Rich rewards often carry big risks, and this is especially true in highly volatile cryptocurrency markets. The uncertainty of 2020 has increased the interest of the public and large institutional investors in global cryptocurrency, a new-age asset class business. More than 10 million Indians have invested in the past year due to increasing digitization, flexible regulatory framework, and lifting of Supreme Court bans on banks dealing with crypto-based firms. Several major global cryptocurrency exchanges are actively exploring the Indian crypto market, which has seen a steady increase in the volume of daily transactions over the past year as many investors were looking to buy value. As the cryptocurrency frenzy continues, many new cryptocurrency exchanges have emerged in the country that enable buying, selling and trading by providing functionality through user-friendly applications. WazirX, India’s largest cryptocurrency trading platform, doubled its users from one million between January and March 2021.
What drives the world’s largest crypto exchanges in the Indian market?
In 2019, Binance acquired the Indian trading platform, WazirX, the world’s largest cryptocurrency exchange by volume of trade. Another crypto startup, Coin DCX has secured investments from Seychelles-based Bitmax and San-Francisco-based giant Coinbase. Crypto and blockchain start-ups in India attracted USD99.7 million investments as of June 15, 2021, up from around USD95.4 million in 2020. In the last five years, global investment in the Indian crypto market has grown by a whopping 1487%.
Despite India’s vague policy, global investors are placing huge bets on the country’s digital currency ecosystem for a variety of reasons, such as
Technology-intelligent Indian population
The main population of 1.39 billion is young (average age between 28 and 29) and tech-savvy. While the older generation still prefers to invest in gold, real estate, patents or equities, the newer ones are embracing high-risk cryptocurrency exchanges because they can adapt more to them. India ranks 11th in Chainalysis’s 2020 report list for global crypto adoption, which shows the excitement about crypto among the Indian population. The government’s less friendly attitude towards crypto or the rumors circulating around crypto are not able to shake the confidence of the youth in the digital coin market.
India offers the cheapest internet in the world, with one gigabyte of mobile data costing around $ 0.26 and the global average $ 8.53. As a result, nearly half a billion users are taking advantage of affordable Internet access, increasing the potential to become one of the world’s largest crypto economies. According to SimilarWeb, the country is the second largest source of web traffic on the peer-to-peer bitcoin trading platform, Paxfull. While the mainstream economy is still battling “epidemic effects”, cryptocurrency is gaining momentum in the country as it provides a new and faster way for young people to earn money.
It is safe to say that cryptocurrency could turn into the Indian millennium. What gold for their parents!
The 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 exchange platforms are highly secure, accessible across different platforms and allow instant transactions, providing a friendly interface for crypto enthusiasts to buy, sell or trade digital assets unlimited. Many of these platforms accept INR for purchases and the trading fee is 0.1% lower so 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 over 900,000 users that enables customers to make peer-to-peer transactions. CoinSwitch Kuber provides the best cryptocurrency exchange platform for Indians and is ideal for beginners as well as day laborers. Unocoin is one of the oldest cryptocurrency exchange platforms in India, accounting for over one million merchants through mobile applications. CoinDCX offers users 100+ cryptocurrencies as an exchange option and even insures investors to cover losses in the event of a security breach. Therefore, investors around the world are looking at the proliferation of cryptocurrency exchange platforms in India to take advantage of emerging markets.
• Mixed response from the government
Legislation to ban a virtual currency that would criminalize anyone involved in possession, issue, mining, business, and transfer of crypto assets may be enacted. However, Finance and Corporate Affairs Minister Nirmala Sitharaman eased the concerns of some investors by saying that the government did not plan to stop using cryptocurrency completely. In a statement to the Deccan Herald, a leading English language newspaper, the finance minister said: “From our point of view, we are very clear that we are not closing all options. It is clear that the government is still examining the national security risks posed by cryptocurrencies before deciding to impose a complete ban.
