Is investors’ money safe? – The New Indian Express

Express News Service

BENGALURU: In November 2021, Bitcoin, the largest cryptocurrency in terms of market value, reached its peak of over $ 67,000, and there were rumors that it could touch $ 1,000,000.

But soon after, the industry began to face major turbulences – with creeping inflation, interest rate hikes from the Fed, war between Russia and Ukraine, Luna collapse (cryptocurrency crash), many cryptocurrencies that stopped withdrawals, sales of global markets – the most popular cryptocurrency fell to a 18-month low below $ 22,000 in June 2022.

Apart from these global factors, the Indian crypto industry also began to see layoffs, crypto winters and the new TDS rule lowering the volumes of many crypto exchanges. Since January this year, leading crypto exchanges in India have seen a drop of at least 70% in trading volume. Many small stock exchanges bear the brunt, and investors also face large losses. When the crypto-lending platforms Celsius Network and Vauld recently announced to stop customer withdrawals, citing various challenges, many customers who invested large sums in crypto began to question massive gray areas in the industry.

Asked about the current state of the crypto industry in the midst of market volatility, Khaleelulla Baig, co-founder and CEO of Koinbasket, said, “We definitely see capitulation, which is largely due to the lack of a regulatory framework. Almost all troubled cryptocurrencies share a common mistake: greed. after more money leads them to exploit and provide security for retail investors without consent. “
Although Vauld said they are finding the best solution for their customers and are in talks with another cryptocurrency lender Nexo for acquisitions, the majority of users are first-time investors and they are worried about their investments.

Baig says investors should only trade in regulated exchanges that do not provide collateral or exploit merged assets. However, it is always a risk to trade with unregulated stock exchanges. Some of the stock exchanges have temporary liquidity problems, as they lent money, and the person who took the cryptocurrency has defaulted on the repayment of the loan to the stock exchange. “This has led some of the exchanges to stop or pause operations,” said Sathvik Vishwanath, co-founder and CEO of Unocoin.

When asked about investors’ money in such cases, Mohammed Roshan, co-founder of GoSats, says that if a stock exchange decides to close, investors may lose part or all of the amount they have invested.
“Centralized crypto exchanges have control over investors’ funds and crypto assets. This means that in the event of a bankruptcy, these assets can be sold to cover debt to creditors,” he says.

Crypto-trading volumes are falling in India
According to stock exchanges, there are 2 crore crypto users in India. Also with new tax laws – 30% tax and 1% TDS – crypto trading volumes are coming down. In the case of institutional traders, they have to pay 1% TDS for each transaction they make. For example, if they make 300 transactions, they have to pay TDS accordingly.

According to an expert, who did not want to be named, a majority of institutional investors have left India and that is why the volumes have collapsed now. It is also said that banks refuse to work with crypto exchanges.

The cryptocurrency exchange WazirX and Zebpay launched a Trader Sentiment Survey, which states that 83% of traders believed that the recent tax implementation deterred their trading frequency, and 24% are considering moving their trading activities to international exchanges due to high taxes.
Rajagopal Menon, vice president, WazirX says that if cryptocurrencies fall, tax collection will also fall. From 1% TDS, the stock exchange asks the government to consider 0.1%, as this will also help them track transactions.

He also wants investors to be cautious while investing in international exchanges. “Some investors invest and think they can avoid taxes by trading on international exchanges,” he says.
“International exchanges are much more complicated than Indian exchanges given the jurisdictional or border issues that already exist,” said Vishwanath of Unocoin.

Centralized exchanges are not guaranteed safe, but growing government regulation and supervision are trying to separate the good and bad crypto actors and put in place a structure that reassures companies and customers who want to operate in space, says Pavel Matveev, CEO and Co-Founder of Wirex.

Experts say that given the market conditions and the recession, investors should be careful before investing all their hard earned money in cryptocurrencies. Here’s a warning to new investors: Experts say investors need to deal with regulated exchanges to protect their assets. Invest in good projects that have stood the test of time in the past, and they should not invest more than 10% of their investments in crypto.

Things to note

• Bitcoin ($ 21,506) has lost over two-thirds of its value since November last year.
• According to experts, Bitcoin could crash to $ 13,000.
• Another popular cryptocurrency Ethereum also plunged to $ 1,213.
• Investors should allocate only 5-10% of the money to crypto.
• International exchanges are a little more complicated than Indian exchanges.