Crypto: Crypto Exchanges Watch Institutional Investors And Students As Volumes Fall

Mumbai: Cryptocurrency exchanges are hoping to attract large institutional investors on the one hand and trying to get students to explore blockchain deals on the other to stem the drastic drop in daily trading volumes after India introduced a tax on virtual digital assets.

Many investors and traders are avoiding crypto assets as profits will be taxed at 30% from April 1. Not only would the recent announcement of the netting ban result in a loss for most investors, reducing risk appetite.

All stock exchanges in India have seen at least a 50% drop in the past few days compared to trading volumes of last year. It also comes at a time when exchanges are wondering how exactly to calculate the 1% tax deducted at source on each transaction.

Exchanges hope that institutional investors would be more open to investing in crypto assets, as the introduction of the tax also lends legitimacy to the cryptocurrency.

“We are set to work on the traction seen by institutional investors and we are also ready to be aggressive in crypto and blockchain-based educational initiatives to strengthen and penetrate deeper into the active crypto ecosystem,” Shivam said. Thakral, CEO of BuyUcoin, a cryptocurrency exchange.

Daily volumes are important for trading because they are often used as a barometer for valuation during investment cycles, according to industry trackers.

Many exchanges are hoping that the lull period will intensify due to the downward trend of major cryptocurrencies.

“Trading volume was highest on March 31 as users/investors settled their positions before the start of the new fiscal year. Since April 1, there has been a decline, which is a usual trend at the start of each fiscal year. However, this year we are seeing a steeper decline due to strict tax laws,” said Minal Thukral, Executive Vice President, Growth and Strategy, CoinDCX, a cryptocurrency exchange.

It also comes at a time when the order books of major exchanges are under pressure.

Cryptocurrency players’ order books are under pressure again as investors struggled to buy or sell such assets after liquidity providers decided to stay away, deterred by tax complications, ET reported Thursday.

Until March, liquidity providers helped exchanges with the float or the difference between the buy and sell price to close a deal.

In most cases, these liquidity providers would provide such free float for a small margin.

Young people from Tier 2 and Tier 3 cities had flocked to cryptocurrency platforms during the Covid-19 pandemic and crypto exchanges saw stronger growth in smaller towns than metros.

Crypto exchange WazirX previously told ET that most of its users are under the age of 35 and that the exchange saw 2,648% growth in user registrations in 2021 in Tier II cities and level III of the country.

Other exchanges had recorded similar trends with most new cryptocurrency investors coming from cities such as Lucknow, Ahmedabad, Patna, Bhopal, Vadodara and Kolkata. According to data available with BuyUcoin, a cryptocurrency exchange, Bhopal saw the biggest jump in new investors last year.

But now that the tax system is in place, many of these young people are falling behind.

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Crypto: Crypto Exchanges Watch Institutional Investors And Students As Volumes Fall


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