Nobody in the lecture hall was taken aback when Sahil Shah, a second-year BBA student of Nirma University, Ahmedabad, secured a perfect 10 in his class project — on bitcoins. “A man who can make money selling bitcoins can also yap about it,” jibed his close friends.It is almost lore on Nirma campus—18-yearold Sahil Shah made a cool Rs 42,000 profit selling two bitcoins on Zebpay (a bitcoin exchange) a week after Prime Minister Narendra Modi announced the withdrawal of Rs 500 and Rs 1,000 notes. The youngster, like many other early adopters of bitcoin, surfed the rally in bitcoin prices that followed the PM’s announcement.The price of bitcoins on Zebpay, which claims to have over 1.3 lakh users, surged from Rs 51,600 to Rs 69,500 (per bitcoin) in a mere 18 days after the demonetisation speech of November 8. Sahil sold his two bitcoins purchased four months ago at Rs 40,000 a piece for a neat sum of Rs 61,000 per piece.“I knew I’d be able to sell them profitably as bitcoins in India were trending at a premium to US prices. The demonetisation announcement stoked the rally and presented a good selling opportunity,” says Sahil. Bitcoin prices in India have remained firm in a tight upper range of Rs 59,000-Rs 61,000 a piece since the early days of demonetisation.In the US (benchmark market for most cryptocurrencies ), bitcoins are trending at $770 apiece (roughly Rs 52,360), marking a clear premium of Rs 7,000 on Indian bitcoin exchanges. A few ingenuous players may have indulged in price arbitrage — buying bitcoins in the US (through relatives in that country), getting them transferred into their own accounts and selling the batch on Indian bourses at a premium.Some part of the price buoyancy in bitcoins could be attributed to market-making initiatives of Indian exchanges. In order to maintain a tight order book, exchanges increase the bitcoin price when there is high demand. Post-demonetisation, exchanges like Zebpay have raised prices marginally to quieten demand (from prospective buyers) and also to lure coin owners to sell their holdings. This strategy seems to have paid off as 350-600 coins are traded on Indian exchanges everyday. Average transaction size (per user) has also moved up to Rs 1.3 lakh on exchanges like Zebpay.“Demonetisation may not have impacted directly, but it has definitely triggered interest in all things cashless, including bitcoins,” says Sandeep Goenka, cofounder of Zebpay. “People are looking at options to transact without using cash… In the case of bitcoins, they’re also trying to speculate and pocket some gains… Many of our users are also using bitcoins as an investment vehicle. A few people residing abroad are using our platform to remit money back home as well.”A bitcoin is a form of digital currency, created and held electronically. These are not printed like fiat money, but are ‘mined’ (or produced) by technocrats around the world. No central bank owns it or controls it. (See box)Going by broad estimates, combined bitcoin trading volumes (at all exchanges) in India could be in the range of Rs 150–200 crore per month. Roughly Rs 1,200-1,500 crore worth of bitcoins are traded in the country every year, exchange owners opine. “Demonetisation could just be an indirect trigger,” says Benson Samuel, founder of Coinsecure, another bitcoin exchange. “People have become a wee bit worried about fiat money… they’ve seen how the value of money can erode when there is intervention from the top. Bitcoin interests them because it is not controlled or regulated by anyone. Beyond that, these people are simply trying out a new mode of payment,” feels Benson.As of now, there aren’t many avenues to use bitcoins in India. Most merchant outlets do not accept payment in digital currency. Ecommerce players like Flipkart, Amazon and MakeMyTrip run voucher programmes for people using bitcoin exchanges (like Zebpay), but they do not accept payment in bitcoins. Most of the time, the exchange converts the bitcoin into normal currency (on behalf of the bitcoin exchange user) and pays off the ecommerce player.The real adopters of bitcoins in India are people who use the cryptocurrency as an investment vehicle. The exchanges abound with speculators punting on volatile bitcoin prices. “I’ve made three times the gains in a little over two years… Now that is very impressive, considering that even mutual funds, in the best of years, double up only once in four years,” says Madhur Todi, owner of Mera Money Advisors, an Ahmedabad-based wealth advisory firm.Todi, a certified financial planner, is quick to point out that one should not invest large sums in bitcoins as it is not a very “investor friendly” asset class. Bitcoins are not issued or backed by banks or governments. Nobody knows how investments in bitcoins can be taxed. Also, the absence of a regulator makes legal recourse almost non-existent.“Bitcoins can be an alternative asset class; you can at best put in 5% of your risk capital,” says Todi. Lavin Mirchandani, a bitcoin investor and founder of GetEvangelized (an entrepreneurs’ marketplace), equates investing in bitcoins with startup investments. According to him, investing in stock markets is much more predictable than betting on bitcoin prices. “Investing in bitcoins is much like investing in startups… It’s either a home-run or a zero,” Mirchandani says.Most bitcoin users like Lavin Mirchandani are worried about the legality of using digital currencies. There are no prescribed laws or guidelines around cryptocurrencies in India.“No one’s sure about the usability of bitcoins; banks do not want to touch bitcoins as it is unregulated currency, merchants are not willing to accept them,” says Sameer Arora, senior manager (products), Worldline (South Asia & ME), an enabler of payments and transactional services. “Bitcoin is at a very nascent stage around the world. In India, it is at least two generations ahead of where we are right now,” Arora added. Till such time that there are clear legal definitions and framework around digital currencies, bitcoins will remain the preserve of savvy investors and speculators in India.