2022 could be the dawn of a new era for cryptocurrencies

Bitcoin prices went through a roller coaster ride in 2021 due to pandemic Trading Room by [Lokeshwarri SK](mailto:lokeshwarri.sk@thehindu.co.in) is a newsletter on all things cryptocurrency. Every Saturday, it will bring you cryptocurrency-related developments that are worth tracking from around the world! 2022 could be the dawn of a new era for cryptocurrencies The last two months of 2021 may have been tough for cryptocurrencies as regulatory uncertainties and profit booking made the raging rally pause, but major cryptocurrencies, led by bitcoin have still managed to close the year with stupendous gains of over 60 per cent. Since this followed another smash-hit year, with investors earning 340 per cent from bitcoin in 2020, the crypto followers have much to be cheerful about. It was, however, not smooth sailing for Bitcoin investors in 2021 as prices went through a roller coaster ride. There was an initial surge from $30,000 dollars to $62,600 by April 2021 as most risk assets soared on abundant global liquidity. But the lethal second wave of the pandemic and the movement restrictions caused prices to retreat to $30,000 again by July. Another rally ensued from then, largely led by investors looking at fresh pastures as stocks began flagging. This was the period when bitcoin exchange traded funds were launched and many famous fund managers proclaimed that they would be including cryptocurrencies in their portfolios. This rally ended at $67,582 with Chinese ban on all cryptocurrency trading and mining. Further, threat of regulatory action in other countries including India pulled prices lower towards $46,000. Despite this volatility, bitcoins have trumped all other asset classes including stocks, bonds and gold. Crypto trading in India The crypto-trading ecosystem in India thrived in 2021, with the country ranking second globally in the number of traders using the crypto trading platforms. As prices sky-rocketed and tales of people who had made outsized returns began doing the rounds, number of traders on platforms such as Wazirx, CoinDCX, BITbns and so on surged. According to reports, around 2 crore Indians are actively trading on the crypto exchanges and the number of cryptocurrency holders in India has crossed 10 crore. But the problem is that the entire ecosystem is unregulated and there is no official data to confirm or dismiss these numbers. But the numbers have been accepted quite readily by the PE and VC funds with money pouring in to all the trading platforms. As a result we had two unicorns created out of these trading platforms – CoinDCX and CoinSwitchKuber. Matters however came to a head during the cricket world cup when the crypto-trading platforms went on an advertising binge, bringing down the government’s ire upon themselves. The official digital currencies and banning of private cryptocurrency bill, that had been shoved away in the earlier part of the year was once again brought out of the shadows. That has quietened the action in crypto-sphere somewhat. RBI warning The RBI has had an important part to play in dampening the fervour towards cryptocurrencies by repeatedly coming out with statements and reports on how private cryptocurrencies including bitcoin pose a systemic risk. The latest note of caution was included in the Financial Stability Report where the central bank noted that “private cryptocurrencies pose immediate risks to customer protection and anti-money laundering (AML) / combating the financing of terrorism (CFT). They are also prone to frauds and to extreme price volatility, given their highly speculative nature.” The report has said that longer-term concerns relate to capital flow management, financial and macro-economic stability, monetary policy transmission and currency substitution. Market capitalisation of the top 100 crypto currencies has reached $2.8 trillion. In the EMEs that are subject to capital controls, free accessibility of crypto assets to residents can undermine their capital regulation framework. As a New Year begins, the correction that began in cryptocurrency prices in the last quarter of 2021 is likely to continue as money moves out of high risk assets in to safer havens such as gold and US treasury securities. Cryptocurrencies could go through a quiet period, while they wait the directives from regulators of major economies including the US and India. The good news is that there are serious deliberations on about letting cryptocurrency trades continue, but with regulatory supervision. In that case, it will be the dawn of a new era for cryptocurrency users. alt_text [alt_text]( You are receiving this email because you are a user of [thehindubusinessline.com]( and have commented on an article. If you do not wish to receive any such emails, [click here.]( To ensure you continue to receive emails from The Hindu in your inbox, please add [news@newsalertbl.thehindu.com](#?order=2) to your Address Book or Safe List.