Rich rewards often come with huge risks, and the same is true of the highly volatile cryptocurrency market. Uncertainties in 2020 have led to increased interest of the masses and large institutional investors globally in trading cryptocurrencies, a new age asset class. Increasing digitization, a flexible regulatory framework and the Supreme Court’s lifting of a ban on banks dealing with cryptocurrency companies have put more than 10 million Indians off their investments 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 drop in prices as many investors look to buy value. As the cryptocurrency craze continues, many new cryptocurrency exchanges have sprung up in the country, offering functionality through user-friendly apps that allow you to buy, sell and trade. WazirX, India’s largest cryptocurrency trading platform, increased its users from one million to two million between January and March 2021.
What is driving the world’s largest cryptocurrency exchanges to the Indian market?
Binance, the world’s largest cryptocurrency exchange by trading volume, acquired Indian trading platform WazirX in 2019. Another cryptocurrency startup, Coin DCX, secured investment from Seychelles-based BitMEX and San Francisco-based giant Coinbase. Cryptocurrency and blockchain startups in India have attracted USD 99.7 million in investments till June 15, 2021, up from USD 95.4 million in 2020. In the past five years, global investment in the Indian cryptocurrency market has grown one-fold. a large 1487%.
Despite India’s uncertain policies, global investors are betting big on the country’s digital coin ecosystem due to various factors.
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• Tech-savvy Indian Population
The dominant population of 1.39 billion is young (median age 28-29) and tech-savvy. While the older generation still prefers to invest in gold, real estate, patents or stocks, the newer ones are embracing them as they are more adaptable to high-risk cryptocurrency exchanges. India is ranked 11th in global cryptocurrency adoption in Chainalysis’ 2020 report, which shows the excitement about crypto among the Indian population. The government’s attitude towards cryptocurrency or the rumors surrounding it cannot shake the confidence of the youth in the digital coin market.
India offers the cheapest internet in the world, where one gigabyte of mobile data costs around $0.26, compared to the global average of $8.53. Thus, almost half a billion users enjoy the affordable internet, fueling India’s potential to become one of the world’s largest crypto economies. According to SimilarWeb, the country is the second largest source of internet traffic to 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, providing the younger generation with a new and faster way to earn money.
It’s safe to say that cryptocurrency can become Indian millennials what gold is to their parents!
• Rise of Fintech Start-ups
The cryptocurrency craze has spawned many trading platforms such as WazirX, CoinSwitch, CoinDCX, ZebPay, Unocoin and many others. These cryptocurrency exchanges are highly secured, accessible across multiple platforms, and enable instant transactions by providing a friendly interface for cryptocurrency enthusiasts to buy, sell or trade digital assets without limits. Many of these platforms accept INR as low as 0.1% for purchases and trading fees, so simple, fast and secure platforms offer a profitable opportunity for both first-time investors and local traders.
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WazirX is one of the leading cryptocurrency exchange platforms with more than 900,000 users and provides customers with peer-to-peer transactions. CoinSwitch Kuber provides the best cryptocurrency exchange platform for Indians and is ideal for both beginners and everyday workers. Unocoin is one of the oldest cryptocurrency exchange platforms in India, reaching over a million traders through mobile apps. CoinDCX provides users with 100+ cryptocurrencies to exchange and even provides insurance to investors to cover losses in the event of a security breach. Hence, global investors are looking at the plethora of cryptocurrency exchange platforms in India to take advantage of the emerging market.
• Mixed Government Responses
A bill to ban virtual currency, criminalizing anyone involved in the ownership, issuance, mining, trading and transfer of crypto-assets, could be enacted. However, Finance and Corporate Affairs Minister Nirmala Sitharaman allayed the concerns of some investors by saying that the government does not plan to completely ban the use of cryptocurrency. In a statement to the leading British newspaper Deccan Herald, the Finance Minister said, “From our side, we are very clear that we will not close all options. We will allow certain windows for people to experiment with blockchain, bitcoins, or cryptocurrency.” It is clear that the government is still investigating the national security risks posed by cryptocurrencies before deciding on a full ban.
