Nearly a crore Indians are estimated to have invested in cryptocurrencies. The estimated number of mutual fund investors in the country is around 2.46 crore. There are at least 2.18 crore demat accounts as per NDSL depository. But the cryptocurrency market is growing. What attracts investors to cryptocurrencies? Are they comfortable with the wild swings in prices? Is it for fun or do they see cryptocurrencies as meaningful investments in the years to come?
Baby steps and rising confidence
A majority of cryptocurrency investors bought Bitcoin and other such digital currencies last year, but there were quite a few who took the bite many years ago. Mumbai-based Utkarsh Somaiyaa, 42, a data analytics professional, invested a small amount in Bitcoins in 2013 after tracking them for over a year. Somaiyaa knew that although Bitcoin was projected as an alternative currency, it was more of an asset, an investment, for him. The democratisation of how it worked and the future use of technology (blockchain) that is sought to being used in other walks of life, is what appealed to Somaiyaa the most.
In 2017, he started a systematic investment plan (SIP) in Bitcoin before it was abruptly stopped the next year as the Reserve Bank of India (RBI) virtually banned cryptocurrencies and prohibited all regulated entities, such as banks, from allowing anyone to trade in them. “Last year, I again started investing in cryptocurrencies,” says Somaiyaa who has since diversified into other digital coins such as Ethereum, the world’s second-largest cryptocurrency by market capitalisation.
A trip to Thailand in 2010 got Mumbai-based stock analyst Nilesh Shah acquainted with someone who had been buying and selling Bitcoins. Initially, Shah dismissed it as he had been a staunch stock market investor for 20 years. But three years later, he invested Rs 100 in Bitcoin. As he read more about cryptocurrencies, Shah says he was convinced that digital currency was the way ahead. That day still hasn’t come, but an increased interest and participation globally has forced countries to sit up and take notice. The government has proposed a Bill to regulate cryptocurrencies. It is called The Cryptocurrency and Regulation of Official digital currency Bill, 2021. The Bill has provisions to make any dealings in cryptocurrency illegal. But there is no clarity yet on when this Bill will be introduced in Parliament. That hasn’t deterred Shah, who has since bought other cryptos such as Dogecoin, Ripple and Tether.
Like Kumble, Kapadia’s strategy is to take money off the table regularly. “I have taken almost 75 percent of my initial capital that I had invested in cryptocurrencies. I am now mainly trading on my profits,” he says.
Rishabh Parakh, a chartered accountant and founder of NRP Capitals explains that cryptocurrencies are bought and sold all over the world. And they are the same everywhere. Besides, due to the decentralisation (no market hours) of the crypto market, it can be bought and sold at any time (24*7*365). The volatility is quite unlike we’ve ever seen in traditional financial instruments.
