Rich rewards often entail significant risks, and the same is true of the highly volatile cryptocurrency market. The uncertainties of 2020 globally have increased the interest of the masses and major institutional investors in trading cryptocurrencies, a nascent asset class. Increased digitization, a flexible regulatory framework and the Supreme Court’s lifting of a ban on banks dealing with crypto-based companies have frozen the investments of more than 10 million Indians last year. Several global cryptocurrency exchanges are actively exploring the Indian crypto market, which has shown a sustained rise in daily trading volumes over the past year amid a significant drop in prices as many investors looked to buy value. As the cryptocurrency craze continues, many new cryptocurrency exchanges have emerged in the country that allow buying, selling and trading by providing functionality through user-friendly applications. WazirX, India’s largest cryptocurrency exchange, doubled its users from 1 million to 2 million between January and March 2021.
What is driving the world’s largest cryptocurrency exchange to the Indian market?
In 2019, the world’s largest cryptocurrency exchange by trade volume, Binance acquired 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 $99.7 million by June 15, 2021, which amounted to about $95.4 million in 2020. In the past five years, global investment in the Indian crypto market has increased by a whopping 1487%.
Despite India’s unclear policy, global investors are making huge bets on the country’s crypto ecosystem due to a variety of factors such as
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 investing in gold, real estate, patents or stocks, the newer generations are adopting high-risk cryptocurrency exchanges because they are more adaptable. India ranks 11th in the list of Chainalysis Report 2020 for global adoption of cryptocurrencies, showing the excitement about cryptocurrencies among the Indian population. And the government’s unfriendly attitude towards cryptocurrencies or rumors circulating about cryptocurrencies cannot shake the confidence of young people in the cryptocurrency market.
India offers the cheapest internet in the world, with 1 GB of phone data costing around $0.26 while the global average is $8.53. Therefore, nearly half a billion users benefit from affordable internet access, enhancing India’s potential to become one of the largest crypto economies in the world. According to LikeWeb, the country is the second largest source of web traffic to the peer-to-peer Bitcoin trading platform, Paxful. While the mainstream economy is still suffering from the “pandemic effect,” cryptocurrency is gaining momentum in the country as it offers the younger generation a new and fast way to make money.
It’s safe to say that cryptocurrency could become Indian millennials like gold for their parents!
• Emergence of FinTech Startups
The craze for cryptocurrency has given rise to multiple trading platforms such as WazirX, CoinSwitch, CoinDCX, ZebPay, Unocoin and many more. These cryptocurrency exchanges are highly secured, accessible across different platforms, allow instant transactions, and provide an easy 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%, and the simple, fast and secure platforms provide a profitable 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 clients with peer-to-peer transaction capabilities. CoinSwitch Kuber provides the best cryptocurrency exchange platform for Indians which is perfect for both beginners and daily workers. Unocoin is one of the oldest cryptocurrency exchange platforms in India with more than 1 million traders through mobile applications. CoinDCX offers users more than 100 cryptocurrencies as an option to conduct exchanges and even provides investors with insurance to cover losses in the event of a security breach. Therefore, global investors are looking to a large number of cryptocurrency exchange platforms in India to take advantage of the emerging market.
Mixed government response
A statutory act related to a virtual currency ban may be enacted that would criminalize anyone involved in holding, issuing, mining, trading and transferring crypto-assets. However, Finance and Corporate Affairs Minister Nirmala Sitharaman allayed the concerns of some investors, saying that the government did not plan to ban the use of cryptocurrencies completely. In a statement to a leading English newspaper, the Deccan Herald, the finance minister said: “For our part, we are very clear that we are not closing all options. We will allow certain windows for people to experiment with blockchain and bitcoins, or cryptocurrency.” It is clear that the government is still Scrutinize 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 cryptocurrency, which prompted investors to integrate into the cryptocurrency market. Despite the constant fear of the ban, the volume of transactions continued to swell, with user registrations and money flows on the local cryptocurrency exchange 30 times more than last year. One of the oldest exchanges in India, Unocoin added 20,000 users in January and February of 2021. The total volume of Zebpay per day from February 2021 was equal to the volume generated in the entire month of February 2020. In an interview with CNBC-TV18, the minister said, “I can only give you this evidence that we are not closing our minds, we are looking at ways in which experiments can occur in the digital world and cryptocurrency.”
