By Gaurav Dahake
People’s investing habits took a 360-degree turn during the pandemic. As more and more people started to work from home, a lot of expenses came down and they found themselves with additional disposable income at hand. At the same time, there was a boom in fintech firms that endeavored to make investment easy for their customers. Investors were also enticed by conversations around crypto and the strong track record it had as a return on investments. Indian crypto exchange platforms saw an increased number of signups and trade volumes also significantly increased during this period.
2022- The Crypto Winter
Post-pandemic, people started returning to work, there was an incoming economic downturn, and many people were also laid off. While the industry and technology both have been profit-making, 2022 was, as rightly termed by experts – a harsh winter for the crypto. Some of the major cryptocurrencies including Bitcoin and Ethereum plunged by more than 60 percent, accounted by these factors. This was also further aggravated by the collapse of FTX, the largest crypto exchange in the world. There were several other exchanges that followed suit like BlockFi, which filed for bankruptcy post regulatory enquiries. The lack of proper regulations and inhibitions of governments to legally recognize cryptocurrency also made investors skeptical about trading. The Reserve Bank of India has also remained extremely cautious of cryptocurrency and assertive in denying its legality. Cryptocurrencies have always been seen as an instrument capable of risking macroeconomic and financial stability.
In India crypto is traded as an asset class and not as a fiat currency. The year began with the announcement of a 30% tax on people’s crypto investment portfolios and a 1% TDS. This resulted in not only a drop in trading volumes on Indian cryptocurrency exchange platforms but also a subsequent increase in trading volumes on foreign exchange platforms. This was done in order to evade the taxation and traceability that was earlier mandated with KYC on Indian exchange platforms.
The season of change for cryptocurrencies
What most people tend to overlook is the fact that cryptocurrencies have always been a volatile asset class. Despite that, they have always shown excellent returns long term. As per market trends, at its most recent high, one bitcoin was worth over $64,000 a far cry from trading for under $0.10 in its earliest days.
Going back to basics, crypto is a product of blockchain technology, a technology so revolutionary that it is driving Industrial revolution 4.0. Countries around the world, including India have developed the Central Bank Digital Currency (CBDC) using the same blockchain technology as crypto. The main difference between them is that while CBDCs are conceptualized, regulated and an alternative to the fiat currency, crypto are privately owned, de-centralized and an asset class.
Even though there was an air of caution cast against investing in crypto clubbed with the collapse of leading international exchanges, faith of investors remains high. The fall in value has been seen as an opportunity by them for making more investments. The only question remains is how we integrate crypto into the current system. In terms of business, crypto remains one of the hottest industries for startups and businesses, especially in India, which has a large tech-savvy audience.
Almost all the crypto exchange platforms in India are doing well in terms of business despite all the uncertainty.
Expectations from 2023
2023 will mark a turning point for cryptocurrency globally and, in particular, for India. We envision India as a potential leader in crypto regulation as the Finance Ministry has been quite vocal about international cooperation on its regulation. With India helming the G20, there have already been several discussions about the scope of recognition and regulation of the industry. The potential of the ecosystem will be completely realized only when there are regulations for centralised crypto players, which are prone to misuse by those who control them.
The industry is also batting for increased innovation and adoption of decentralised infrastructure, to offer more transparent and secure trading methods and management of digital assets. With all this and more in the making, the coming year definitely looks promising for crypto enthusiasts who have continued to show faith as well as cynics who still question their viability.
The author is CEO, Bitbns
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