Rich rewards often entail great risks, and the same
stands true for the highly volatile cryptocurrency market. The economic
uncertainties in 2020 led to a heightened interest of masses and large institutional
investors in a new-age asset class like cryptocurrency. Ever since the
country's Supreme Court overturned a previous ban on cryptocurrencies in March
2020, India's crypto market has grown by 600% over the past
year, according to research by Chainalysis. Currently, India has
the highest number of cryptocurrency owners (around ten crore),
followed by the USA, with 2.74 crore crypto owners. More
than 340+ crypto start-ups have come into existence, and the
trading volume has grown over 500% in India since March
2020.
Major global cryptocurrency exchanges are scouting
the Indian crypto market, consistently showing a surge in daily trading volume
over the past few years. The new trading platforms enable buying, selling, and
trading that offers enhanced functionality through user-friendly applications.
The trading volume of India's biggest cryptocurrency trading platform, WazirX, with
an 8 million+ user base, has reached over USD38 billion in
2021 year-to-date.
Despite regulatory fears and a possible blanket
ban, cryptocurrency is skyrocketing in India. Ever since cryptocurrencies
entered the market in 2013, they have always remained under scrutiny by Indian
regulators. Following demonetization, a surge in fraudulent crypto transactions
has further aggravated the lack of trust over the volatile digital ecosystem.
The central bank and Indian government have developed some serious concerns
from macroeconomic and financial stability with the sudden growth in the number
of crypto traders in the country.
Cryptocurrency & Regulation of Official Digital
Currency Bill 2021 (CRDC)
The new cryptocurrency bill passed in the
parliament seeks a ban on "all private cryptocurrencies" in the
country and creates a framework for central bank-backed digital money. The bill
also intends to promote the adoption of digital currencies and address security
risks associated with crypto exchanges introducing some safeguard measures.
After the ban on private crypto trading platforms in the country, crypto assets
would become illegal, engaging in possession, issuance, mining, and
trading.
Amidst the looming concern over a 'possible'
blanket ban on crypto trading, finance, and corporate affairs, Minister Nirmala
Sitharaman has sparked some optimism among investors, saying that the
government has not planned to ban the use of cryptocurrency completely. In a
statement given to a leading English newspaper, Deccan Herald, the
finance minister said, "From our side, we are very clear that we are not
shutting all options. We will allow certain windows for people to do
experiments on the blockchain, bitcoins, or cryptocurrency."
Why are Global Investors Attracted to the Indian
Cryptocurrency Market?
Some of the largest cryptocurrency exchanges are
investing in India due to growing virtual trade volumes and growth of retail
participants in the country. In 2019, India's largest trading platform, WazirX was
acquired by the world's largest cryptocurrency exchange by trade volume, Binance. Seychelles-based BitMEX and
San-Francisco based-giant Coinbase invested in another crypto start-up, Coin
DCX, which has a user base of 3.5 million. Overall, many crypto start-ups
in India managed to attract a sum of around USD95.4 million in
2020, mainly from foreign investors. The global investments in the Indian
cryptocurrency market have increased by a whopping 1487% in
the last five years. Despite India's unclear policies regarding cryptocurrency,
global investors are not afraid to make huge bets on the country's digital coin
ecosystem. Here are some of the factors driving them to make huge investments
in the Indian crypto market.
·
Tech-savvy
Indian Population
A large proportion of India's 1.39 billion
population is young and tech-savvy, while the older generation preferred
investing in gold, real estate, patents, or kinds of equities. The younger
generations like millennials and Gen Z are adapting to high-risk crypto
trading. As per Chainalysis's 2020 report listing, India ranks 11th for global
adoption of crypto, which explicates the enthusiasm about cryptocurrencies
among the young Indian population. Hence, uncertainties regarding the
cryptocurrency environment in the country are not able to shake the confidence
of the youth population for investing in the virtual coin. Cryptocurrency
has become what gold was for the older generation.
- Rise of Trading Platforms
WazirX, CoinSwitch, CoinDCX, ZebPay, Unocoin are
some of the successfully emerging trading platforms in the country that have
collectively managed to acquire millions of users. The cryptocurrency exchange
platforms are highly secured and accessible across various platforms, providing
users with added flexibility and security. Also, they allow instant
transactions as well as provide a friendly interface for cryptocurrency
enthusiasts to buy, sell, or trade digital assets conveniently. Many of the new
trading platforms accept INR for making purchases, and their trading fees costs
as low as 0.1%. This provides both the first-time investors and local traders a
lucrative opportunity for making investments without spending a hefty sum for
trading.
WazirX is one
of the leading cryptocurrency exchange platforms that is on its way to become a
unicorn with steady growth. CoinSwitch Kuber is another such
platform, which is ideal for beginners as well as people interested in doing
daily crypto trading. In addition, CoinDCX provides
users with the option of 100+ cryptocurrencies and allows them
to make exchanges in different currencies. They even offer investors insurance
to cover the losses in case of a security breach or other fraudulent
activities.
