Rich rewards often come with great risks, and the same is true of the highly volatile cryptocurrency market. Uncertainties in 2020 globally have led to increased interest of the masses and large institutional investors in trading cryptocurrencies, a new age asset class.
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Increased digitization, a flexible regulatory framework and the lifting of the Supreme Court’s ban on banks dealing with cryptocurrency-based companies have stopped investments by more than 10 million Indians in the past year. Several major global cryptocurrency exchanges are actively exploring the Indian cryptocurrency market, which has seen a steady increase in daily trading volume over the past year amid a steep price decline as many investors looked to buy value. As the cryptocurrency craze continues, many new cryptocurrency exchanges have emerged in the country that enable buying, selling and trading by offering functionality through user-friendly applications. WazirX, India’s largest cryptocurrency trading platform, doubled its users from one million to two million between January and March 2021.
What is driving the world’s largest crypto exchanges to the Indian market?
In 2019, the world’s largest cryptocurrency exchange by trading volume, Binance acquired the Indian trading platform WazirX. Another crypto start-up, Coin DCX has secured investment from Seychelles-based BitMEX and San-Francisco giant Coinbase. Crypto and blockchain start-ups in India attracted investments of USD 99.7 million till June 15, 2021, which totaled around USD 95.4 million in 2020. In the last five years, global investments in the Indian crypto market have increased by an incredible 1487%.
Despite India’s unclear policies, global investors are placing big bets on the country’s digital coin ecosystem due to a number of factors such as
• India’s tech-savvy population
The overwhelming population of 1.39 billion is young (median age between 28 and 29) and tech-savvy. While the older generation still prefers to invest in gold, real estate, patents or stocks, the newer ones embrace high-risk cryptocurrency exchanges because they are more adaptable. India is ranked 11th in Chainalysis’ 2020 Global Cryptocurrency Adoption Report, which shows the excitement around cryptocurrencies among the Indian population. Neither the less than friendly attitude of the government towards cryptocurrencies or the rumors swirling around cryptocurrencies can shake the confidence of the youth in the digital coin market.
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India offers the cheapest internet in the world, where one gigabyte of mobile data costs around $0.26, while the global average is $8.53. Thus, nearly half a billion users are taking advantage of affordable internet access, increasing India’s potential to become one of the largest crypto economies in the world. According to SimilarWeb, the country is the second largest source of web traffic to the peer-to-peer bitcoin trading platform, Paxful. While the mainstream economy is still struggling with the “pandemic effect”, cryptocurrency is gaining momentum in the country as it provides young generations with a new and fast way to earn money.
It’s safe to say that cryptocurrency could become to Indian millennials what gold is to their parents!
• Rise of Fintech start ups
The cryptocurrency craze has led to the emergence of multiple trading platforms such as WazirX, CoinSwitch, CoinDCX, ZebPay, Unocoin and many more. These cryptocurrency exchanges are highly secure, cross-platform, and enable instant transactions, providing a friendly interface for crypto enthusiasts to buy, sell, or trade digital assets unlimitedly. Many of these platforms accept INR for purchases and trading fees as low as 0.1% so the simple, fast and secure platforms present a lucrative opportunity for both first-time investors and local traders.
WazirX is one of the leading cryptocurrency exchange platforms with more than 900,000 users that provides users with peer-to-peer transactions. CoinSwitch Kuber provides the best cryptocurrency exchange platform for Indians and is ideal for beginners as well as those who work daily. Unocoin is one of the oldest cryptocurrency exchange platforms in India with over 1 million mobile app traders. CoinDCX provides users with more than 100 cryptocurrencies as an exchange option and even provides investors with insurance to cover losses in the event of a security breach. So, global investors are looking at the plethora of cryptocurrency exchange platforms in India to take advantage of the emerging market.
• Mixed response from the Government
A legislative proposal to ban virtual currency that would criminalize anyone who owns, issues, mines, trades and transfers crypto assets could be passed into law. However, Finance and Corporate Affairs Minister Nirmala Sitharaman allayed the concerns of some investors by saying that the government had no plans to completely ban the use of cryptocurrencies. In a statement given to a leading English newspaper, the Deccan Herald, the finance minister said, “On our part, we are very clear that we are not closing all options. We will allow certain windows for people to do experiments on blockchain, bitcoins or cryptocurrencies.” It is clear that the government is still examining the national security risks posed by cryptocurrencies before deciding on an outright ban.
