19 Sep, 2022
A latest report by worldwide crypto trade Kucoin has proven that just about 15% of Indians traded or invested in crypto in the previous 6 months, a staggering 115 million traders! According to WazirX, certainly one of the largest crypto exchanges in India, 66% of customers are beneath the age of 35 and moreover, over 50% of Indian traders plan to extend their investments in the subsequent 6 months. This signifies not solely robust adoption from the youthful era in India, but in addition a better variety of traders with conviction in crypto.
However, 2022 has not been a banner 12 months for crypto traders in India or round the world, particularly as the world economic system teeters on the brink of a recession. With inflation raging uncontrolled, Central Banks all through the world have raised rates of interest and stopped ‘printing money’ by way of quantitative easing which had the world awash in liquidity throughout the Covid pandemics darkish days of 2020-21.
The world as we speak is in a really totally different place in comparison with even a 12 months in the past and this is significantly evident in the efficiency of the crypto business. Prices of the blue chips of crypto – Bitcoin and Ethereum – have each tanked, with BTC dropping near 70% and ETH dropping 65% from their peaks as of finish August 2022. Several so-called ‘altcoins’, like Avalanche, Solana and Fantom, have dropped much more, averaging a fall of near 85%.
The complete crypto market cap stood at $1.09 trillion as of August 25. At its highest, it was at $3.009 trillion. Between April to June, the market wiped off near $1.4 trillion. It is clear that we’re in the midst of a crypto winter. The final crypto bear market in 2018 lasted virtually two-and-a-half years, which is a sign that we could not see costs come again to all-time highs earlier than late 2023 or early 2024.
In addition to an unsure macroeconomic setting, there have been a number of occasions particular to the crypto business which have induced this bloodbath in the markets. In May 2022, the altcoin $LUNA, together with its related stablecoin $UST, worn out $40B from the markets resulting from a deadly flaw in its mechanism to maintain $UST pegged to $1USD.
This induced a ripple impact, which resulted in a broader market sell-off. Centralised lending and borrowing platforms like Celcius, BlockFi and Voyager confronted insolvency resulting from their publicity to $UST. The pre-eminent crypto hedge fund, Three Arrows Capital, needed to file for chapter a number of weeks later, as they’d invested $500M in $LUNA a number of months earlier than the crash, and had been liquidated when $LUNA crashed. More just lately, Singapore-based crypto borrowing and lending platform, Hodlnaut, froze all withdrawals resulting from ‘difficult market conditions’, and has now been positioned beneath judicial assessment.
What is very clear in these latest occasions is that quite a few massive institutional traders had been fully decimated when the market crashed. These so-called accredited traders with years of expertise in crypto had been left bare when crypto costs crashed. But how about retail traders? The $LUNA crash in May worn out the life financial savings of retail traders all through the globe with determined traders speaking about suicide being the solely possibility left for them.
While one can argue that they knew what they had been moving into, at the finish of the day, retail traders are usually not as subtle as accredited institutional traders, and I’d posit that some quantity of regulation is essential to safeguard their pursuits.
A whole lot of crypto traders entered the markets in late 2020 or early 2021, when the crypto markets had been in the center of a bull run. Almost each single token went up in worth throughout this era and traders had nothing a lot to do besides to purchase low and promote excessive. This is not the case, particularly as most token costs are down by 70-85% and traders, significantly retail traders have been left ‘holding the bag’.
Regulation is wanted to make sure that retail traders know precisely what they’re moving into, and, significantly to make sure that they’re unable to take leveraged positions with out passing quite a few pre-determined pointers.
The latest taxation modifications in India together with the 30% tax on all crypto transactions has already induced volumes to crater in crypto exchanges in India. But, taxation in itself is not a deterrent when markets are frothy. Regulation must be put in place to guard retail traders when the downturn occurs – which at all times will at the finish of a bull market. The losses suffered by retail traders round the globe when $LUNA crashed earlier this 12 months destroyed many lives. Some measures have to be taken to make sure that this doesn’t occur once more.