Crypto Loses Currency for Young Investors, HNIs Lap it up

Young investor who have been driving the cryptocurrency boom in the country seem to be liquidating their positions amid new taxation rules, only to be replaced by high net-worth individuals (HNIs) as the key investor segment on crypto exchanges. Exchanges said several young investors who made money through high volume of trading, including many from smaller cities and towns, have liquidated their positions, especially in the riskier assets. At the same time, HNIs who tend to invest high amounts, sometimes touching anywhere around ₹10lakh in one go, are showing increasing appetite for crypto assets, they claimed. Now, the nature of investment, industry experts said. The way HNIs trade and invest is different, so are thee assets they invest in. HNIs do not trade as much as their younger counter parts. Also they tend to opt for comparatively safer crypto assets such as Bitcoin and Ethereum, or even stable coins that are pegged to US dollar or other currencies. “HNIs investors have clarity now as compared to youngster,” said Sathvik Viswanathan, cofounder and CEO of Uno coin, a cryptocurrency exchanges. A 30% income tax on returns from all virtual digital assets (VDAs), introduced in the recent Budget, came into effect on announced a 1% TDS on such assets starting July 1. Crypto exchanges official also said the government decision to disallow set-of losses from one crypto asset transaction against gain from another will wipe out profits for smaller investor. Suppose a person invests in, say, both Bitcoin and Ethereum and makes a loss of ₹1lakh on one and a profit of the same amount on the other, the investor will have to pay ₹30,000 in tax, as set-off is not allowed, they pointed out.

Youngsters from tier 2 and tier 3 cities had flocked to cryptocurrency platforms and crypto exchanges had also recorded a steeper growth in smaller cities than metros. Crypto exchanges WazirX had earlier told ET that most of its user are below 35 years of age and the exchanges had recorded 2,648% growth in user signups in 2021 from Tier-II and Tire-III cities of the country. Other exchanges had recorded similar trends with most recorded similar tends with most of the new cryptocurrency investors coming from cities such as Luck-now, Ahmedabad, Patna, Bhopal, Vadodara, and Kolkata. As per data available with Buy Ucoin, a cryptocurrency exchange, Bhopal had seen the highest jump in new investor last year. But now that the Taxation regime has started, many of these youngster is taking a back seat. “There will be some retail investor who would opt out of the crypto industry itself just because they would have the burden of filing their returns by the end of the current financial year,” said Vishwanath of Un coin. With large investor who do not trade so actively who do not trade so actively slowly replacing younger ones, crypto exchanges are likely to see lower volumes, experts said. “We have seen trade volumes seeing slight dips during the last few weeks, but that can be mostly attributed to slowdown in retail markets,” said Shivam Thakral, CEO of Buy Ucoin. He also said a lot of investor are hedging their crypto portfolios into stable coin assets that are pegged to reserve assets like a country’s currency or a commodity.

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