Fear, uncertainty and doubt have taken over the market during the past few weeks amid pricey valuations, regulatory crackdown in some countries and concerns over environmental impact of the world’s biggest crypto token, bitcoin
MUMBAI: As an asset class, cryptocurrencies have seen an exponential increase in global investor interest over the past year and had peaked in April this year. In India too, a similar trend was visible with crypto exchanges clocking impressive user additions and a sustained surge in daily trading volumes.
Over the past two-three weeks, however, volumes on Indian exchanges have tanked along with their global peers amid bearish mood in the crypto market.
“There has been a barrage of news that has been influencing increased price volatility in most cryptocurrencies, which has deterred many crypto traders from taking on incremental risk. Additionally, with most of the largest cryptocurrencies such as bitcoin and ether having corrected substantially from their peak prices, investors have adopted a cautious stance further impacting trading volumes," said Sumit Gupta, co-founder and CEO, CoinDCX.
The exchange’s daily trading volume dropped to below $10 million this week from a high of $76 million in May, as per data available with CoinGecko.
In the past, even if there was a big drop in prices, there was a surge in trading, as many investors looked at value buying. However, volume hasn’t increased despite a small recovery in the crypto prices, recently. Should it be a cause of concern for investors?
India’s biggest cryptocurrency exchange, WazirX, saw a trading volume of $114 million on Thursday. It had hit daily trading volume of $392 million on 17 April 2021.
“The June volume is still way above what we were doing in April. This was in spite of all the banking issues. The crypto market has been growing since last year. I feel that the market will remain in the consolidation phase during the quarter, and from the next quarter mid, we should see market movement happening.
There is still a lot of buying happening and HNIs are investing a lot and doing their research and setting up their accounts," said Siddharth Menon, co-founder and chief operating officer, WazirX, which logged a trading volume of $6.4 billion in May.
Gupta adds: “With reducing volatility and increased investor awareness about the long-term prospects of crypto assets, there will be a stronger rebound in trading volumes going ahead."
Globally, there has been increasing adoption across the developers and investor community. The key reason is the large number of projects being developed using blockchain technology that are now catering to many industries and driving significant operational improvements. Fear of missing out (FOMO) has also driven retail investors to this new asset class.
However, fear, uncertainty and doubt (FUD) have taken over the market during the past few weeks amid pricey valuations, regulatory crackdown in some countries and concerns over environmental impact of the world’s biggest crypto token, bitcoin.
Prices of bitcoin have tanked more than 45% from its all-time high of $64,804.72 hit on 14 April, while ether is down 47% from its lifetime high of $4,356.99 hit on 12 May.
“FOMO and FUD, both are part of any market, be it the equity, crypto or commodity market. We are in a consolidation phase and people are looking for a clear direction of price movement. Depending on this direction, FOMO or FUD will play out. However, we always recommend investing in crypto assets using rupee cost averaging for the long term to get rid of the short-term volatility and get a better average price of entry into the market," said Avinash Shekhar, co-CEO, ZebPay.
According to Shekhar, any kind of development within the crypto space, ranging from network upgrades to more use cases, will boost the market.
“In terms of India, measures that would further boost the crypto market include formal recognition of cryptocurrencies as an asset and more clarity in terms of the taxation policies applicable for both investors and exchanges," said Gupta.
According to experts, people who are in for quick money may find this market a little shaky, but investors who are in for the long term, are still pretty strong on the market.
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