Mumbai: A growing interest among Indians towards adopting cryptocurrency, which is no longer seen as a taboo following the Supreme Court ruling in March, was one of the defining points of 2020 so far as investment in alternative assets is concerned.
In its ruling, the apex court lifted the ban imposed by the Reserve Bank of India (RBI) in April 2018 on cryptocurrency transactions which prompted many individuals to show interest as exchanges saw sign-ups rising 10 times as compared to the previous year.
Bitcoin, the most traded crypto currency, outperformed all other asset classes in 2020 fetching over 200 per cent returns, and became the key driver for investor’s interest in cryptocurrencies, which are often referred as an alternative to gold and a hedge to inflation.
The surge in India was driven by male millenials, sector players told ThePrint.
Sathvik Viswanathan, chief executive officer, Unicoin, one of the oldest crypto trading exchanges of the country, said the apex court ruling resulted in interest from investors increasing by five to 10 times.
“Since March there has been a five times growth every month, and some of the good months it was 10 times, in terms of new customers signing up, giving the KYC documents. New customers signing up, logging in, doing transactions, more of less everything goes hand in hand,” said Viswanathan.
He added that India is still in the adoption stage and not in acceptance mode as volumes are low compared to some of the developed nations. However, there are encouraging signs as the numbers are growing and several smaller exchanges came up this year in many states.
“Smaller exchanges are mushrooming. We see half a dozen in many states. I know about 50 of them in the last one year. They are trying to have their small community to trade with them and trying to scale up. But the well-known ones continue to be handful, only 5-6. The smaller ones also contribute to the growth of the industry, directly or indirectly,” he said.
Sumit Gupta, CEO of CoinDCX, another crypto exchange said there is a lack of awareness when it comes to cryptocurrencies as an asset class. “They have heard about Bitcoin but they don’t know what it is. People do not have the right kind of knowledge, and tools to invest in crypto assets.”
Gupta agreed that 2020 was a stellar year for this particular asset class with daily trading volumes showing impressive growth and active users rising.
“2020 was an amazing year. The March 2020 Supreme Court judgment was in favour of crypto business. What the SC ruling had said was that banks should be allowed to work with crypto exchanges. That news itself got 10 times sign-ups on our platforms,” he said.
“There has been an increase in terms of daily active users. We are clocking $15-20 million worth of daily trading. Trading volume is growing 10 per cent quarter-on-quarter. Our daily active users are increasing 4x, quarter-on-quarter,” added Gupta.
The investors pushing crypto growth
According to the players in the sector, it is mostly individuals who have been pushing the volumes despite limited interest from institutions. What is revealing is that it is the male millennials who are more proactive in adopting crypto as an alternative asset class.
“What we observed from our exchange’s activity is, these investors are individuals, in the age group of 25 to 40 years. 25 is the age when they start their professional life. Lot of these young people, who understand technology, choose crypto as their first asset class. Because a lot of these people believe in the power of technology,” said Gupta.
“They may be software engineers, close to the technology world, mainly hailing from tier-1 and tier-2 cities, and are predominantly male. Women participation is still on the lower side. This is also what we are trying to change. We want to bring more women into the ecosystem,” he added.
The blockchain technology enabled the existence of cryptocurrency. It was invented for Bitcoin, the most popular among cryptocurrencies.
In 2020, not just Bitcoin, other cryptocurrencies like Ethereum, Tether and Litecoin also delivered a strong performance.
One of the reasons why institutional participation is yet to gain momentum in the adoption of this asset class is lack of clear regulations and guidelines.
“Institutions (in India), wealth managers are far less than other countries because the government has not laid out clear regulation and guidelines. People who are investing millions of dollars need clarity on all these aspects before they put their capital,” said Gupta.
But commercial banks that shunned cryptos in 2018 are coming on board.
“For banks, this industry is just a customer for them. If one bank is not against it, the other bank is taking away its business. If a dozen of the banks are hostile towards it, we have more than a few dozen of banks who are accepting. We have some seven banks that we engage with. After the SC verdict, their mindset is changing, not for every bank but most of them,” Viswanathan said.
Stepping up growth
The encouraging trend towards adoption of cryptocurrency in 2020 by Indians has also prompted exchanges to chalk down aggressive growth plans for 2021.
CoinDCX, which raised around Rs 100 crore last week from a clutch of investors, said one of the fundraising objectives is to spread awareness and literacy around crypto as an alternative asset.
“One of our priorities is to enable large scale crypto adoption in India through our ‘trycrypto’ movement. Anyone who is interested in investing, someone who wants to try it out, we have built a product which is very well suited for new entrants. This is like buying crypto like ordering a product online — the product is extremely simple,” said Gupta, adding the people can invest as low as Rs 10 to begin with.
He, however, emphasised that understanding technology is essential for someone who wants to invest in this digital currency, and should have a long-term view.
Unicoin, which has 13 lakh customers will also press the growth pedal, following its fundraising in October. “We right now are signing up between 500 and 1,000 customers every day. We started the trading platform in 2013, so this is our eighth year of operation. It is the oldest one. Our growth plan for 2021 is definitely aggressive,” Viswanathan said.
What lies ahead
CoinDCX said that there will be a major uptrend in Bitcoin prices in 2021. Similar movement of top cryptocurrencies, such as Ethereum, in the first quarter of 2021 is also expected.
“In 2021, we can expect even greater demand from institutional investors, hedge funds, family offices, and from retail investors as well,” CoinDCX said.
While cryptocurrency outperformed all other asset classes in 2020, the coming year may shed some light if adoption turns into acceptance despite indifferent postures from the regulatory authorities.