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. Increasing digitization, a flexible regulatory framework and the lifting of the Supreme Court’s ban on banks dealing with cryptocurrency-based companies have blocked investments by more than 10 million Indians in the past year. Several of the world’s major cryptocurrency exchanges are actively exploring India’s crypto market, which has seen a steady increase in daily trading volume over the past year amid a major price drop as many investors looked to buy for 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.
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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 startup, Coin DCX has secured investment from Seychelles-based BitMEX and San-Francisco-based giant Coinbase. Crypto and blockchain startups in India have attracted investments of USD 99.7 million by June 15, 2021, totaling around USD 95.4 million in 2020. In the last five years, global investments in the Indian crypto market have grown by an incredible 1487%.
Despite India’s unclear policies, global investors are betting heavily on the country’s digital coin ecosystem due to various 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 generation embraces high-risk cryptocurrency exchanges because they are more adaptable. India ranks 11th in Chainalysis’ 2020 global crypto adoption report, which shows the excitement about crypto among the Indian population. Neither the less than friendly attitude of the government towards crypto or the rumors circulating around crypto are able to shake the confidence of the young population in the digital coin market.
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, which increases 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 internet traffic for 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 the young generation 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!
• 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 exchanges are highly secured, cross-platform and enable instant transactions, providing a friendly interface for crypto enthusiasts to buy, sell or trade digital assets without limits. Many of these platforms accept INR for purchases and trading fees as low as 0.1%, so the simple, fast and secure platforms represent a lucrative opportunity for both new investors and local traders.
WazirX is one of the leading cryptocurrency exchange platforms with over 900,000 users that provides users with peer-to-peer transaction capabilities. CoinSwitch Kuber provides the best cryptocurrency exchange platform for Indians and is ideal for beginners as well as everyday users. Unocoin is one of the oldest cryptocurrency exchange platforms in India covering over 1 million merchants through mobile apps. 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 proposed virtual currency ban that would criminalize anyone involved in owning, issuing, mining, trading and transferring crypto assets could become 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 cryptocurrency. In a statement given to the leading English newspaper 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, bitcoin, or cryptocurrencies.” It is clear that the government is still closely studying the national security risks that cryptocurrencies pose before deciding on an outright ban.
In March 2020, the Supreme Court overturned the central bank’s decision to ban financial institutions from dealing in cryptocurrencies, prompting investors to pile into the cryptocurrency market. Despite the lingering fear of a ban, the volume of transactions continued to grow, and user registration and money flow on the local crypto-exchange grew 30 times more 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 has become equivalent to the volume generated in the entire month of February 2020. Addressing the cryptocurrency scenario in India, the Finance Minister has said in an interview with CNBC-TV18: “I can only give you an indication that we are not closing our minds, we are looking at ways experiments can happen in the digital world and cryptocurrency.”
Instead of sitting on the sidelines, investors and interested parties want to make the most of the expanding digital coin ecosystem until the government bans “private” cryptocurrencies and the announced sovereign digital currency.
Is India moving towards financial inclusion with cryptocurrency?
Once considered a “boy’s club” due to the predominantly male population’s involvement in the cryptocurrency market, the ever-growing number of female investors and traders has led to greater gender neutrality in the new and digital form of investment methods. Earlier, women used to stick to traditional investments, but now they are becoming risky and venturing into 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 represent 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-return assets like cryptocurrencies. Also, women are more analytical and better assess risks before making the right investment decisions, so they are more successful investors.
Increasing Institutional Acceptance of Cryptocurrencies
The uncertainty and panic caused by SARS-Covid 19 led to a liquidity crisis even before the economic crisis began. Many investors turned their holdings 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 a cryptocurrency recovery. 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 drive 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, which led to an international jump in the price of bitcoin from $40,000 to $48,000 within two years. days. Two of the largest payment platforms worldwide, Visa and Mastercard, also support cryptocurrencies by presenting them as a medium for conducting transactions. While Visa has already announced allowing stablecoin transactions on the Ethereum blockchain, Mastercard would begin transactions with the cryptocurrency 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 continue to stay 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 bitcoin, 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.
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 more acceptance, which could lead to greater adoption of digital currency.
According to another TechSci Research Report on “India’s Cryptocurrency Market By Offer (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 region, forecast and opportunities, 2026″, Indian cryptocurrency is expected to grow at a significant CAGR due to increasing demands for transparency and reduction in transaction costs. In addition, increasing adoption of digital currency and growing blockchain technology are fueling the Indian cryptocurrency market.