Bitcoin is now just a heartbeat away from its 2017 peak, but the current rally has been disproportionately powered by institutional investments betting on the cryptocurrency. The enthusiasm about the rally is, however, lacking among retail investors.
A bitcoin is now worth ₹12.4 lakh, more than double its January value of ₹6 lakh, and nearly three times its March low of ₹3.8 lakh. Bitcoin had hit a record price on 15 December 2017, when it was worth ₹12.6 lakh.
According to experts, the rebound is driven by institutional interest in the US, with many companies investing part of their treasuries in such assets. Rupee depreciation against the dollar also contributed to a faster rebound for bitcoin-denominated in Indian rupees. The rupee has weakened from around ₹64 to the dollar in December 2017 to its current exchange rate of ₹74.5.
“The trigger in 2017 was bitcoin crossing ₹10 lakh. The move this year is seen as a recovery to that high,” said Nischal Shetty, chief executive, WazirX, India’s largest cryptocurrency exchange.
“However, I think bitcoin will need to cross ₹14-15 lakh for retail investors to jump in with large numbers. Globally, the price this year has been driven more by institutional buying in the US than retail buying across the world,” he said.
MicroStrategy Inc., a software firm that trades on the Nasdaq, invested $425 million in bitcoin across August and September. Square, a payments firm led by Twitter chief executive Jack Dorsey, said in October it would invest 1% of its assets ($50 million) in bitcoin this year. PayPal also announced plans in October to permit its users to hold cryptocurrency in its wallet.
According to Shetty, the PayPal move may be a trigger for retail participation internationally. Shetty’s company has seen a doubling of user registrations over the past few months compared to what the exchange received in the summer.
Indian crypto investors have faced a rocky road in the past few years. The peak of December 2017 was followed by a crash and a Reserve Bank of India (RBI) ban on crypto payments in 2018, leaving many investors stranded, unable to access or spend their money in rupees. In March 2020, the Supreme Court quashed the ban, leading to a flurry of crypto exchanges resuming operations and re-entering India.
However, the cryptocurrency rebound doesn’t match the intensity of 2017. “Although bitcoin is close to its all-time rupee high, other cryptos such as ethereum or ripple are not. Some of these are 90% down from their highs,” said Gaurav Dahake, chief executive of Bitbns, a cryptocurrency exchange.
Dahake estimates the rupee crypto industry volume at $10 million per day, up from almost nothing during the ban. However, this is a far cry from the $200-300 million per day in 2017, as Neeraj Khandelwal, co-founder of CoinDCX, a large Indian cryptocurrency exchange, told Mint in September.
The crypto industry has played down the gains that investors have made in 2020 and is anxious to promote a more stable culture of crypto investors. ZebPay, a former market leader in the crypto space, is working to sign up more long-term investors and women. “At ZebPay, we are moving away from short-term trading to long-term value investing and wealth-building,” said chief executive Rahul Pagidipati.
By and large, the crypto investor base has been dominated by millennials, particularly men. As much as 66% of ZebPay’s users are millennials (24-39-year-olds) with Gen X (40-55-year-olds) accounting for a bulk of the rest.
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