Thriving ecosystem has helped cryptocurrencies weather uncertainties in India

In 2008-09, when the world was in the grip of a financial crisis, an anonymous online entity named Satoshi Nakamoto developed Bitcoin—a peer-to-peer, unregulated alternative to the regulated but crisis-hit banking system.

More than a decade since, the cryptocurrency ecosystem has grown by leaps and bounds globally. In India, it remains an unregulated asset, but that has not deterred Indians from investing in it in a big way. According to a recent report by the trade website BrokerChooser, India had 10.07 crore crypto owners—more than any other country in the world. The US has 2.74 crore and Russia, 1.74 crore.

Crypto popularity in India exploded in March 2020, right after the Supreme Court lifted the Reserve Bank of India’s ban on cryptocurrencies. Bitcoin price jumped from $6,484 to more than $47,000 now, according to the research platform Statista. Earlier this year, prices hit a record high of $61,000. The price boom has been driving interest among millennials, say experts.

But there are many pioneers in India who were early adopters of cryptocurrency. They saw a bright future in crypto long before others did. Some of them started investing several years ago; some have even gone all in.

Harshad Gawde of Mumbai is one such pioneer. An app and website developer, Gawde is both an investor and crypto miner. Mining is, essentially, a process of minting new crypto coins. He has been a miner since 2014.

“When I first learnt about Bitcoin, it opened so many ideas,” said Gawde. “A lot of people were asking questions by the time I was learning [more about the market]. That is when I started blogging. I also ran a website for a few years.”

According to Gawde, Bitcoin can work as a complete banking system. “Apart from mining and trading, I am now working on a project—sort of an e-commerce website, where you will be able to exchange things through cryptos,” he said.

Gawde bought his first Bitcoin for $200. According to the global price-tracking website CoinMarketCap, Bitcoin traded at $48,755 on December 21, 2021. Gawde did not reveal his exact crypto wealth, but said he was holding Bitcoin in double digits, Ether in high double digits and XRB in four digits. He has also started buying Solana, one of the world’s fastest growing crypto ecosystems.

When he first began spending hours studying the market and then mining Bitcoin, Gawde had struggled to convince his family about the value in crypto. “I was always into computers and games,” he said. “Then, for almost a year and a half, I was totally into crypto research. My father used to tell me he doesn’t like me sitting in front of the computer for 6-8 hours and calling it work. But soon I could convince him that I was making lakhs of rupees a week.”

Impressed, his father introduced him to friends who wanted to enter the market. That is when Gawde began his blog. Today, he runs the website Getbitcoinready.com, which offers lay investors a crash course on crypto. He is also planning to start a blog in a regional language to expand his reach. Unlike in the early days, when he used his own machine for mining, Gawde now relies on data centres and cloud computing. The reason: the computing power to mine Bitcoins has grown manifold over the years.

Akshay Haldipur, who has a web security background and is a digital marketing expert, entered the market around the same time Gawde did. “Bitcoin traded for barely $40-50 dollars back in 2012,” he said. “That time, it was just about buying and holding cryptos.” Ensuring returns were not really a priority for early enthusiasts like him.

By 2017, Haldipur had 77 Bitcoins and stakes in a few other cryptocurrencies. He said he was currently holding a “good amount” in Bitcoin, Ether, stablecoins (a type of crypto whose value is linked to external assets like dollar and gold), and NFTs (non-fungible tokens, which can be sold or traded).

“There are three types of traders—scalpers, swing traders and long-term holders,” said Haldipur. “I do scalping, which basically means that I enter with very big positions and exit in 15 to 20 minutes. What I would have made in a month, I make in 10-15 minutes. That is my strategy.”

Naimish Sanghvi, who founded the crypto platform CoinCrunch, is focused on long-term gains. He learnt about the market when he was working for a global consulting firm that was carrying out a study on blockchain technology. In 2017, he began investing in crypto.

“My experience in the beginning was really bad,” said Sanghvi. “I used to trade for just 1 to 2 per cent profit. I would make money and then lose it all in one go. It took a while to understand that it is a better investment as a long-term asset.”

