Indian cryptocurrency exchanges lost over 75% monthly trading volumes in last six months

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In the first six months of 2022, top crypto exchanges such as WazirX, CoinDCX, Bitbns and Zebpay, among others, lost more than 70-75 percent of their trading volumes on a monthly average basis. Following the July 1 implementation of the 1 percent TDS (tax deducted at source) on virtual digital assets (VDAs) that was announced in the budget, the situation has only worsened.

While industry stakeholders and experts remained hopeful, terming it a cyclical event, they cautioned that smaller exchanges may face the risk of going bust, even as larger ones may have to slash costs by cutting jobs.

According to data accessed from CREBACO Global, a cryptocurrency research and analysis firm, monthly trading volume on WazirX, which was acquired in November 2019 by Binance, the world’s largest crypto exchange by volume, monthly trading volume plunged from $38.98 million in January to $9.6 million in June 2022, dropping by 75.18 per cent. Zebpay’s monthly trading volumes fell 72.83 per cent from $10.67 million in January to $2.90 million in June, while Bitbns’ trading volumes dropped by over 50 percent from $15.39 million to $7.33 million over the same period.

WazirX is the largest crypto exchange in the country, facilitating more than 50 percent of trades in India.

Gaurav Dahake, CEO, Bitbns, told Moneycontrol, “We are seeing a situation like this for the third time. A similar scenario played out in 2018-19 as well. The only difference is, this is happening at a larger scale this time. A lot of exchanges have expanded their teams, hiring hundreds of people.”

“Back then, most teams were very small, WazirX too had 12-13 people. We didn’t hire as much last year but we are hiring now because it’s a good market for hiring. From here on we will see exchanges taking different paths,” he added.

For instance, some exchanges will shut down due to operational hurdles and lack of funds, he said.

Coinbase Ventures and Pantera Capital-backed crypto platform Vauld’s sudden freezing of withdrawals, trading and deposits on the platform this week came as a shock, which was followed by a hurried acquisition announcement.

Dahake said, “Vauld is just one of the examples. They had operational issues. They hired aggressively and were looking to raise a $100-million round but that didn’t materialise. Exchanges are also coming up with innovative solutions to circumvent TDS. Of course, there are tougher times but I think we are fairly close to how worse it can get.”

Another industry source seeking anonymity concurred, saying he too expects several smaller exchanges to go bust due to the ongoing liquidity crunch, apart from one of the bigger players, without naming it.

Sidharth Sogani, founder and CEO, CREBACO Global, said, “Laying off is a very good strategic move. If I am laying off, it means I am going to survive this time. But volumes going down along with it will not help. In the ongoing situation, I will say it is not just crypto-centric, layoffs and funding shortages are happening globally and across sectors.”

“Crypto is just a taboo word. If the market starts going up and there’s momentum in crypto, people are ready to pay 30 percent tax and jump in. But there is no momentum at the moment and this type of recession with pandemic and wars is happening for the first time,” Sogani explained.

Yet venture capital firms invested in these startups believe that cryptocurrency is the asset of the future for long-term technological advancements. The current downturn in the market will only impact speculative investors, they say.

“If we look at crypto as a market singularly, separate from opportunities in blockchain and Web3, then it will be an injustice to an asset-driven market which will always be cyclical… Speculative investors will be facing the impact of the ongoing events. We as VCs (venture capitalists) are not speculators and look at crypto very differently,” said Sanjay Mehta, founder and partner, 100X.VC, a Mumbai-based fund that specialises in investing in early stage startups.

He added, “Crypto startups which failed to build strong communities or are facing troubles with management will break down. But others with sound backing and fundamentals will come back. Companies like CoinDCX, where I was one of the earliest investors, they have scaled very sensibly over years.”