What is the Crypto market & why it is growing

Getting a return of 8x in 2020-21, Crypto wildly attracted retail investors into the frenzy, pouring $40Billion(based on data from Chainalysis) into the asset. The majority of this growth is driven by the 18-35 age group. The attraction was catalyzed by a plunge in multiple commodities posed by the pandemic and FOMO to the buzzword. 

Let's start with answering the elephant in the room - Is it legal to trade in Crypto? Can I possibly lose all my money in Crypto trading?

The short answer to both the questions is - YES!

Well, we experienced a short ban from Crypto in the years 2018-2020, but the Supreme Court in 2020 ruled against the RBI's ban citing - “There are no clear grounds of banning Cryptocurrency”. 

Also, given the high volatility of the crypto market, you can possibly lose all the money. 

But the bigger question is “What if I have digital money and cannot convert it back to fiat?”

This is where it becomes fuzzy. Recently, based on a report from Reuters, Indian crypto exchanges are struggling to find permanent payment partners. 

"Banks are reluctant to do business," said Avinash Shekhar, a co-chief executive of ZebPay, one of India's oldest crypto exchanges.

Reuters cites - “India's central bank is informally urging lenders to cut ties with cryptocurrency exchanges and traders as the highly speculative market booms, despite a Supreme Court ruling that banks can work with the industry, three sources told Reuters”

What's in the future?

With institutional investors being excited about this new asset class, it won't be an understatement to say “Crypto is the new Gold”. 

The only catch is how regulators shall respond to this loss in their power to control the economy. The past few weeks have been a mix of reactions - from China banning major crypto mining sites to El Salvador opening its door for crypto as an official currency. 

Happy Reading!

Shubham Agarwal (CFA L2 Candidate | Incoming MBA candidate at University of Cambridge, UK)


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