India’s effort to stem corruption by taking high-value notes out of circulation has sent bitcoin prices soaring. The cryptocurrency approached three-year highs as risk averse investors continued to diversify out of volatile currency markets.
The BTC/USD exchange rate was trading as high as $775.09 on Saturday, according to CoinDesk. As of 1:15 pm ET, the pair was up 0.5% to $774.15. That’s within striking distance of the June high of $781.31. The BTC/USD settled at $770.41 on Friday. A clean move above June highs would send bitcoin to its strongest settlement since 2014.
Bitcoin has been on a tear since early November after Indian Prime Minister Narendra Modi removed Rs500 and Rs1000 notes from circulation to counter black market activity that was aiding corruption and terrorism. The decision, which affects $256 billion worth of notes, proved extremely controversial domestically, triggering a cash crunch in Asia’s third-largest economy.
The cash shortage has led to a near doubling of bitcoin trading volume in India, a clear sign that investors were viewing cryptocurrency as a safe haven. Indians have also been downloading digital payment apps at a faster pace, according to Unocoin, the country’s largest bitcoin company.
Bitcoin’s haven status has grown this year as investors have looked for hedges against currency instability. The eight-year old cryptocurrency has no central authority and is therefore not directly affected by things like monetary policy.
Jitters about yuan instability in neighboring China have also created higher demand for bitcoin-as-an-investment. Chinese traders have been at the center of bitcoin’s surging valuations this year.
Currency volatility was on display this week when the euro plunged against the dollar after the European Central Bank (ECB) announced it would reduce the size of its monthly bond purchase program. Next week, the Federal Reserve is expected to raise US interest rates for the first time in a year, a move that could rile the currency markets. Anticipation for a Fed rate hike has sent the US dollar to its highest in nearly 14 years.