Cryptocurrencies open up new investment opportunity amid Covid-19 crisis

Nischal Shetty

Amid the volatile stock market, especially after the global COVID 19 outbreak, the Supreme Court of India’s verdict to overturn the Reserve Bank of India’s ban order against cryptocurrencies is giving a fresh lease of life to the stakeholders of the Indian cryptocurrency sector. They are now optimistic about embracing this investment avenue under the gloomy economic conditions.

The RBI, in its command, had assumed that virtual currencies posed a systemic risk to the banking system and it was purely inane. Till earlier this year, the market capitalization of the global cryptocurrency market was valued at USD 261 billion, marking a growth of around USD 70 billion since the beginning of 2020. This figure is about USD 15 billion more than what India added to its GDP back in 2017-2018 – a period when India’s economy was moving upward at the fastest pace in recent times. The numbers bear out that the global crypto market is growing at an exceptional pace.

The growing interest of investors towards global crypto market

Besides China, where the government is already pushing multiple blockchain projects, funds and local crypto champions, nations such as Iran and Russia too are leveraging the fertile ground of the current geopolitical climate to double their cryptocurrency efforts. In fact, the Bank of England’s governor Mark Carney too has announced a digital Synthetic Hegemonic Currency, similar to Facebook’s Libra cryptocoin, as an alternative to the dollar.

During the coronavirus contagion, there were concerns about slowing global economic growth and seething trade tensions. However, the US stock markets had still performed strongly by the middle of February with the tech-heavy Nasdaq rising 8.5 percent and S&P 500 up by 4.3 percent. Other national stock markets were doing well too with Australian markets up by 6.9 percent and Italy up by 7.3 percent. Gold too had climbed 6.22 percent year to date. But earlier in March, the cryptocurrency market suffered an intense sell-off due to the continuing pandemic. It witnessed a downfall in its value worth USD 93.5 billion within 24 hours and a 48 percent crash in the price of bitcoin. Much of the selling off of cryptocurrencies happened in the equity market.

However, over the past few years, bitcoin has been compared to digital gold and some are seeing it as the safest asset to invest in when markets are under pressure as it has returned a whopping 2,332,803 percent during 2010 and 2019. Compare that to the 189 percent returns of the S&P 500 and 19 percent returns that gold has given over the same time frame. Considering that they have been the best performers all this while, conventional institutional investors are once again showing interest in the leading cryptocurrency as today it stands at a value of nearly USD 7000.

The RBI’s ban order in 2018 had already pushed the country’s crypto community to step back and either shut shop or move their operations overseas. However, on the brighter side, Indian cryptocurrency startups like WazirX are gaining ground to help India get over the policy paralysis and stay relevant amid the global interest. Being the largest cryptocurrency exchange, the platform has recorded its daily volume grow by over 70 percent during March 2020.

Return of Indian investors in the crypto game

With a population of more than 1 billion, the Indian market is a sleeping giant and RBI’s crypto ban lift will now bring a massive boost in crypto adoption in India, thus empowering traders to streamline their investment plans. There is yet another advantage that users can now sell their crypto investments and get the cash directly into their bank accounts, which previously was prohibited. Although, this does indicate that cryptocurrencies are here to stay as a new investment avenue for the potential investors, they should be cautiously optimistic before pledging their money. In this situation, regulations adopted by the Indian policy makers will be the key variable in determining the pace at which the country’s citizens will adopt cryptocurrencies.

The author is Founder & CEO, WazirX.