India’s Crypto market is in the doldrums

Is India's crypto market heading for a crash? The number of Crypto related transactions is down by 66%, and the average monthly transaction amount has nosedived by 90%, resulting in a record number of Crypto enthusiasts exiting the market.

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As new tax rules have forced many crypto enthusiasts to maintain distance from the cryptocurrency industry, India’s adoption rate of cryptocurrencies is likely to drop at a concerning rate in the second half.

India may lose the numero-uno status in Asia’s top cryptocurrency market as the 30% capital gains tax that came into effect in April – another 1% tax deducted at source (TDS) on profits made from crypto in July – is hugely impacting the prospects of cryptocurrency investments.

A recent report from Chainalysis’, titled Geography of Cryptocurrency report 2022, lists a few concerning factors.

Crypto market in India

India has been the most valuable cryptocurrency market in central, southern Asia, and Oceania (CSAO). Between July last year and June this year, the Indian cryptocurrency investments market was valued at $172 billion -significantly ahead of second-placed Thailand, which drew less than $150 billion.

The equations have been changing fast since Budget 2022 was announced. In an apparent attempt to discourage people from investing in Crypto, and reap the most of the heavy gains people have been reporting, the government of India has levied heavy taxation on crypto investments. However, the decision to tax Crypto gain has been taken without giving any clarification about how these investments will be regulated.

From April to September this year, data from Crebaco Global shows a sharp drop in daily trading volumes at WazirX as well as CoinDCX – two of India’s leading crypto exchanges. WazirX’s average daily transactions amounted to $23.2 million in April. This figure has nosedived to $1.3 million this month, resulting in a more than 94% decline. The drop in itself tells a lot about how much people have lost confidence in the crypto market in India.

The scenario with CoinDCX is no different either; Daily trades on CoinDCX is down to just $1.4 million on 14 September from $13.1 Million in May.

WazirX’s quarterly trading averages fell 86% sequentially from $48.9 million in the June quarter to $6.9 million in the about-to-end September quarter. On the other hand, CoinDCX’s quarterly trade dropped to a mere $6.3 million this quarter, down 79% from $29.8 million in the June quarter. 

It’s important to note that the September quarter is yet to end, and the average quarterly data may vary, albeit marginally. Any kind of significant change in the trend is most unlikely to take place considering the fear of recession has started gripping people.

Few market experts believe that the current market downturn is due to a domino effect and a combination of a variety of factors.

The TDS was implemented on July 1st and had a significant impact on liquidity on Indian crypto exchanges. Traders are now wary of trading crypto profit margins due to the tax. This has had a significant impact on trading volumes in exchanges and the non-favouring global economic conditions have worsened the situation.

The discouraging scenario in India’s crypto market has a direct impact on India’s ranking as well. The country was ranked second in cryptocurrency markets worldwide in 2021 but had fallen to the fourth position as of June 2022.

There is no sign of recovery anytime soon, considering the global economic downturn. Many countries, including India, are staring at the longest recession due to the worsening market conditions in the US with each passing day.

This fact is evident in a direct comparison of WazirX’s June and July daily trading volumes. WazirX recorded $9.7million in daily trades in June. However, this number dropped to $3.3 million in July, a decline of 66% within a month.

The Crypto winter is going to say for a very long time, some of the industry experts have indicated. As a result, many crypto enthusiasts have pushed themselves back from crypto investment. A sizeable number of people have temporarily exited the crypto market fearing the worst days ahead.

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