Spectre of ‘crypto winter’ spooks all

Synopsis

In the last two months, Indian crypto investors have had to deal with regulatory ambiguity and the announcement of high tax rates on crypto gains on top of rising volatility in digital assets, which dragged their investments into the red.

Mumbai: Most new crypto investors are in panic mode as the fourth correction in two months has set off fears of a ‘crypto winter’ after Russia’s invasion of Ukraine resulted in a major sell-off in cryptocurrencies on Wednesday night.

The crypto markets were in a slump for most of 2018, what is now referred to as a “crypto winter.”

In the last two months, Indian crypto investors have had to deal with regulatory ambiguity and the announcement of high tax rates on crypto gains on top of rising volatility in digital assets, which dragged their investments into the red.
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“Phas gaye yaar’…that’s what I hear from most small investors these days. Most of them have invested small sums but have been bearing rising losses. They have gone through a whole range of emotions in the last few months—from euphoria in November to fear now,” said Vishal Gupta, a Noida-based trader and crypto commentator.

Crypto investors fear if the war between Russia and Ukraine intensifies, there could be more selling.

“Crypto assets are likely to see more pain in the coming days given its global correlation until these ongoing tensions between Russia and Ukraine cool off. All retail investors are definitely panicking looking at their portfolios after this massive free fall, but the key here is to remember that if you’re holding on to good projects with strong fundamentals, the best thing for you to do is hold,” said Chahal Verma, a 20-year old Gurgaon-based crypto investor.

In the last two months, a few small investors have tried ‘buying the dips’ and bought more coins, hoping to average out their investments, but the continuing price correction has locked in their money.

Now they can’t sell as it would result in a big loss, and averaging has led to more allocation to risky crypto assets than intended.

“I am not even opening the app. Every time I look at my portfolio, the loss figure is higher. I invested more money than I had set aside for crypto investments to average out my portfolio. Now I am stuck. I will forget about the crypto portfolio for the next 3-4 months, “said Gopala Somani, a New Delhi investor.

Following Russian forces’ entry into Ukrainian territory by force, Bitcoin was even trading below $35,000 for some time, its lowest level in a month.

A few Indian crypto exchanges ET spoke to said that trading volumes had gone up a little, but new investors were panic selling. Older investors, on the other hand, were buying new coins.

“The Indian market is following the global crypto market. However, we do see increased activity from users and higher volumes. While there has been some panic selling, specifically by retail users holding small portfolios, the volume wise buy/sell ratio has not changed much, ” said Minal Thukral, SVP-Growth and Strategy, CoinDCX.

At 5 p.m. India time, Bitcoin was trading at $ 35,113 on Coinmarketcap, down 8.96 % in the previous 24 hours and 18.63% lower over the previous seven days’ average.

Other alt coins also bled as investor sentiment worsened due to Russia’s military operations against Ukraine—-Ethereum was down 13 %, Binance Coin fell 12.12%, Avalanche dropped 14.63%, Solana dropped by 10.29 %, and Cardano was down 18.21%.

Experts say that with cryptocurrencies increasingly being regarded as a hedge to fiat currencies, it will be interesting to see how both Russia and Ukraine use the digital assets during the military operation.Both the countries are big players in the global crypto market, especially in mining.
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Updated: 02/25/2022 — 19:00