The cryptocurrency market saw a major crackdown on Wednesday with the world’s best-known cryptocurrency Bitcoin crashing over 30% within 24 hours. Other cryptocurrencies such as Ethereum, Dogecoin too nosedived. Major Indian crypto exchanges like WazirX and others crashed under extremely high transaction volumes, sending shock waves in the financial circle.
The recent crypto bubble took place after China banned its financial and payment institutions from dealing in digital assets. Tesla CEO Elon Musk also first raised concerns announcing that his company will not be accepting bitcoin payments for its cars, given the high energy consumption trends involved in its mining.
According to cryptocurrency platform Coindesk, Ethereum plunged up to 30.35% to $2,385.18 in the last 24 hours while Dogecoin slid as much as 30% to $0.338528 in one day. At the time of writing this report, Bitcoin was trading at $35,890.96 (down 20%) and its market cap stood at $673.34 billion. From its all-time high of $64,829.14, the virtual currency has plunged as much as 53%.
Market expert and Founder of CapitalMind Deepak Shenoy tweets: “Bitcoin’s market cap is down some $300 billion+ in a week. That’s like half of RBI’s forex assets. The wealth impact of this is staggering.”
The question that first comes to mind is: ‘Is it a sign of worry for crypto traders and investors?’ Despite the potential of a looming crash, most analysts opine that volatility is the sole nature of the market and hence there is nothing to be perturbed about.
According to Neeraj Khandelwal, CTO, and Co-founder, CoinDCX, this as a temporary price correction. He says, “Bitcoin is a store of value and should be treated as an asset class with a long-term forecast on gains. Price corrections are a part and parcel of every asset class and bitcoin is no stranger to the same.”
A look at the Y-O-Y appreciation in Bitcoin’s prices you would see steady growth. Bitcoin’s stellar rally from its early April 2013 lows of $50 to have appreciated by over 1300 times to its recent high of $66,000 in mid-April 2021 is testimony to its growth, explains Khandelwal.
Hence, the recent comments by industry stalwarts like Elon Musk have contributed to some corrections in the pricing, but this is not to be seen as permanent.
Avinash Shekhar, Co-CEO, ZebPay, too states, “Bitcoin is the greatest invention of the century, perhaps bigger than the Internet itself. The rise of such a breakthrough technology will have roadblocks, but they will only make Bitcoin stronger.”
Nischal Shetty Founder of WazirX believes it is a healthy correction – deviated owing to various global market pressures. “But we have to understand, markets don’t go straight up, it has to take a breather to correct itself and then move up again. Moreover, this will not impact long-term Bitcoin investors.”
According to him, “Bitcoin has been around for over a decade, and it has withstood two global recessions. It is considered as digital gold, and is emerging as a as a preferred investment class especially among millennials because of its underlying technology.”
While this could be a precautionary signal for crypto investors, fluctuations or volatility is essentially the kind of environment in which the traders trade. Traders typically estimate the macroscopic movement, support levels, resistance levels, and the fair market value before taking calculated risks.
As for the current crypto climate in India there has never been a more exciting time as the Govt. of India plans to set up a new panel to study crypto regulations. The panel, though still in its infancy, could also be tasked to implement the digital currency ideas, as proposed by RBI. The crypto industry welcomed this move, saying that the blanket ban suggested in 2019 by the Subhash Garg committee report was outdated and redundant and that this sets a positive mandate for the Indian crypto industry.
Crypto is a massive opportunity for the country, with significant potential to enhance the capabilities of an economy that is already well-suited to attract crypto-related capital investments, considering the market size and internet connectivity in India. Experts suggest it makes sense to wait and watch the long-term impact of these actions.