Rich rewards often come with big risks, and the same is true of the highly volatile cryptocurrency market. Uncertainty in 2020 globally has led to increased interest of the masses and large institutional investors in cryptocurrency trading, a new age asset class. Increasing digitization, a flexible regulatory framework and the lifting of the Supreme Court’s ban on banks working with crypto-based companies have parked investments of more than 10 million Indians in the past year. Several major global cryptocurrency exchanges have been actively exploring the Indian crypto market, which has seen a sustained surge in daily trading volume over the past year amid a major price decline as many investors looked to buy value. As the cryptocurrency craze continues, many new cryptocurrency exchanges have sprung up in the country that enable buying, selling and trading by offering functionality through user-friendly apps. WazirX, India’s largest cryptocurrency trading platform, doubled its users from one million to two million between January and March 2021.
What is driving the world’s largest crypto exchanges to the Indian market?
In 2019, Binance, the world’s largest cryptocurrency exchange by trading volume, 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 US$ 99.7 million till June 15, 2021, which amount to about US$ 95.4 million in 2020. In the last five years, global investments in the Indian crypto market have increased by as much as 1487%.
Despite India’s unclear policies, global investors are placing huge bets on the country’s digital coin ecosystem due to various factors such as
• Tech-savvy Indian population
The overwhelming 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 stocks, the newer ones are embracing high-risk cryptocurrency exchanges as they are more adaptable to them. India ranks 11th in Chainalysis’ 2020 Global Crypto Adoption Report list, indicating the excitement for crypto among the Indian population. Neither the government’s friendly attitude toward crypto nor the rumors swirling around crypto can 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. So, almost half a billion users benefit from affordable internet access, increasing 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 web 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 as it provides the young generation with a new and fast way to earn money.
It is safe to say that cryptocurrency can become to the Indian millennium what gold is to their parents!
• Rise of fintech startups
The cryptocurrency craze has led to the emergence of numerous trading platforms such as WazirX, CoinSwitch, CoinDCX, ZebPay, Unocoin and many more. These cryptocurrency exchanges are highly secure, cross-platform accessible, and allow instant transactions, providing a friendly interface for crypto enthusiasts to buy, sell, or trade unlimited digital assets. Many of these platforms accept INR for purchases and trade fees as low as 0.1%, so the simple, fast and secure platforms represent 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 provides customers with peer-to-peer transaction capabilities. CoinSwitch Kuber provides the best cryptocurrency exchange platform for Indians and is perfect for both beginners and everyday people. Unocoin is one of the oldest cryptocurrency exchange platforms in India, representing over one million traders through mobile applications. CoinDCX provides users with 100+ cryptocurrencies as an option to exchange 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 government response
A legislative bill regarding the ban against virtual currency, which would criminalize anyone involved in the possession, issuance, mining, trading and transfer of crypto-assets, may become law. However, Finance and Corporate Affairs Minister Nirmala Sitharaman eased the concerns of some investors by saying that the government had no plans to completely ban the use of cryptocurrency. In a statement made to a leading English newspaper Deccan Herald, the finance minister said, “On our part, we are very clear that we are not closing all options. We’re going to allow people to do certain windows to experiment with blockchain, bitcoin, or cryptocurrency.” It’s clear that the government is still carefully examining the national security risks posed by cryptocurrencies before deciding to impose an outright ban.
In March 2020, the Supreme Court overturned the central bank’s decision to ban financial institutions from trading in cryptocurrencies, prompting investors to flock to the cryptocurrency market. Despite the continued fear of a ban, transaction volumes continued to grow, and user registrations and cash flows on the local crypto exchange became 30 times more than a year ago. One of the oldest exchanges in India, Unocoin added 20,000 users in January and February 2021. Zebpay’s total volume per day from February 2021 became equivalent to the volume generated in the entire month of February 2020. Turning to the scenario with cryptocurrency in india, Finance The minister said in an interview with CNBC-TV18: “I can only give you this idea that we are not closing our minds, we are looking for ways in which experiments can happen in the digital world and cryptocurrency.”
Instead of standing on the sidelines, investors and stakeholders want to make the most of the proliferation of the digital coin ecosystem until the government implements the ban on “private” cryptocurrency and declares a sovereign digital currency.
Is India Moving Towards Financial Inclusion With Cryptocurrency?
Once considered a “boys club” due to the overwhelming involvement of the male population in the cryptocurrency market, the ever-increasing 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 starting to take risks and venture into the crypto space in India. After the Supreme Court clarified the legality of the “virtual currency”, the Indian 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 are creating fierce competition in the Indian market. Women tend to save much more than their male counterparts, and more savings means more investment diversity, such as high-return assets like cryptocurrencies. Also, women are more analytical and better at assessing risks 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 turned their holdings into cash to protect their finances, causing Bitcoin and altcoin prices to crash. But even though crypto 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 confidence in central bank policies and money in its current design, people have an increased appetite to digital currencies, which led to a resurgence of cryptocurrency. Due to the cryptocurrency’s stellar performance in the midst of the global financial crisis, the upward trend has boosted interest in the virtual currency market in Asia and the rest of the world.
In addition, to fuel 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 users to hold, buy or sell with virtual assets. Recently, Tesla CEO Elon Musk announced a USD 1.5 billion investment in the cryptocurrency market and that the electric company will accept Bitcoin from buyers, which caused the international price of Bitcoin to jump from USD 40,000 to USD 48,000 in within two days. Two of the largest payment platforms in the world, Visa and Mastercard, also support cryptocurrencies by presenting them as a means of making transactions. While Visa has already announced that it will allow stablecoin transactions on the Ethereum blockchain, Mastercard will begin crypto transactions sometime in 2021.
What does the future hold for the cryptocurrency market in India?
The Indian cryptocurrency market is not immune to the horrific crypto crashes. Despite huge investments from global partners, local investors are still keeping their distance from crypto investments due to uncertainty about the legality of India’s digital coin ecosystem 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 bitcoins, creating a strategic disadvantage for the Indian economy. The Indian government plans to appoint a new panel to look into 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 bring transparency to transactions. For a country with over 15 million crypto adherents, the new recommendation from the committee 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. Cryptocurrency is gradually gaining mainstream acceptance, which may lead to greater adoption of digital currency.
According to another TechSci Research report on “Cryptocurrency Market in India By Supply (Hardware & Software), By Process (Mining & Transactions), By Type (Bitcoin, Etgereum, Bitcoin Cash, Ripple, Dashcoin, Litecoin, Others), By End User (Banking, Real Estate, Stock Market & 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. Additionally, growing adoption of digital currency and growing blockchain technology are fueling the cryptocurrency market in India.