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In March 2020, the Supreme Court overturned the central bank’s decision to ban financial institutions from dealing in cryptocurrencies, prompting investors to flock to the cryptocurrency market. Despite the constant fear of a ban, the volume of transactions continued to grow, and user registration and money flow on the local crypto-exchange increased 30 times compared to a year earlier. One of India’s oldest exchanges, Unocoin added 20,000 users in January and February 2021. Zebpay’s total volume per day in February 2021 is equivalent to the volume generated in the whole of February 2020. Addressing the cryptocurrency scenario in India, the Finance Minister in an interview with CNBC-TV18 said: “I can only give you a hint that we are not closing our minds, but looking for ways experiments can happen in the digital world and cryptocurrency.”
Instead of sitting on the sidelines, investors and stakeholders want to make the most of the expanding digital coin ecosystem until the government bans “private” cryptocurrency and announces a sovereign digital currency.
Is India moving towards financial inclusion with cryptocurrencies?
Once considered a “boy’s club” due to the male-dominated involvement of the cryptocurrency market, the ever-growing number of female investors and traders has led to more gender neutrality in the new and digital form of investment methods. Earlier, women used to stick to traditional investments, but now they are becoming more risky and entering the crypto space in India. After the Supreme Court clarified the legality of “virtual currency”, India’s cryptocurrency platform, CoinSwitch witnessed an exponential increase of 1000% in female users. Although women investors still constitute a small percentage of the crypto community, they are creating fierce competition in the Indian market. Women tend to save much more than their male counterparts, and more savings means more diversity in investments such as high-yield assets like cryptocurrencies. Also, women are more analytical and better assess risks before making the right investment choice, so they are more successful investors.
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Increasing mainstream institutional adoption of cryptocurrencies
The uncertainty and panic caused by SARS-Covid 19 led to a liquidity crisis even before the economic crisis broke out. Many investors turned their investments into cash to protect their finances, resulting in a drop in bitcoin and altcoin prices. But even though cryptocurrency suffered a major crash, it still managed to be the best-performing asset class in 2020. With the increased vulnerability of the system and the loss of trust in central bank policies and money in its current design, people have an increased appetite for digital currencies which has resulted in the return of cryptocurrency. Due to the great performance of the cryptocurrency in the midst of the global financial crisis, the upward trend has strengthened the interest in the virtual currency market in Asia and the rest of the world.
Furthermore, to fuel society’s demand for convenient and reliable transaction solutions, digital payment gateways such as PayPal have also shown their support for cryptocurrencies that can allow consumers to hold, buy or sell virtual assets. Recently, Tesla CEO Elon Musk announced a $1.5 billion investment in the cryptocurrency market, and that the electric company will accept bitcoin from customers, causing the international price of bitcoin to jump from $40,000 to $48,000 within two days. . Two of the largest payment platforms worldwide, Visa and Mastercard, also support cryptocurrencies by introducing them as a medium for conducting transactions. While Visa has already announced that it will allow stablecoin transactions on the Ethereum blockchain, Mastercard will begin cryptocurrency transactions sometime in 2021.
What does the future hold for the cryptocurrency market in India?
The Indian cryptocurrency market is not immune to the dire cryptocurrency crashes. Despite huge investments from global partners, local investors are still staying away from crypto investments due to uncertainty surrounding the legality of the digital coin ecosystem in India, as well as high market volatility. Although the cryptocurrency market has been booming since last year, Indians own less than 1% of the world’s bitcoins, creating a strategic disadvantage for the Indian economy. The Indian government plans to appoint a new panel to study the possibility of regulating digital currencies in the country, as well as focus on blockchain technology and suggest it for technological improvements.
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Blockchain technology’s ability to provide a secure and immutable infrastructure has been realized by various industries to instill transparency in transactions. For a country with more than 15 million cryptocurrency users, the board’s new recommendation could be of great value in determining the future of cryptocurrency in India. However, stakeholders believe that technical and economic power will make India a key player in the crypto and blockchain market. Gradually, cryptocurrency is gaining acceptance, which could lead to greater adoption of digital currency.
According to the second TechSci Research’s report on “India’s Cryptocurrency Market By Offering (Hardware & Software), By Process (Mining & Transactions), By Type (Bitcoin, Etgereum, Bitcoin Cash, Ripple, Dashcoin, Litecoin, Others), By End User (Banking, Real Estate, Stock Exchange & Virtual Currency) , By regions, forecasts and opportunities, 2026″, Indian cryptocurrency is expected to grow at a significant CAGR due to increasing demand for transparency and reduction in transaction costs. Additionally, increasing adoption of digital currency and growing blockchain technology is fueling the Indian cryptocurrency market.