- Increasing Mainstream Institutional Adoption
of Cryptocurrencies
Economic uncertainty and panic stirred by the
COVID-19 resulted in a liquidity crisis. Many investors began to turn their
holdings into cash to safeguard their finances, which severely affected the
prices of bitcoin and altcoin. Although the cryptocurrency market underwent a
major crash, it still managed to be the best performing asset class of the year
2020 amidst the global economic crisis. The increased vulnerability of the
financial institutions and loss of trust in the policies of the central bank
led to increased inclination of people towards cryptocurrency trading, which
resulted in the major rebound of cryptocurrency. The sudden spike in the
cryptocurrency prices led to an uptrend, which strengthened people's interest
in the virtual currency market, especially in Asia and the rest of the world.
Furthermore, the growing demand of people for
convenient and reliable transaction solutions pushed digital payment gateways
such as PayPal to show their support towards cryptocurrencies. Many
payment gateways now allow consumers to hold, buy, or sell in exchange for virtual
currencies. Recently, Tesla’s CEO Elon Musk made an astonishing announcement
regarding cryptocurrency, which sparked people's interest in crypto trading
even more. Elon Musk announced that the electric company would start accepting
bitcoins from Tesla buyers, which led to an international bitcoin price rise
from USD40,000 to USD48,000 within just two days. Two of
the biggest platforms, Visa and Mastercard, also support the use
of cryptocurrencies, introducing them as a medium to make transactions. Visa
would allow transactions with stable coins on the Ethereum blockchain, whereas
Mastercard would concede transactions with cryptocurrency sometime in
2021.
Investors and stakeholders want to make the best of
proliferating the digital coin ecosystem and hence supporting the buying,
selling, and trade of cryptocurrency and making them a sovereign digital
currency to make purchases. Rather than buying expensive cryptocurrencies
such as Bitcoin and Ether, investors are purchasing lower-priced coins like
Litecoin, Polkadot, Solana, UniSwap, XRP, and more as calculated investments in
altcoins can lead to larger gains.
Is India Heading Towards Financial Inclusivity with
Cryptocurrency?
Due to predominant male population engagement
in the virtual currency ecosystem, the cryptocurrency market was earlier
considered a "Boys club", but the scenario is definitely changing. A
sudden increase in women investors and traders has led to more gender
neutrality in the new and digital form of investment methods, which is a
positive sign of the real economic development for a nation like India.
Earlier, women used to stick to more traditional forms of investments, but now
they are becoming risk-takers and venturing into the crypto space in India,
which is highly volatile and does not always guarantee profits.
After the apex court of India announced the
legality of "virtual currency," one of the Indian cryptocurrency
platforms, CoinSwitch, witnessed an
exponential 1000% increase in its female user base. Although women
investors still constitute a small percentage of the cryptocurrency community,
they are fiercely competing in the Indian crypto market. Females generally tend
to save a lot more than their male counterparts. More savings means more
diversity in investments, which would be beneficial for women owners who are
likely to invest in high-return assets such as cryptocurrencies. Besides, women
are more analytical and better at evaluating financial risks before making the
right investment choices, so they turn out to be more successful
investors.
What Does the Future Hold for the Cryptocurrency Market
in India?
The cryptocurrency market is booming at a rapid
rate in India since 2020. India ranks 11th out of 154 nations in
terms of cryptocurrency adoption, as per a report released by Chainalysis.
Investments in cryptocurrency have grown from approximately 923 million
in April 2020 to around 6.6 billion in May 2021. Rapid fintech
advancements and greater adoption will contribute to a sharp increase in the number
of Indians investing in the virtual currencies.
The blanket ban on crypto would impact the crypto
community consisting of over 10 million holders, 300+ startups generating
thousands of jobs as well as millions of dollars in revenue and taxes, which
could lead to an economic crisis in the country. The right crypto regulation
will push India ahead in innovative technology however, the imposed ban could
set India back by a decade, and the country will end up losing a golden
opportunity in this sector.
According to TechSci research report on “Global Cryptocurrency Market By Offering (Hardware & Software), By Process
(Mining & Transaction), By Type (Bitcoin, Etgereum, Bitcoin Cash, Ripple,
Dashcoin, Litecoin, Others), By End User (Banking, Real Estate, Stock Market
& Virtual Currency), By Company, By Region, Forecast & Opportunities,
2025”, the global cryptocurrency market is anticipated
to grow at a robust CAGR of 7% owing to the high growth in venture capital
investments and enhanced transparency in distributed ledger technology.
According to another
TechSci research report on “India Cryptocurrency Market By Offering (Hardware & Software), By
Process (Mining & Transaction), By Type (Bitcoin, Etgereum, Bitcoin Cash,
Ripple, Dashcoin, Litecoin, Others), By End User (Banking, Real Estate, Stock
Market & Virtual Currency), By Region, Forecast & Opportunities, 2026”, India cryptocurrency
is anticipated to grow at a significant CAGR owing to increasing requirement
for transparency and reduction in transaction costs. Additionally, rising
adoption of digital currency and growing blockchain technology are fuelling
India cryptocurrency market.