Bitcoin Wave This Time Sees Mature Investor Participation

December
25, 2020

9 min read

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Ashish Nitin Patel made his first bet on bitcoin in late 2017 amidst the brouhaha around cryptocurrencies. He jumped in to make a quick buck, like most investors back in the day. But, as he learned more about the value proposition of the digital tokens, Patel stuck around.

“Initially the intention was a short-term investment, but now I firmly believe that some good projects (hedge funds, ETFs) can deliver good gains of about 5-10X over a long period of 1-3 years,” says the 28-year-old tech professional.

After its first run-up three years ago, bitcoin, the most popular cryptocurrency, is making headlines again on gaining nearly 242 per cent year to date, to trade at all time high levels of about USD 24,000. In the last four months alone, bitcoin’s price has surged by nearly 104 per cent.

Of course, investors are yet again flocking to cash in on its price rally.

Cryptocurrency exchange CoinDCX has reported a 3X QoQ growth in trading volume and 4X QoQ growth in daily active users. In October alone, it has registered a 25 per cent MoM growth in the number of users and 21 per cent MoM growth in average trade volume. Zebpay, one of the early exchanges in India, has recorded a 270 per cent QoQ surge in trading volume and 218 per cent increase in number of users trading in 2020.

However, investors this time are in for the long-haul.

Take the case of Delhi-based Shruti Vakhariya who made her first cryptocurrency investment in October this year. “I’d been meaning to buy bitcoin for a long time but only took the plunge after thoroughly reading up on the digital tokens and their applications,” she says. “My current holding has gained over 35 per cent but I’m in no hurry to cash out. I see a lot of value in cryptocurrencies and want to remain invested for a few years to see where this is going.”

Digital-asset exchanges also confirm the trend that this time investors are not entering the space in the heat of the market sentiment.

Vikram Rangala, chief marketing officer, ZebPay says users are behaving like long-term investors by holding on to their investments instead of quick buying and selling, as was the case during the 2017 rally.

“In the two-week period of November 5-17 that kicked off the current bitcoin rally, despite a 46 per cent increase in BTC-INR (bitcoin-Indian Rupee) volume and a 48 per cent increase in the number of unique customers trading BTC, our withdrawals stabilized,” Rangala pointed.

This behavior is in contrast to the 2017 run when most investors ploughed in a small amount and cashed out during the upsurge as they didn’t particularly wish to wait for a long time to receive the pay-offs, say industry stakeholders.

 “Our daily transaction volume right now is less compared to the 2017 rally but…