In March 2020, the Supreme Court overturned the central bank’s decision to ban financial institutions from trading in cryptocurrencies, prompting investors to enter the cryptocurrency market. Despite the long-standing fear of sanctions, the volume of transactions continues to rise, and user registrations and money flows on local crypto-exchanges are up to 30 times higher than a year ago. One of the oldest exchanges in India, Unocoin added 20,000 users in January and February 2021. The total volume of Zebpay per day in February 2021 is equivalent to the volume created for the whole month of 2020. Addressing the cryptocurrency situation in India, the finance minister said in a CNBC-TV18 interview, “I can only give you the clue that we are not closing our minds, we are looking at ways to make experiments happen in the digital world and cryptocurrency.”
Instead of sitting on the sidelines until the government imposes a ban on “private” cryptocurrencies and declares a sovereign digital currency, investors and stakeholders want to do their best to expand the digital coin ecosystem.
Is India moving towards financial inclusion with cryptocurrency?
Once considered a “boys’ club” due to the predominance of the male population in the cryptocurrency market, a growing number of female investors and traders have led to new and digital forms of investment and more gender neutrality. In the past, women used to stick to traditional investments but now they are becoming risk takers and entering the crypto space in India. After the Supreme Court clarified the validity of “virtual currency”, Indian cryptocurrency platform CoinSwitch has witnessed an indicative 1000% increase in its female users. Although female investors still make up a small percentage of the crypto community, they are creating intense competition in the Indian market. Women save a lot more than their male counterparts and more savings means more diversification in investments like high-return assets like cryptocurrency. Also, women are more analytical and better at risk assessment before choosing the right investment, so they are more successful investors.
Increasing the mainstream institutional acceptance of cryptocurrencies
The uncertainty and panic created by the SARS-Covid 19 led to a liquidity crisis before the economic crisis began. Many investors have converted their holdings into cash to protect their finances, leading to lower Bitcoin and Altcoin prices. But while crypto has suffered a major setback, it has become one of the best performing asset classes of 2020. With the growing weakness of the system and the loss of confidence in central bank policy and the loss of confidence in money in its current design, people’s appetite for digital currency has increased, leading to a rebound in cryptocurrency. Due to the great performance of cryptocurrency in the midst of the global financial crisis, the uptrend has strengthened the interest in virtual currency markets in Asia and the rest of the world.
Furthermore, in order to accelerate society’s demand for convenient and reliable transaction solutions, digital payment gateways such as PayPal have also shown their support for cryptocurrencies that enable customers to retain, buy or sell virtual assets. Recently, Tesla CEO Elon Musk announced an investment of USD1.5 billion in the cryptocurrency market and the electric company will accept bitcoin from buyers, raising the value of international bitcoin from USD40,000 to USD48,000. Day is approving two major payment platforms worldwide, Visa and MasterCard, by introducing cryptocurrencies as a medium of transaction. Although Visa has already announced that it will allow transactions with stable coins in the Ethereum blockchain, MasterCard will begin trading with crypto in 2021.
What does the future hold for the cryptocurrency market in India?
The Indian cryptocurrency market is not free from a terrible crypto crash. Despite huge investments from global counterparts, local investors are still reluctant to invest in cryptocurrencies due to uncertainty over the legitimacy of India’s digital currency ecosystem as well as high market volatility. Although the cryptocurrency market has been growing since last year, Indians own less than 1% of the world’s bitcoin, which poses a strategic challenge to the Indian economy. The Government of India is planning to appoint a new panel to study the feasibility of digital currency control in the country as well as to focus on blockchain technology and to propose it for technological advancement.
The ability of blockchain technology to provide a secure and unalterable infrastructure has been realized by various industries to establish transparency in transactions. For countries with more than 15 million cryptocurrencies, the committee’s new recommendations could be invaluable in determining the future of cryptocurrency in India. However, stakeholders believe that technological and economic power will make India a key player in the crypto and blockchain market. Gradually, cryptocurrency is gaining mainstream acceptance, which could lead to higher adoption of digital currencies.
According to another “TechSci Research Report on India Cryptocurrency Market Offer (Hardware and Software), Process (Mining and Transaction), By Type (Bitcoin, Itzarium, Bitcoin Cash, Ripple, Dashcoin, Lightcoin, Other), By End User (Banking, Real Estate, Stock Market and Virtual Currency) , By region, forecast and opportunity, 2026 “, India’s cryptocurrency is expected to grow at a significant CAGR due to reduced requirements for transparency and reduced transaction costs.