Instead of sitting on the sidelines, investors and stakeholders want to make the most of the proliferation of the digital currency ecosystem until the government imposes a ban on “private” cryptocurrency and declared sovereign digital currency.
Is India Heading Towards Financial Inclusion with Cryptocurrency?
Once considered a “boys club” due to the predominant male participation in the cryptocurrency market, the steadily increasing number of female investors and traders has led to more gender-neutrality in the new and digital form of investment methods. Earlier, women used to stick to traditional investments but now they are taking risks and venturing into the crypto space in India. After the Supreme Court clarified the legality of “virtual currency,” the Indian cryptocurrency platform, CoinSwitch has seen a massive 1,000% increase in the number of its female users. Although female investors still make up a small percentage of the crypto community, they present fierce competition in the Indian market. Women tend to save a lot more than their male counterparts, and more savings means more diversity in investments such as higher-yielding assets like cryptocurrencies. Women are also more analytical and better at assessing risks before making the right investment choices, so they are more successful investors.
Increased mainstream institutional adoption of cryptocurrencies
The uncertainty and panic triggered by SARS-Covid 19 led to a liquidity crunch even before the economic crisis erupted. Many investors have cashed in their holdings to protect their finances, leading to a crash in bitcoin and altcoin prices. But even though cryptocurrencies suffered a major crash, they managed to be the best performing asset class of 2020. With the increasing weakness of the system and the loss of confidence in the central bank’s policies and money in its current design, they have a growing appetite for digital currencies which has led to the cryptocurrency rebound. Due to the stellar performance of cryptocurrencies in the middle of the global financial crisis, the bullish trend has boosted interest in the virtual currency market in Asia and the rest of the world.
Moreover, to support the community’s demand for convenient and reliable transaction solutions, digital payment gateways such as PayPal have also demonstrated their support for cryptocurrencies that can enable consumers to hold, buy or sell virtual assets. Recently, Tesla CEO Elon Musk announced an investment in the crypto market worth $1.5 billion and that the electric company would accept bitcoin from buyers, sending international bitcoin prices from $40,000 to $48,000 within two months. . days. Visa and MasterCard, two of the largest platforms for making payments worldwide, support cryptocurrencies by offering them as a medium for transacting. While Visa has already announced allowing transactions with stablecoins on the Ethereum blockchain, Mastercard will begin transactions with crypto sometime in 2021.
What does the future hold for the cryptocurrency market in India?
The Indian cryptocurrency market is not immune to the terrible crashes of the cryptocurrency. Despite the huge investment from global peers, local investors are still turning away from cryptocurrency investments due to uncertainty about the legitimacy of the digital currency ecosystem in India as well as high volatility in the market. Although the cryptocurrency market has been booming since last year, Indians own less than 1% of the world’s bitcoin, which creates a strategic flaw for the Indian economy. The Indian government plans to appoint a new commission to study the possibility of regulating digital currencies in the country as well as focus on blockchain technology and propose technological improvements.
The ability of blockchain technology 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 crypto users, the commission’s new recommendation could hold significant value for 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 could lead to increased digital currency adoption.
According to another TechSci Research report on “India’s Cryptocurrency Market” By view (hardware and software), by process (mining and transactions), by type (Bitcoin, Etgereum, Bitcoin Cash, Ripple, Dashcoin, Litecoin, etc.), by end user (banks, real estate, stock market, virtual currency) by region, forecasts and opportunities 2026,” India’s cryptocurrency is expected to grow at a significant CAGR due to increased transparency requirements and lower transaction costs.