Fear, Uncertainty, Doubt Now Grip New Crypto Investors

‘Fear uncertainty and doubt’ or ‘FUD’ as it’s known in the cryptocurrency community-is now getting to Indian investors. A growing number of small investors are now sitting on the fence, gripped with FUD over mixed message from the government on the upcoming crypto bill, the sudden weekend crash that wipes out about 15-20% of the value of Bitcoin and other alt coins, and negative sentiments largely caused by misinformation.

“I am in a bind. I would rather wait it out till there is clarity around the assets class,” said Gopala Somali, a Delhi-based crypto investor. Experts said up to 10% new investors are not trading. Volatility across popular digital assets like Bitcoin, Ethereum, Solana, Luna, Ripple, and Cardano isn’t helping either. Plus, a growing chorus of experts claim the crypto cycle may have changed as the US Federal Reserve looks at tightening monetary policy, they said.

Bitcoin fell below $47000 on global exchanges on December 4, losing nearly 20% in 24 hours. “We have seen that 5-10% of new investors have stopped trading, but there are mostly new young investors, “said Gaurav Dhaka, founder and chief executive of crypto exchange Batons. “Mature investors have now gotten used to the volatility. They feel it’s a good time to enter.”

Crypto exchanges onto- added the largest number of investors this calendar year. So, there is a big chunk of young, inexperienced, and worried small investors who haven’t experienced such times of FUD, experts said. “Hopefully, will settle the market,” Dhaka said.

ALL EYES ON REGULATION

Venture capital funds with interest in Indian crypto exchanges, too, are tracking the regulatory developments closely.

“A lot of funds don’t invest in crypto companies currently due to regulatory risk.” Said a venture capital funds manager who has invested in an Indian exchange, “Clarity in regulations will help develop the industry in a systematic way. We have seen that in the microfinance case, where the sector took off after the government brought in regulation, “the person said.

 All stakeholders in the crypto industry are hopeful that the government comes up with a progressive law that helps in mainstreaming a new asset class. They said investors need not worry even if the government restricts some currencies, industry insiders said, “The government will provide a window to exchanges and investors if there is any adverse regulation, “CEO of a crypto exchanges said.

CONSOLIDATION

Some experts said a broader consolidation may be in the works. “Cryptocurrencies have always been volatile, “said Praveen Kumar, founder and CEO of Belfries. “In 2021, Bitcoin experienced one of the largest and fastest bull runs in history, reaching an all-time high of over $68000. A price correction was always around the corner after such a steep rise in the valuation of cryptocurrencies like Bitcoin, Ethereum, Doge coin, etc. Every price correction helps us discover a new base price for Bitcoin. I believe the market will try to correct and consolidate before the next bull run. S-ET

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