to
Rs.5,00,000.
16. From this project it can be observed that Bitcoin Futures are also available who
are interested in Risk free investments.
17. From this project it can be observed that R.B.I banned trading cryptocurrencies
in India.

85
Conclusion:
Bitcoin will do to the banking industry what email did to the postal service. The email
did not make postal service irrelevant however forced the post office to concentrate on
their strengths like their reach to remote rural areas, providing banking to low income
population etc. and less on their weaknesses. That’s the technology part of it, as per
economics, perfect currency should have limited supply, easily recognizable, durable, as
well as portable and that’s exactly what Bitcoin is. The problem that we can foresee is
the pace of change in regulations; change in regulation usually takes a route of develop,
propose and adopt which generally takes a period. Regulations or regulatory changes
typically evolve at a slower pace than innovation thereby killing it by declaring it
illegitimate. Also, as its not been governed by a central authority Bitcoin tends to
fluctuate widely and to be used globally its volatility needs to settle down
The likely impact of the RBI move, seems to be disastrous for crypto-investors in India.
The RBI is also deliberating the matter of introducing its own digital currency11,
however, it is yet unclear, how it will be put into operation. An inter-departmental group
has been formed to discuss on the issue, which is likely to submit its report by end of
June, 2018. While, the Circular is expected to create outrage in the market, on the
brighter side, RBI has moved ahead to undertake and gradually eliminate the dealings of
crypto-currencies through unregulated private entities.
However, it is crucial that a systematic mechanism is structured and implemented, to
allow flow of funds in the right direction, which are currently blocked in crypto-
currencies, once the banks and other regulated entities, end their relationships with the
dealers.

87
Questionnaire
The following questionnaires were used to collect information relating to the topic
of research.
1) Name: ________
2) Gender: _________________
3) Age:
a. 18-25
b. 25-45
c. 45-60
d. 60+
4) Country:
a) India
b) Other: ___________
5) What is your occupation?
a. Employee
b. Profession
c. Businessmen
d. Student
6) What is your annual income?
a. Below 50,000
b. 50,000 – 1,00,000
c. 1,00,000 – 3,00,000
d. Above 3,00,000
7) Do You Perform trading in bitcoins?
a. Yes
b. No

88
8) If yes, then since how long are you trading in bitcoins?
a. Below 1 Year
b. 1-2 Years
c. 2-3Years
d. More than 3 years
9) If no, then why are you not into trading?
a. No proper information
b. Being Risky
c. Not interested
d. Other
10) Have you ever used bitcoin for purchasing goods and services?
a. Yes
b. No
11) Do you have a bitcoin wallet?
a. Yes
b. No
12) Do you believe that the value of bitcoin will rise in next 4 months?
a. YES, THE VALUE WILL RISE A LOT
b. YES, THE VALUE WILL RISE MODERATELY
c. NO, THE VALUE WILL FALL A LOT
d. NO, THE VALUE WILL FALL MODERATELY
e. NO IDEA
13) Your opinion about bitcoin trading
a. Risky
b. Less Risky
c. Highly Risky
d. Not Risky
e. I Don’t Know

89
14) From whom do you get investment advice?
a. BITCOIN NEWS WEBSITES
b. BITCOIN EXCHANGES
c. CONSULTANTS
d. SOCIAL MEDIA GROUPS AND COMMUNITIES
e. OTHER
15) Which websites you refer for bitcoin news?
a. bitcoinnews.com
b. cryptocoinsnews.com
c. bitcointalk.org
d. Other
16) Do you mine bitcoins?
a. Yes
b. No
c. I Don ‘t know what mining is
17) if yes, then how long you mine bitcoins?
a. >15 Hours per week
b. < 15 Hours per week
18) Why does bitcoin value fluctuate very often?
a. GOVERNMENT REGULATIONS
b. DEMAND FOR OTHER CRYPTO CURRENCIES
c. RISK ASSOCIATED
d. I DONT KNOW
19) WHY DOES BITCOIN VALUE FLUCTUATES VERY OFTEN?
a. Government Regulations
b. DEMAND FOR OTHER CRYPTO CURRENCIES
c. RISK ASSOCIATED
d. I Don’t Know.

90
BIBLIOGRAPHY:
1) http://vinodkothari.com/wp-content/uploads/2017/08/Bitcoints-India-
Report.pdf
2) http://www.elkjournals.com/journal-of-finance.asp#
3) http://ijcsit.com/docs/Volume%208/vol8issue3/ijcsit2017080324.pdf
4) https://www.investopedia.com/terms/c/cryptocurrency.asp
5) https://blockgeeks.com/guides/what-is-cryptocurrency/
6) https://www.youtube.com/watch?v=0B1IVnDhU2Y
7) http://cryptocurrencyfacts.com/list-of-cryptocurrencies/
8) https://www.gsb.stanford.edu/faculty-research/case-studies/bitfinance-
revolutionizingzimbabwes-fragile-economy-bitcoin
9) https://masterthecrypto.com/identifying-scam-coins/
10) https://hackernoon.com/this-time-is-different-part-2-what-bitcoin-really-
isae58c69b3bf0
11) https://fee.org/articles/how-to-live-like-a-
bitcoinmillionaire/?utm_source=FEE+Email+Subscriber+List&utm_campaign
=09db3164f3-
MC_FEE_WEEKLY_2017_12_16&utm_medium=email&utm_term=0_84cc8d
089b09db3164f3-108440721
12) https://economictimes.indiatimes.com/markets/stocks/news/what-exactly-
is-bitcoingood-for-a-theory/articleshow/62211385.cms
13) https://economictimes.indiatimes.com/markets/stocks/news/what-exactly-
is-bitcoingood-for-a-theory/articleshow/62211385.cms
14) https://www.cryptocoinsnews.com/fiat-cryptocurrency-indias-central-bank-
plansdigital-rupee/
15) https://news.bitcoin.com/big-difference-electronic-fiat-cryptocurrency/
16) https://news.blackmooncrypto.com/the-fiat-cryptocurrency-efficient-
frontier47e8602f1b42
17) http://www.zerohedge.com/news/2017-08-25/cryptocurrencies-unfolding-
fiat-digitalscheme
18) https://inc42.com/buzz/rbi-bitcoin-cryptocurrencies/

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