Sanghvi’s primary investments are in Bitcoin and Ether. He started trading when Bitcoin was around $2,500. By the time he began seriously investing in it, it had topped $10,000. He said he held less than 10 crypto coins now, but is open to buying more when prices fall.

The cryptocurrency market in India has been growing fast. Today, there are more than half a dozen exchanges that are running advertisements to attract new investors. Experts, however, have been pointing out market risks.

One, cryptocurrencies are extremely volatile; prices can rise and fall sharply in a matter of minutes. For instance, when news broke in November that the government was mulling a crypto ban, prices of major cryptocurrencies fell 15 per cent. In early December, cryptocurrencies shed another 15 per cent.

Prices can go up equally fast, too. When Tesla chief Elon Musk announced that the electric carmaker would accept Dogecoin as payment for merchandise on a test basis, the price of that crypto jumped 15 per cent in a single day.

“Crypto is extremely volatile,” said Haldipur. “In a stock market, you might sit and wait for a 5 per cent move for an entire week; but in the crypto market, a 25 to 100 per cent increase happens in a matter of minutes.”

Two, there are risks of exchanges being hacked and fraudsters peddling Ponzi schemes. “I have been scammed many times,” said Gawde. “A lot of cloud-mining companies and exchanges simply shut shop one day and ran away with the money. So, I do my own research now. I try it, test it and, if it is good, put it on my website so that people can use it.”

So how do these crypto pioneers safeguard their investments? “You keep money on exchanges if it is a small quantum—verified exchanges, which are backed by US regulation and so on,” said Haldipur. “These exchanges, even if they get hacked, will give money back to you if you file a claim. A lot of people use hardware ledgers, where you have your keys to yourself. There are other things like wallets; so even if the exchange gets hacked, you have the crypto in that wallet.”

Doing thorough research and technical analyses before investing is crucial, considering that there are more than 12,000 active cryptocurrencies now. “If you are here for the long term, then just invest in coins that have good fundamentals, like Ether, Bitcoin or Solanos,” said Haldipur. “Hold them with no expectations. Think of it like a mutual fund.”

Exchanges like CoinDCX are trying to build awareness of the crypto market so that investors can make better decisions. “You should not look at cryptos from a get-rich-quick perspective,” said Sumit Gupta, co-founder and CEO, CoinDCX. “The right mindset is to become knowledgeable about the subject and then take a long-term approach.”

Gupta had a well-paying job at a multinational corporation in Japan before he returned to India and bought into the cryptocurrency ecosystem. He was introduced to cryptocurrencies and the distributed ledger system in 2014, when Bitcoin started gaining momentum. He began focusing on crypto in 2016, and cofounded CoinDCX with his college mate Neeraj Khandelwal in 2018. CoinDCX became a unicorn this year—it has raised $90 million at a valuation of $1.1 billion.

“There is massive interest among Indian youth to get into this emerging asset class and technology,” said Gupta. “But in terms of advancements in the whole space, India has a lot to catch up on. We felt that an ecosystem, or sort of, has to be built up. The exchange is a gateway for Indian users to access [the market], not just buy and sell crypto.”

One could buy hundreds of cryptocurrencies through exchanges. But Gupta feels investors must stick to only those crypto tokens that have a high market cap—a practice that he follows himself.

Prevailing regulatory uncertainties are not really deterring investors. All eyes are now on the cryptocurrency bill that will be tabled in Parliament after it gets cabinet approval. Crypto backers say it will be very difficult for the government to ban cryptocurrencies altogether.

For one, the crypto market is global and runs 24x7. If cryptocurrencies are banned here, investors would simply shift operations to exchanges registered and operating abroad. Quite a few investors already invest through such exchanges. “Cryptos are not in the government’s control,” said Gawde. “To ban it, they will have to shut down the internet—which is impossible.”

So, as the first regulatory step, investors want cryptocurrencies to be recognised as an asset class—just like equity, mutual fund or gold. Gupta said sound regulations would drive investor confidence, lead to the development of the market in an orderly manner, and boost the crypto startup ecosystem. “There are,” said Gupta, “thousands of entrepreneurs sitting on the fence.”