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 fear of a ban, the volume of transactions continued to grow, and user registrations and money inflows on the local crypto-exchange increased by 30 times compared to a year ago. One of India’s oldest exchanges, Unocoin added 20,000 users in January and February 2021. In February 2021, the total volume of Zebpay equaled the volume generated during the entire month of February 2020. Addressing the cryptocurrency scenario in India, the Finance Minister told CNBC-TV18 in an interview, “I can only give you this hint that we are not closing our minds, we are looking at the ways in which experiments can happen in the digital world and in cryptocurrency.”
Instead of sitting on the sidelines, investors and stakeholders want to make the most of the proliferation of the digital coin ecosystem until the government bans “private” cryptocurrency and declares a sovereign digital currency.
Is India Moving Towards Financial Inclusion with Cryptocurrency?
Once considered a “Boys Club” due to the male dominance of the cryptocurrency market, the steady increase in the number of female investors and traders has led to a new and digital form of investment methods that are more gender neutral. Earlier, women used to stick to traditional investments, but now they are becoming risk takers and entering the crypto space in India. CoinSwitch has witnessed an exponential growth of 1000% in the number of women users after the apex court clarified the legality of Indian cryptocurrency platform ‘virtual currency’. Although women investors still constitute a small part of the crypto community, they face fierce competition in the Indian market. Women tend to save more than their male counterparts, and more savings means more diversity in investments, such as high-yielding assets like cryptocurrencies. Also, women are more analytical and assess risks better before making the right investment choice, so they are more successful investors.
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 began. Many investors converted their stocks to cash to protect their finances, which resulted in lower bitcoin and altcoin prices. But even though cryptocurrency suffered a major crash, it still managed to be the best-performing asset class of 2020. With the increased vulnerability of the system and the loss of faith in central bank policies and money in its current design, people have a growing appetite for digital currencies, which has resulted in the return of cryptocurrency. Due to the excellent performance of cryptocurrency in the midst of the global financial crisis, the bullish trend has fueled interest in the virtual currency market in Asia and the rest of the world.
In addition, to increase society’s demand for convenient and secure transaction solutions, digital payment gateways such as PayPal have also demonstrated support for cryptocurrencies that allow consumers to store, buy or sell virtual assets. Recently, Tesla CEO Elon Musk announced that he is investing USD 1.5 billion in the cryptocurrency market and that the electric company will accept bitcoin from buyers, which caused the international price of bitcoin to rise from USD 40,000 to USD 48,000 in two periods. days. Two of the world’s largest payment platforms, Visa and Mastercard, also endorse cryptocurrencies as a means of making transactions. While Visa has already announced that it will allow transactions with stablecoins on the Ethereum blockchain, Mastercard will begin transactions with the cryptocurrency in 2021.
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What does the future hold for the cryptocurrency market in India?
The Indian cryptocurrency market is not immune to horrific cryptocurrency crashes. Despite huge investments from global counterparts, local investors are still staying away from cryptocurrency investments due to uncertainty about the legality of the digital coin ecosystem in India and high market volatility.
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Although the cryptocurrency market has grown rapidly since last year, Indians own less than 1% of the world’s bitcoin, putting the Indian economy at a strategic disadvantage. The Indian government plans to appoint a new panel to study the possibilities of regulating digital currencies in the country and also focus on blockchain technology and suggest for technological improvements.
Blockchain technology’s ability to provide a secure and immutable infrastructure has been implemented by various industries to instill transparency in transactions. For a country with more than 15 million cryptocurrencies, the committee’s new recommendation could be of great value in determining the future of cryptocurrency in India. However, stakeholders believe that technical and economic strength will make India a major player in the cryptocurrency and blockchain market. Gradually, cryptocurrency is gaining mainstream acceptance, which may lead to higher adoption of digital currency.
According to another TechSci Research “The Indian Cryptocurrency Market By Offering (Hardware & Software), By Process (Mining & Transaction), By Type (Bitcoin, Etgereum, Bitcoin Cash, Ripple, Dashcoin, Litecoin, Others), By End User (Banking, Real Estate, Stock Exchange & Virtual Currency ) , Region, Forecast & Opportunities, 2026″, Indian cryptocurrency is expected to grow at a significant CAGR due to increasing demand for transparency and decreasing transaction costs. In addition, growing adoption of digital currency and growing blockchain technology are fueling the Indian cryptocurrency market.