Despite a high rate of tax on crypto, declining trading volumes and recently imposed money laundering provisions, India’s crypto sector still manages to garner an increasing interest of investors.
There are a number of reasons that explain this conundrum. This Calendar year is turning out to be relatively good for cryptocurrencies. Investors heaved a sigh of relief after bitcoin's price hit a 9-month high recently after the Silicon Valley Bank's collapse.
“The collapse fuelled the rise in crypto prices because the belief in centralised banking systems was affected. As the flaws in the existing systems become more evident, the crypto sector will continue to have a revival,” says Avinash Shekhar, Founder & CEO, TaxNodes.
Some experts have called this trend an affirmation of ‘reverse relationship’ between fiat currencies and blockchain-generated currencies.
To explain in simpler words: while banking system is undergoing a turmoil with the collapse of two US-based regional banks (Silicon Valley Bank and Signature Bank), blockchain- generated currencies are getting a much-needed boost at the same time.
“In a truly remarkable decoupling from traditional finance, Bitcoin price has been soaring since the banking crisis started unfolding. Medium-size and regional banks in the US are under pressure due to fast rising interest rates and a run-on deposits, while industry observers are of the view that Bitcoin’s fixed supply schedule offers a unique hedge against the current macro environment,” says Parth Chaturvedi, Crypto Ecosystem Lead, CoinSwitch.
Crypto prices spike
Bitcoin has been rising considerably since the start of this year. Bitcoins prices rose from $16,625 (on Jan 1) to $27,493 (on Mar 24), reporting an increase of 65.37 percent in fewer than three months. Trading volumes spiked by 182 percent during this period.
Ethereum prices also rose considerably from $1,201 (on Jan 1) to $1,752 (Mar 24), reporting an increase of 45.87 percent. The ETH trading volumes during this period rose by 356 percent, CoinMarketCap data shows.
Bitcoin prices since Jan 1
|Date||Price (in $)||Increase|
|March 24||27,493||65.37 %|
BTC trading Volume
|Date||BTC volume ($)||Increase|
|Jan 1||9.2 B||--|
Coinswitch’s Parth Chaturvedi also confirms a similar trend. “Trading volumes across asset classes is a function of prices and usually increasing prices attract more trading volume. We have witnessed a similar trend in crypto trading volumes, since the beginning of the year, when prices started moving higher. We continue to onboard new domestic users and are also seeing existing users come back with renewed interest as crypto as an asset class is helping in portfolio diversification,” says Mr Chaturvedi.
“The rally in bitcoin and other crypto prices will certainly add a positive outlook for cryptos for long-term investors,” adds Shekhar from TaxNodes.
Now since cryptocurrencies are made on blockchain technology, India’s large IT population and ever-growing tech infrastructure can turn things to its advantage, assert industry experts.
“Due to government policies and increased market awareness, there has been a decoupling of cryptocurrency from blockchain. This shift in focus presents India with a unique opportunity to become a powerhouse of blockchain innovation, given its large IT competent population. This trend is a testimony to the shifting interests in the technology, and we can expect to witness more eastward movement of blockchains in the near future,” says Gaurav Mehta, Founder of Catax — Simple Crypto Taxes.
An upcoming global blockchain conference next month by Polkadot blockchain platform is seen as a validation of India’s growing importance in the blockchain technology.
Polkadot blockchain platform is hosting first global conference in India in the first week of April in run up to its foray into India.
While talking about the conference, Rishant (Rish) Kumar, Growth Lead, APAC, KILT Protocol said that India is an important hub for blockchain innovation.
This global conference can be seen by crypto optimists as one of the key events in the annals of blockchain industry and its growing significance in India.
It’s technology, stupid!
Experts argue that the blockchain technology is revolutionary and its innovative use cases and implications continue to unfold. And the confusion happens when the entire focus of investors revolves around crypto prices instead of viewing blockchain in its entirety.
“Despite its immense potential, the public at large has predominantly focused on the oasis of cryptocurrency, attracted by the promise of quick returns and libertarian ideals. As a result, blockchain technology has received less attention and remained outside of mainstream discourse and implementation,” says Mr Mehta from Catax.
However, in view of the extreme volatility witnessed in the past, investors are advised to be wary before getting too bullish on cryptocurrencies.
After all, despite the recently reported increase in bitcoin prices, this cryptocurrency still trades nearly 60 percent lower than its all-time high of $68,789.
“Investors are finding merit in Bitcoin’s function as a store of value against monetary debasement, and the next few months will be crucial in supporting this narrative,” Parth Chaturvedi signs off.
So far, it may be a good year for cryptocurrencies, but what does the future hold for them — only a crystal ball reader can predict.