China' s decision in order to declare crypto unlawful sparks panic product sales in IndiaSeptember 30, 2021
Mumbai: Several Indian investors rushed to square off their positions in smaller cryptocurrencies while others took refuge in safer names like Bitcoin and Ethereum as the asset class tumbled on Friday and Saturday after the Chinese central bank declared all cryptocurrencies illegal.
Transaction volumes surged nearly 50% at top Indian exchanges in the past two days, industry trackers told ET. In most cases, exchanges dealing in such assets saw a rush to sell smaller crypto currencies. Industry trackers said veteran investors were relatively calm, but those new to the cryptocurrency market reacted to the news flow from Beijing.
“The largest sell-offs we’ve seen are in the biggest gainers as investors are likely to cash out their investments in assets like Cardano, Solana, Matic and the like,” said Shivam Thakral, chief executive, BuyUcoin, a cryptocurrency exchange. Industry trackers said that while even Bitcoin witnessed a sell-off, only a small percentage of investors lightened positions.
In some cases, some investors switched to Bitcoin and Ethereum from smaller crypto assets.
Until the beginning of this year, most Indians were putting a large chunk of their money in Bitcoin. That changed lately as many new age investors entered the cryptocurrency market.
Exchanges dealing in such assets expect the China impact to be temporary, although the next few days may see more panic selling before the dust settles.
George Zarya, chief executive at digital asset brokerage and exchange Bequant, said, “China has been known to go to extremes with either very assertive statements and prosecutions or complete radio silence.”
‘China Will Not Support’
“This time, the point was made very clear, that China will not support cryptocurrency market development as it goes against its policies of tightening up control over capital flow and big tech,” said Zarya of Bequant.
“For the institutional crypto industry, it won’t change much as those who could leave have already left and those who couldn’t have either closed or gone under the radar. The retail market, most likely, has gone under the radar and will continue to support market volumes,” he added.
China is the biggest player in bitcoin mining but the majority of the Chinese Bitcoin mining firms and individuals had moved their operations out of China into crypto-friendly countries.
China recently announced it will soon launch its own digital currency. Experts are hoping Beijing will not take more extreme steps. “The Chinese central bank has been lobbying against crypto for a very long time. This recent move wasn’t a surprise to many people as everyone saw it coming,” said Thakral of BuyUcoin. “But we hope China will reconsider its decision and create a healthier environment for crypto enthusiasts moving forward.”