More than $1 trillion wiped out in a matter of days, stratospheric highs followed by painful crashes, growing government scrutiny, central bankers’ dire warnings of a bubble—cryptocurrency is not for the faint of the heart.
In the digital currency sweepstakes, a tweet, especially if it is from a certain Elon Musk, can make or undo fortunes in seconds. It is a volatile, mercurial world and it is only getting bigger—bitcoin, ethereum, dogecoin, you name it and they love it.
India is firmly in the grip of the crypto mania sweeping the world even as debate rages if a digital coin is a currency or an asset or even anything of value? The enthusiasm continues to spawn crypto exchanges and their volumes are multiplying.
At last count, Indians have invested Rs 15,000 crore in cryptocurrencies with around 1.5 crore people, mostly young, invested in cybercurrencies, according to industry insiders.
These are impressive numbers for something which is still a grey area. Cryptocurrencies are no longer illegal in India but are not legit either. The government is yet to spell out its view of crypto and what it plans to do with it. And yet Indians, many of them young, are still going big.
Moneycontrol spoke to about a dozen young crypto investors and one thing they all agreed on was—risk doesn't exist because it's always assumed to be 100 percent.
Meet Shah was all of 15 when he stumbled upon bitcoin. The year was 2012 and only a few had heard about the concept of cryptocurrency. PayPal was the biggest thing in the fintech space and at home, the National Payments Corporation of India had just launched a new card payment network—RuPay, India’s answer to Visa and MasterCard.
As a tech-savvy kid, Shah was hooked. Thanks to India's oldest crypto-exchange, ZebPay, he collected a tiny portion of bitcoin via affiliate activities’ referrals and paying Rs 300.
The early adopters were hardcore engineers, who understood how the internet was publicly designed and vowed to continue to decentralise digital money.
Today, Shah’s investment is worth more than Rs 65,000. No stock exchange in the world can deliver that kind of absolute returns but cryptocurrencies, which are unregulated, have no upper or lower circuit and operate 24 hours. The coin, or token if you will, is floated on decentralised crypto exchanges that are virtual.
"When I bought bitcoin, I did it for fun. My intention was always to hold onto it and never sell. The technology always looked promising and a lot of well-known internet researchers and developers were backing it. Bitcoin was just the start, my bet was on the blockchain," Shah told Moneycontrol over the phone from Ahmedabad.A cryptocurrency rests on a blockchain, which is a database that is shared across a network of computers. It is like a shared ledger, a record of transactions, which don’t need to be administered. A record or entry once made cannot be erased or changed, making it transparent and free from manipulation, at least that is what is largely held.
Surfing the ‘wave’
While users like Shah are few, the rise of bitcoin, ethereum, litecoin and other tokens has set off a race unlike any other.
Bitcoin was valued at $523 in May 2016. Today, it's well above $35,000 and even touched $64,829 in mid-April 2021. For believers, bitcoin holds one big lesson—it is a long play.
The first “wave” came in 2016-17 when bitcoin touched almost $20,000. The next four years, however, were difficult—it crashed to $3,000 and then stabilised around $7,000. But for crypto enthusiasts, the four years were a blip. The strategy all along has been about holding.
Around this period, Aman Banka, a 19-year-old engineering student invested in ethereum. His investment would often be in red but then came 2020 and the climb began and the token galloped to more than $30,000.
Despite the volatility, his five-year-old investment has given a far bigger return than a conventional instrument.
This strategy and expectation of a windfall are why the young are taking cryptocurrencies seriously. Newer tokens like dogecoin offer a start to those who were late to the crypto party.
The crypto market has created a predictable trend over a decade—initial bullish euphoria, an inflated peak followed by a massive correction and a period of silence. Many call these outcomes collectively a single wave. The crypto world has already seen at least two to three such waves and each left users richer.
The traditional financial world is watching the rise of crypto with a mix of fascination and trepidation. Investment professionals watch fundamentals, analyse risk factors, plot future trajectories as they work towards maximising returns.
But when you enter the hallowed crypto church, you discard these concepts.
Risk hai to…
Every single penny that is funnelled into a token is not expected to come back. It's a bet they are ready to take. Their young age is a cushion since they have "nothing to lose".
"I put a few thousand rupees in dogecoin when everyone was talking about it, Elon (Musk) was praising it, and the world was laughing at a meme currency," said Sayesha Arora, 25-year old communication professional from Delhi.Arora said many could view it as a senseless decision, even wasting hard-earned money but she treated it like a daily expenditure. “I'll spend that much eating out anyways. Instead of calling it an investment, I'd call it a lottery ticket that has far better odds of winning," she said.
The young have gone headlong into crypto. According to Giottus crypto exchange, almost 70 percent of its users are under 30 and the simple process of joining crypto is the reason they are attracted to it.
"The stock market requires a lot of analysis, understanding and research. It's impossible for me to just signup with a broker and start investing," said Aayush Pannikar. The 22-year-old engineer from Mumbai finds the process of allotment of shares during an IPO confusing and tedious.
“Whenever I buy a stock, it becomes a serious investment and I can't afford to go in the red. I might as well stick to mutual funds and give them a small fee to manage my serious assets," Pannikar said.
Signing up for a crypto exchange was far easier and straightforward, he said. “ZebPay, WazirX, Binance, CoinBase, and Kraken are among the most used by Indians. Simple, intuitive, open-source and quick," Pannikar added.
Pannikar and many like him may not have the patience for the stock market but they know what they are getting into. Most crypto investors Moneycontrol spoke to have SIPs or other investment plans in place.
Crypto is not their Plan A but it does offer them a fair and a much faster chance to grab a multi-bagger. "It's far easier to find a new potent token like Internet Computer than a traditional player like KEI Industries," Pannikar said.
Internet Computer is a new cryptocurrency that promises to take on the hegemony of big tech companies in the cloud-computing space. It captured a market cap of more than $45 billion within a day of its debut. And, the next wave of cryptos aims to add a new set of features that justify the existence of cryptocurrencies.
"Cryptocurrencies are one of the largest and highly talented open-source communities. It's just a matter of time before they find solutions to existing fundamental tech problems that hinder its adoption,” said Vikram Subburaj, co-founder and CEO of Giottus Cryptocurrency Exchange.Subburaj cites the example of ethereum, which is a blockchain and the token is called ether but is mostly referred to as ethereum.
“Spending a tremendous amount of electricity for confirming transactions was being overcome by a new concept of proof of stake being implemented by ethereum. With such innovations in this field, we will see more use cases than ever," Subburaj said
Ethereum is trying to gain relevance by adopting NFTs (non-fungible tokens), Chiacoin claims to be eco-friendly, CHANGE promotes charity, while Monero offers anonymity.
There are a lot of options, each with its unique selling point. Only time will tell if these blockchains can co-exist with traditional processes or overtake them.
Watch your step
But the road ahead is far from smooth and experts advise caution. It's become easier to create a new crypto blockchain, which has given rise to worthless currencies, which are being used to fleece users, or worse, some don't even exist.
Scams are abundant and new Initial Coin Offerings are almost hourly.
"We insist that users only invest what they can afford to lose entirely and always back the high market-cap coins for assured growth. In addition, no user should go all-in on cryptocurrencies," Giottus warns.
And, there are no redressals cause there is no regulation. The hope is with increased adoption and new technologies, authorities will have to come out with some kind of regulations for the crypto world, which whether they like it or not, is here to stay.(The author writes on technology, aviation, and mobility.)