Cryptocurrencies are rallying again, but concerns remain

The price of bitcoin has increased by 140% in the past year. Photo: Reuters
The price of bitcoin has increased by 140% in the past year. Photo: Reuters


  • Prices of cryptocurrencies have jumped, partly because of the launch of Bitcoin ETFs in the US, but that hasn't changed the RBI's stance one bit.

When cryptocurrency exchange FTX imploded in 2022, many saw it as a sign of the crypto industry's end. “Prices have crashed, investors are walking away, and Sam Bankman-Fried (FTX founder) is in jail. It’s not clear if the industry can recover," the Washington Post wrote that December. “The collapse of FTX has dealt a catastrophic blow to crypto’s reputation and aspirations," The Economist noted. This March, an American court sentenced Bankman-Fried to 25 years in prison. However, the industry seems to have recovered and is on another run.

The price of bitcoin, the pioneer cryptocurrency and the biggest by market cap ($1.3 trillion), has increased by 140% in the past year. Other large cryptocurrencies have also appreciated in excess of 75% during the same period, including ethereum (market cap of $398 billion) and Binance coin ($87.3 billion). Spot trading volumes of cryptocurrencies on centralised exchanges more than doubled month-on-month in March to $2.94 trillion, the highest since May 2021. Derivatives trading volumes for the same month jumped 86.5% to $6.18 trillion, the highest ever, according to CDC's latest report on cryptocurrency exchanges.

Investor interest in crypto companies has also picked up since the last quarter of 2023. It had started to wane in 2022, initially due to rising interest rates and then the collapse of companies such as FTX and Terra. In each of the past two quarters, crypto companies have attracted over $2.6 billion in venture capital funding. In March alone, they attracted $1.16 billion, the highest since April 2022, according to Rootdata.

The ETF push

This January, the US Securities and Exchange Commission approved nearly a dozen spot bitcoin ETFs (exchange-traded funds), after years of resisting them. Many industry players see this as a sign of mainstream acceptance of cryptocurrency. Bitcoin ETFs allow investors to trade in the cryptocurrency in the traditional market, rather than cryptocurrency exchanges, opening the market up for new customers. “The spot ETFs have opened up a gateway for institutional capital to flow into the bitcoin ecosystem," Michael Saylor, executive chairman of MicroStrategy, the largest corporate holder of Bitcoin, told Bloomberg.

Institutional investors see bitcoin ETFs as a way to diversify their portfolios without getting into the complexities of crypto exchanges. The top three ETFs—Grayscale Bitcoin Trust, iShares Bitcoin Trust (run by BlackRock) and Fidelity Wise Origin Bitcoin Fund—have more than $48 billion in assets under management. Ethereum spot ETF proposals (by Greyscale, Fidelity and Bitwise) await SEC approval.

The dark side

In his statement approving bitcoin ETFs in January, US SEC head Gary Gensler said the approval does not “signal anything about the commission’s views as to the status of other crypto assets". He also pointed out that “bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing".

According to blockchain research firm Chainalysis, the value of cryptocurrency received by illicit addresses dropped by 39% in 2023. Yet, at $24.2 billion, it was still higher than $23.2 billion in 2021. According to TRM Labs, proceeds from hacks fell 50% to $1.8 billion in 2023, but illicit drug sales grew by 23% to $1.6 billion. This odd mix of numbers underscore the ongoing fight between industry players and scammers. This month, Google sued two people who it said uploaded 87 fraudulent apps to its Play Store, which were downloaded by over 100,000, many of whom lost money.

Expanding pool

Indian regulators remain cautious about crypto. In January, responding to the US SEC approving bitcoin ETFs, Reserve Bank of India (RBI) governor Shaktikanta Das said: “Our position, my position and the RBI's position on this remains unchanged irrespective of who does what." In India, gains from cryptocurrency trading are taxed at 30%, plus a surcharge of 4%. This has tempered their growth. While crypto trading by Indians has picked up of late, it remains lower than in 2021.

However, the pool is growing, especially among the younger population (75% are under 35 years old, according to Coindesk). Globally, too, the numbers are growing. In 2023, the number of crypto owners grew 36.5% to 580 million. BCG has projected that this number will hit a billion by 2030. Even as users grow, the incremental supply of bitcoins is set to fall. This has increased volatility in recent days. With cryptocurrencies, though, volatility is likely to remain a permanent fixture. is a database and search engine for public data.

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