Dec 7, 2020
Cryptocurrencies are seeing a huge rally over the last few months or so. Bitcoin has been at the forefront of this price increase, but the likes of Ethereum and Ripple are not far behind either. However, this is nothing new - there was a huge rally back in 2017 as well, after which prices crashed, causing huge losses. That crash was triggered by various countries banning and restricting cryptocurrency transactions, as well as a few high-profile hacking attacks on crypto exchanges where tokens worth millions of dollars were stolen.
This was seen in India as well, where cryptocurrencies suffered a huge blow when the country’s central bank, the Reserve Bank of India, asked banks to not work with crypto exchanges in 2018. Due to this, combined with the global crash, Indian crypto investors and traders either sold off their positions, or chose to hold them but not make any further transactions. However, this time seems to be a little different. For starters, it has been institutional investors who have been the major players in the crypto market during the recent rally, not individual investors, which automatically indicates that those investments are likely to be maintained for longer. Additionally, this buying has led to a supply crunch, which has further increased prices.
In India, more and more people have also been showing interest in cryptocurrencies. This is no surprise, as crypto is a more developed market now than it was in 2018, while several online firms have also begun to offer cryptocurrency payments as an option for customers, boosting its appeal further. The security and assurance offered by crypto transactions means that it is being increasingly favoured at online casinos, for example, where many operators have begun to offer btc games - games where bitcoin can be used, and thus players can rest assured that their money will not be stolen.
The entry of PayPal into this space, by announcing that it would support cryptocurrencies on its platform soon, has been a huge boost to the sector. Other reputed financial institutions, such as JPMorgan, have also been making encouraging noises about crypto, while American payments startup Square has also spoken about investing in bitcoin, and all of this positive news has also contributed to this recent rally.
There are multiple crypto exchanges in India, such as CoinDCX, Unocoin, WazirX and others, where Indians can open digital wallets and use rupees to buy Ethereum, Bitcoin and other crypto assets. This was only made possible by the Supreme Court’s ruling in 2020, which overturned the RBI’s directive to stop banks from working with crypto businesses. Most of the founders of these platforms have said that they have been receiving an increasing amount of queries around the recent rally, with the majority of people wanting to know if it is sustainable. Some of these are investors who had first put in their money in 2017 and had been burnt by the subsequent crash, so they want to know if they should stick it out this time, or whether a similar experience is possible again. Official figures around trading are not available, but market estimates are that daily trading in the crypto space in India is around Rs 20 to 30 crore, with the majority of traders being in the 20-40 age group, and 85% male. Globally, Bitcoin has a market cap of $357 billion at the moment, while Ethereum is at $68 billion.
Indian regulators have been extremely strict on cryptocurrencies thus far, but most investors and interested parties have been trying to push for effective regulations instead of outright bans on crypto in the country. It remains to be seen if this will come to pass.