Major Crypto Sell-Off in India as Zebpay warns users of potential withdrawal suspension

Yesterday afternoon, India’s largest exchange Zebpay sent out a notice to users warning banks may terminate deposits and withdrawals anytime soon. On April 5th, the Reserve Bank of India had announced that banks registered with them should not deal with cryptocurrencies, or companies that deal with cryptocurrencies. This cuts off exchanges from accessing banking services. The RBI had given three months time for the banks, which is set to end soon.

Yesterday’s Zebpay notice came as no surprise, but it had a huge impact on the market, inducing panic and widespread sell-offs. The 24 hour trade volume for Bitcoin on Zebpay yesterday was Rs. 38 Crores.

The zebpay notice was sent out at 2:30pm IST and the price took a major dip in the first hour. The price of Bitcoin went from Rs. 4.59 Lakhs to Rs. 3.5 Lakhs in just one hour, dropping by nearly 24%. The price managed to recover after the initial dip and closed at Rs. 3.9 Lakhs, 15% lower than its opening rate.

There was another fall today morning, reaching a low of 3.5 Lakhs once again and is currently trading at Rs. 3.92 lakhs, slightly more than todays opening rate.

Though the market for cryptocurrencies is highly uncertain, we expect the price to stabilise in the coming days. Traders who are worried about the ban are cashing out and exiting the market. Once this ends, the market will once again stabilise.

There’s a huge gap between the global rates and rate of Bitcoin in India. The average global price of Bitcoin is $6,657 (Rs. 4.5 Lakhs), which is nearly Rs. 60,000 more than the price of Bitcoin in India. Traders with access to international exchanges are making use of this flash sale to place arbitrage trades across exchanges. However, it is not easy for everyone to execute these trades because most exchanges that offer fiat services do not do so without strict KYC process for international customers.

Our recommendation to our readers is that take risks you can afford to lose out on. If you feel the risk of a ban is too high, feel free to cash out and do not feel the FOMO pressure. For those who have a large appetite for risk, it may be worth staying in the market. Most developed nations have embraced cryptocurrencies and are regulating them. Currently, the RBI has taken a hasty decision to come to this conclusion without proper research. We’re hoping the RBI would learn from other countries and eventually form sensible regulations and legalise cryptocurrencies.