Rich rewards often come with great risks, and the same is true of the highly volatile cryptocurrency market. The uncertainties of 2020 globally led to increased interest of masses and large institutional investors in trading cryptocurrencies, a new age asset class. Rising digitization, flexible regulatory framework and the lifting of the Supreme Court’s ban on banks dealing with cryptocurrency-based businesses have parked investments of more than 10 million Indians over the past year. Several major global cryptocurrency exchanges are actively exploring the Indian cryptocurrency market, which has shown a sustained increase in daily trading volume over the past year amid a steep price decline as many investors looked to buy value. As the cryptocurrency frenzy continues, many new cryptocurrency exchanges have emerged 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 in 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, secured investment from Seychelles-based BitMEX and San Francisco giant Coinbase. Crypto and blockchain startups in India have attracted an investment of $99.7 million as of June 15, 2021, rising to about $95.4 million in 2020. In the past five years, the Global investment in the Indian crypto market has increased by a whopping 1487%.
Despite India’s unclear policy, global investors are betting big on the country’s digital currency ecosystem due to several factors such as
• Technology-savvy Indian population
The predominant population of 1.39 billion is young (average 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 high-risk cryptocurrency exchanges as they are more adaptable to them. India ranks 11th in Chainalysis’ 2020 report list for global crypto adoption, which shows the enthusiasm for crypto among the Indian population. Neither the unfriendly attitude of the government towards cryptography nor the rumors swirling around cryptography can shake the confidence of the young population in the digital currency market.
India offers the cheapest internet in the world, where a gigabyte of mobile data costs around $0.26, while the global average is $8.53. Thus, nearly half of the billion users are taking advantage of affordable internet access, enhancing 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. Although the mainstream economy is still struggling with the “pandemic effect”, cryptocurrency is gaining momentum in the country as it offers the young generation 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!
• Rise of Fintech start-ups
The cryptocurrency craze led to the emergence of multiple trading platforms such as WazirX, CoinSwitch, CoinDCX, ZebPay, Unocoin and many others. These cryptocurrency exchange platforms are highly secure, accessible across multiple platforms and enable instant transactions, providing a user-friendly interface for cryptocurrency 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 present a lucrative opportunity for both early stage 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 offers the best cryptocurrency exchange platform for Indians and is ideal for both beginners and daily traders. Unocoin is one of India’s oldest cryptocurrency exchange platforms with over a million traders through mobile apps. CoinDCX offers users more than 100 cryptocurrencies to choose from and even offers investors insurance to cover losses in the event of a security breach. Therefore, global investors are looking at the plethora of cryptocurrency exchange platforms in India to tap into the emerging market.
• Mixed government response
The virtual currency ban bill that would criminalize anyone involved in the possession, issuance, mining, trading and transfer of crypto assets could be enacted into law. However, Finance and Corporate Affairs Minister Nirmala Sitharaman allayed the concerns of some investors by saying that the government has not planned to completely ban the use of cryptocurrency. In a statement to a leading English newspaper, Deccan Herald, the finance minister said, “From our side, we are very clear that we are not closing all options. We will allow certain windows for people to experiment with blockchain, bitcoins. , or cryptocurrency”. Clearly, the government is still examining the national security risks posed by cryptocurrencies before deciding to ban them entirely.
In March 2020, the Supreme Court overturned the central bank’s decision to ban financial institutions from trading in cryptocurrencies, causing investors to flock to the cryptocurrency market. Despite the lingering fear of the ban, transaction volumes continued to rise, with user registration and money inflows to the local crypto exchange increasing 30-fold compared to a year ago. One of India’s oldest exchanges, Unocoin, added 20,000 users in January and February 2021. Zebpay’s total volume per day in February 2021 was equivalent to the volume generated in the entire month of February 2020. Addressing the cryptocurrency scene in India, the Finance Minister said in an interview to CNBC-TV18, “I can only give you this hint that we are not closing our minds, we are looking for ways in which experiments can happen to the digital world and cryptocurrency.”
Instead of standing on the sidelines, investors and stakeholders want to do their best to proliferate the digital currency ecosystem until the government introduces a ban on “private” cryptocurrency and announces sovereign digital currency.
Is India Moving Towards Financial Inclusion With Cryptocurrency?
Once considered a “boys club” due to the predominantly male population’s participation in the cryptocurrency market, the ever-increasing number of women investors and traders has led to greater gender neutrality in the new, digital form of the methods of investment Earlier, women used to stick to traditional investments, but now they are becoming risk takers and venturing into the crypto space in India. After the Supreme Court cleared the legality of the ‘virtual currency’, Indian cryptocurrency platform CoinSwitch witnessed an exponential 1000% increase in its female users. While women investors still represent 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 diversity in investments, including high-yielding assets like cryptocurrencies. Also, women are more analytical and assess risks better before making appropriate investment choices, making them more successful investors.
Increasing widespread institutional adoption of cryptocurrencies
The uncertainty and panic sparked by SARS-Covid 19 led to a liquidity crisis even before the economic crisis began. Many investors converted their holdings to cash to safeguard their finances, causing bitcoin and altcoin prices to plummet. But even though crypto suffered a significant fall, it still managed to be the best-performing asset class of 2020. With increased vulnerability in the system and loss of confidence in central bank policies and money in its current design, people have a growing appetite for digital currencies that led to the rise of cryptocurrency. Due to the stellar performance of the cryptocurrency in the midst of the global financial crisis, the bullish trend has strengthened the interest in the virtual currency market in Asia and the rest of the world.
In addition, to feed 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 would accept bitcoins from buyers, which led to an international jump in the price of bitcoin from $40,000 to $48,000 within two days. Two of the largest platforms for making payments worldwide, Visa and Mastercard, also endorse cryptocurrencies by introducing them as a means of making transactions. While Visa has already made the announcement to allow stablecoin transactions on the Ethereum blockchain, Mastercard would 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 terrible cryptocurrency crashes. Despite the huge investment from their global counterparts, local investors are still keeping their distance from crypto investments due to uncertainty about the legality of the digital currency 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 group to study the possibility of regulating digital currencies in the country, as well as focus on blockchain technology and propose it for 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 adopters, the committee’s new recommendation could be of great value in determining the future of cryptocurrency in India. However, stakeholders believe that the technical and economic power will make India a key player in the crypto and blockchain market. Cryptocurrency is slowly gaining mainstream acceptance, which could lead to greater adoption of the digital currency.
According to another TechSci Research Report on “India Cryptocurrency Market By offering (hardware and software), by process (mining and transaction), by type (Bitcoin, Etgereum, Bitcoin Cash, Ripple, Dashcoin, Litecoin, others), by end user (banking, real estate, stock market and virtual currency), By Region, Forecast and Opportunities, 2026″, Indian cryptocurrency is expected to grow at a significant CAGR due to increased transparency requirements and reduced transaction costs. In addition, growing adoption of digital currency and growing blockchain technology are fueling India’s cryptocurrency market.