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Two years ago, a stream of ads by YouTube influencers got Dheekshan K.S. thinking of cryptocurrencies. So in November, the hotelier from the coastal town of Udupi took the first tentative step, investing a portion of his income in crypto. “I just wanted better returns than FDs."

Most of his crypto investments were centred around Bitcoin and Ether, but Dheekshan also put 75,000 in Luna, the cryptocurrency backed by the Terra stablecoin UST. Luna was popular then. It promised investors a 20% annual yield and was backed by a stable coin, a cryptocurrency whose value is often fixed to the dollar.

In this case, 1 UST was supposed to be 1 dollar. On 9 May, the Terra stablecoin was de-pegged from the dollar, sending it crashing. On 13 June, crypto saw another meltdown, with the price of Bitcoin tumbling as global investors fled risky assets. Luna is now trading at nearly zero. Last month, a new set of Luna 2.0 coins dropped, but they have already slid 70-80% in value.

“It was a real slap in the face," Dheekshan, 24, said.

Like most investors globally, Dheekshan has written off his investment in Luna though he still has his coins. His other investments in Bitcoin and Ether are also down. “I had invested over 3.5 lakh, about a third of my savings. It is a bit hard to look at the app and check the red marks, but my investments are down at least 55%," he said.

Till he began investing in crypto, Dheekshan, frugal by nature and from a family that owns a small restaurant in the Karnataka town, had primarily invested in gold and fixed deposits.

He was not alone. A larger set of crypto investors Mint spoke to also had little to no exposure to equities or other volatile assets. But as crypto entered mainstream consciousness through celebrity endorsements, especially during the Indian Premier League, they were drawn to it —perhaps not always aware of the risks involved. Many of them were from small cities, which have seen greater adoption of cryptocurrencies, according to WazirX, the crypto exchange. After a free run for a year, the Advertising Standards Council of India (ASCI) cracked down in February. It mandated that crypto ads follow a set of 12 guidelines and show a “highly risky" disclaimer.

WazirX has over 7.3 million users and clocked over $21.8 billion in trading volume in 2021, with tier-II and tier-III cities cornering 55% of total user sign-ups on the crypto exchange. Of this, women from these cities contributed to 65% of the total sign-ups from all over the country.

Takshak Pai, 26, another Udupi-based crypto investor, started investing in the asset class around March and April last year when prices were hitting new highs.

“I didn’t want to get involved with stocks—it seemed dull, to be honest, while crypto looked like the next big thing," he said.

The early days of trading were heady. At the time, he was finishing a Master’s degree in England and initially lost a few hundred dollars. “Later, I got into the ‘shitcoin trading’ phase. Randomly named tokens (mostly scams) on decentralized exchanges were making the most noise. You might have heard about Mars Coin, Elongate and others," he said.

Most of these coins don’t exist anymore.

“I’ve lost track of my losses," Pai said.

He is now looking to diversify into mutual funds and stocks, but most of his money is still invested in crypto. “At least for the near term, I will just stick to established cryptocurrencies and cost average it for the next few months," he adds.

Like Pai, Nishant Sarda, 24, who runs a printing business with his family in Siliguri, is looking to diversify out of crypto. He said he had minimal exposure to stocks when he started trading crypto seven months ago. He had invested up to 1.5 lakh for longer-term exposure, but this is down 40%. Of this, he lost 50,000 in trading. “Around 20% of my net worth is invested in crypto. I will slowly average it and focus on long-term investments," Sarda said.

Some of the drawdowns have been painful for investors, even those working in the Web3 ecosystem.

Take, for instance, a Guwahati-based marketer who declined to be named. In late 2020, she started working for a few crypto startups. She had dabbled in stocks before, but crypto felt like a calling for this 25-year-old.

“I saw potential in the vision. I started researching and investing in different projects. I also invested and flipped (short-term trading) NFTs during this period," she said.

All of last year, she was one of the bulls. “The majority of my investments were in Polygon, Ether, and Solana. I am still confident about them, but the bear market hit so suddenly that it has been tough. I tried not to panic because I had faith in these projects, but prices just kept going down," she said.

She had invested upwards of 5 lakh, which is worth around 50,000 now, after the crash.

She says India has imposed what she calls a “death tax", referring to the levy introduced in the budget on crypto income. According to a report by blockchain data platform Chainalysis, the Indian cryptocurrency market grew from $923 million in April 2020 to $6.6 billion in May 2021. Over 15 million Indians have invested in crypto. Among 154 nations, India ranked second in cryptocurrency adoption, the report added. With a tax, this may go down in the future. Meanwhile, many Indian crypto users have been left holding the bag.

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