Why Indian investors are betting on crypto | Economic Times

Mumbai: Indian cryptocurrency investors are betting on the nascent industry even as investors and experts ruminate on whether the market has entered a bearish phase or not.A drop in cryptocurrency price by 20-40% between June 15 and June 22 may have egged on Indian investors to ‘buy the dip’ or average down their investments in the belief that the fundamentals of bitcoin and other major tokens remain strong. Tiger Global-backed crypto platform CoinSwitch Kuber and Binance-owned crypto exchange WazirX saw a 250% and 60% increase, respectively, in money deposited by account holders on June 21, and the upward trend continued on June 22, according to executives.The latest mini collapse in crypto prices was partly because of China’s crackdown on crypto mining, causing bitcoin to briefly lose all gains made this year, when it fell below $30,000 on June 22.According to Siddharth Menon, the chief operating officer of WazirX, an increase in deposits during a dip signals support from long-term investors. “A lot more people who are interested in the long-term perspective are actually coming, and we see a lot more deposits,” he said.From a high of almost $65,000 in April, Bitcoin’s value has nearly halved.Experts said this was a sign of market consolidation as many traders exit.“We may see some more corrections happening, which is great,” said Menon. “If we are able to get through that, I think we will find very strong support for the crypto market.”Joel John, principal at digital asset investment firm LedgerPrime, said that while the current bitcoin price is lower than an all-time high, other indicators—such as fundraising, increased adoption of decentralised finance (DeFi), and new ventures in the space—remain positive. “These metrics are lagging indicators, and in a full-blown bear market, would also decline radically—like they did in 2019 or mid-2015,” John said.Bitcoin’s fundamentals are much stronger in 2021 than during previous dips, said Nitin Sharma, general partner at crypto venture fund Antler. There is a large-scale adoption by institutions, and long-term investors have begun to view it as a serious asset class, he added.According to crypto exchanges, investors across categories have increased their exposure to take advantage of the relatively low prices.A business graduate from Mumbai said he increased his investment by 150% on Tuesday when bitcoin fell below $30,000. Siddharth Kothari, 29, chief investment strategist of his family fund Om Kothari Group, also expanded the fund’s exposure this week by 10-20%.“It is something very new, and it can shape up either way depending on how people behave, and authorities react,” said Kothari, who took a serious position in the crypto market earlier this year. Warning noteRetail investors have a strong tendency to “average down” their investments when asset prices crash. However, experts warn that this can lead to increased concentration of funds in a single asset and thus increase risk significantly.“Averaging down works if we are in long-term bull markets,” said Nithin Kamath, co-founder of online brokerage firm Zerodha. “It is super tough to do this with crypto, whether in bull or bear markets. The right thing to do is ensure asset allocation doesn’t go off whack, and not buy too much of a risky asset.”Sachin Jain, who manages crypto investments of high net-worth individuals, says ‘buy the dip’ is ‘hopium’ for both long-term investors and frequent traders. However, they should base their decision on targets and keep asset allocations in check.Also Read: Crypto exchanges roll out the red carpet for India’s super-richMrityunjay, a Gen Z investor, is using his gaming computer to mine Ethereum to protect his investment during the slide. “For me, it definitely acts as a cushion,” Lala, who has invested a few thousand rupees in crypto, said. “It’s also something that is giving me a decent return without any investment as such because I had this computer idle at home.”According to Antler’s Sharma, Gen Z—who make up the bulk of crypto investors in India— do not mind the volatility, so an increase in deposits is not surprising.Also Read: ETtech Unwrapped | Daft Crypto “There are still a lot of people who felt left out in that last bull run, and they are now trying to enter at these prices,” said Sharma. “I think enough people have probably understood that these kinds of fluctuations are part and parcel of crypto investing.”