Last week, India gave an optimistic response to the cryptocurrency ban being effectively lifted by a Supreme Court judgement. However, while Indian startups have offered a largely positive outlook to the verdict and claimed that they are, in fact, seeing a steady and exponential growth in their user base, the global cryptocurrency market appears set for extensive inconsistencies due to a global economic slowdown, of which the coronavirus pandemic is the epicentre. Over the past 24-odd hours, Bitcoin, the most extensively traded cryptocurrency in the world, saw a wild swing of the price chart as it dipped to below $3,650 (~Rs 2,69,200) before rebounding back up to over $5,200 (~Rs 3,83,600) in a matter of minutes.
At the time of publishing, Bitcoin was trading at $5,733 (~Rs 4,22,900). While this is still better than the sub-$3,700 levels that Bitcoin dipped to earlier today, it is considerably lower than the levels that Bitcoin was trading at, exactly one week ago (on March 5, the price of one Bitcoin was $9,075, or about Rs 6,69,500). On overall terms, Bitcoin has dropped by over 30 percent since the start of this year, with reports estimating that nearly $50 billion has been wiped out from the cryptocurrency market in just the past few days. In essence, it has lost all the profits that it made this year, in 2020. Other cryptocurrencies such as Ethereum and Ripple also declined, contributing to the sharp overall fall of the crypto market.
It is this volatility that many experts seem to be wary of. Post India's cryptocurrency verdict, while startups accordingly mentioned their expectations of rising investments, market watchers stated that the sector will largely remain cautious before diving into investments. It is perhaps an ill-timed moment, with the coronavirus pandemic causing a global economic meltdown, and many stock markets including the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) seeing the implementation of a 45-minute circuit breaker earlier today in order to stop their drastic falls.
At a different time, in a bull economy, India's cryptocurrency verdict might have actually seen a far more positive impact, both in the crypto market and from investors. Now, reports on the internet have quoted multiple reasons, including oil cartel Opec's failure to cut supply and crypto Ponzi scheme PlusToken's estimated sell-off of $100 million-odd Bitcoins, as the reasons behind the eccentricity shown by Bitcoin of late. This further impacts India, where first time investors would have been more likely to observe and invest in cryptocurrencies, had their first experience of it not been a wild, manic ride.A Forbes report quotes a respected Bitcoin and crypto trader, Peter Brandt, as estimating that Bitcoin might even fall to as low as sub-$1,000 levels, something that has not happened to it in years. If it does happen, it will give a devastating blow to cryptocurrency startups and enthusiasts, who might find it exceedingly hard to draw back investors after an estimated ~90 percent fall in value. While the core technology principle of Bitcoins remain sound, their public trading, and the risks that come with the technology itself, makes it a very tricky one to regulate, and hence an even trickier one for investors to put their full faith in.