Crypto stakeholders cheered the move on Twitter considering it as a positive signal
“I am going to make him an offer he can't refuse”, Al Pacino had famously said as Don Michael Corleone in the classic, cult film Godfather (1972).
More than three decades later, the wild West of the financial world has a new ‘dogefather’, the eccentric Elon Musk, who is at the forefront of promoting a digital currency that is impossible to ignore or refuse. He is not alone in this, as cryptocurrencies have caught the fancy of millennials and older generations alike. But what is behind the crazy rise of crypto? And the question remains, will this rise be sustainable and consistent?
While origins of cryptocurrency remain shrouded in secrecy, with the revolutionary idea breaking on the internet one sleepy day in 2008 as a simple paper titled Bitcoin – A Peer to Peer Electronic Cash System by one unknown Satoshi Nakamoto, cryptocurrency broke on the financial scene with much promise and potential.
Indian push and pull
It comes as no surprise, then, that bitcoin, the first cryptocurrency, remains the best performing asset class of the last decade, delivering mind-boggling returns of more than 9,000,0000% between 2010-2019, as per Bloomberg. To put this in perspective, BSE Sensex surged only about 136% between the same period.
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Despite being hit by resistant financial regulators and the pandemic, India marched on to become the second-largest country in the world, ranking next only to China, when it comes to trading cryptocurrencies between 2015-20, according to data by bitcoin marketplace Paxful. India traded 10,017 bitcoins worth 94.7 million dollars during the period.
This came at a time of a relatively hostile regulatory environment, with RBI (Reserve Bank of India) calling for a blanket ban on cryptocurrencies in 2018, calling them Ponzi schemes. This was later overturned by the Supreme court in March 2020, providing some respite to the Indian crypto space. While we still tread in grey areas when it comes to crypto regulations and threats of an impending ban persist, some ray of hope lies for the, 10 million strong crypto investor base in India, which saw as much as a 30% increase in cryptocurrency transactions over the last year. There have been increased demands from the crypto industry to constitute a regulatory body on the lines of SEBI (Securities and Exchange Board of India) and not RBI, to regulate the space.
Prominent Indian crypto exchanges like WazirX, Coin DCX, and more have seen an exponential rise in their investor base. For instance, WazirX saw its user base, mostly aged between 25-40, shoot up by almost 50% to reach 3 million in April 2021, a milestone it is sure to breach in the coming days, along with other crypto exchanges, as more and more Indians lookout for alternative investment, income, diversification and profit-making opportunities in the markets.
Rakshit Lodha, Associate Product Manager at INDMoney, is one of the many young investors enthusiastic about the crypto space. “It is the next big financial revolution, for sure and it would be unwise to not be invested in this space”, he says.
Dogecoin, Bitcoin, and everything in between
The global cryptocurrency sentiment has been anything but dull, with bitcoin, the original crypto flying past 1,000 billion dollars in market capitalization in 2021. With a yield of around 96.77% since the start of the year, bitcoin might have aced the markets, but the biggest winner, perhaps, remains the parody currency dogecoin. Standing at a market capitalization of 65 billion dollars, yielding more than 8,000 % in a single year, it caused major crypto trading platforms to crash before steadying.
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For those looking for a less volatile, more secure cryptocurrency trend, Ethereum has not disappointed. With solid fundamentals and technological backing, many crypto enthusiasts are confident that it will change the financial landscape, particularly that of DeFi (Decentralised Finance).
Siddharth Menon, Co-founder at Wazir X feels quite bullish on the potential of Ethereum. “Ethereum is an amazing innovation. It is the world's biggest decentralized virtual machine network and the foundation for many decentralized apps and fundamental businesses,” he says.
The cost of all this, however, is a hefty environmental disaster in making. Citing insanely dangerous energy consumption trends in bitcoin mining, Musk recently u-turned on accepting payment for Tesla cars in bitcoin. Ecological impacts of crypto mining and storing have long been discussed, with demands for more sustainable, environment-friendly processes.
Cryptocurrency production is estimated to generate between 22.2 and 22.9 million metric tons of carbon dioxide emissions a year. This is almost equal to the levels produced by countries like Jordan and Sri Lanka, found a 2019 study in Joule, a premier scientific journal.
According to Digicomist, a blog founded by cryptocurrency economist Alex De Vries, A single bitcoin transaction has a carbon footprint of 359.04 kg, which is equivalent to the carbon footprint of 59,840 hours of watching YouTube. Heavy, isn't it?
It is impossible to shy away from crypto-mania, which is already a billion-dollar industry. Many experts also believe it to be the next multi-trillion dollar space that is still in its infant space. With global crypto-regulations loosening and India relenting to regulating the crypto space rather than banning it, there are definitely green shoots to be seen for crypto enthusiasts
“It will all depend on how well the government will regulate the space. That is the only solution in the long run. There is a lot of potential for growth in the cryptocurrency space, both from a short- and long-term perspective”, says Karan Anand, who has been regularly investing in crypto for some time now.