There are more reasons to exit the cryptocurrency market in the latest scenario than to maintain this complex investment mechanism. Some of the factors dampening the crypto investment mood are – new taxation in India, geopolitical tensions, fears of recession, liquidation of hedge funds, suspension of withdrawals, liquidity crunch, macroeconomic risks and global slowdown among others. This has sent the crypto market under selling pressure. However, as they say, investing in the markets is driven by sentiment. Therefore, it is advisable not to panic but to be patient with the market instruments as the long term picture is largely fruitful. That said, the long-term case of the crypto market is promising.
According to data from CoinMarketCap, the market recovered early losses on Saturday and gained momentum. Currently, the global crypto market is trading at $964.11 billion, an increase of 3.86% over the previous day. However, crypto volume stood at $54.72 billion, down 17.14% during the day. BitcoinThe dominance is currently at 41.94%, which is a decrease of 0.65% on the day. The market leader is currently residing above $21,200. The Ethereum equivalent gained almost 8% to near $1,350.
The crypto market wiped out its $1 trillion market in the last month. After hitting an all-time high of $68,786.10 in November last year, bitcoin has now given up 75% of its gains, with nearly every buyer of the cryptocurrency at a loss since February due to the dramatic crash that left the cryptocurrency widely open. And some even collapsing like the Terra Sisters, and the latest lethal 3AC.
But the crypto market is not the only one to register a deep correction in its levels, the same is the case for the global equity markets.
The crypto market is currently facing liquidity crunch. Celsius Withdrawals that were halted in June due to huge losses resulting from a deep depression in the cryptocurrency market – voluntarily filed for bankruptcy this week. Celsius has a deficit of $1.19 billion on its balance sheet.
Celsius is just one of the liquidity-strapped dominoes in the market. Other exchanges such as Binance, Coinflex, Wold and Voyager Digital have also halted their withdrawals. Also, the markets face the liquidation of hedge funds such as Three Capital Arrows (3AC).
The crypto market tends to overshadow the equity market globally due to macroeconomic risks. Apart from this, Indian investors also have to face new tax rules. Back home, cryptocurrencies have a 30% tax rate from April 1, and a 1% tax at source (TDS) has also come into effect from the beginning of this month.
But despite the current turmoil in cryptocurrencies, the market is seen as a long-term wealth maker. It is assumed that the crypto market is moving and will be stable compared to its current fragile state.
Rajagopal Menon, Vice President of WazirX, said, “According to our recent trader sentiment survey, we have observed that hodlers still have high sentiment when it comes to investing in crypto. After April 1, they continued to maintain their position with 45 % saying that they will continue to hold their positions. This reflects their belief that tax provisions will be made more favorable in the long term. With the implementation of TDS, we expect hodlers to trade on Indian exchanges. This will lead to an ideological shift from a get-rich-quick scheme to a long-term wealth-creating cryptocurrency.”
Bitcoin Country Head Amanjot Malhotra elaborated on why hodlers are keen on holding the cryptocurrency, Bitte highlighted three points.
1. Lack of Supply: Liquid Supply, which tracks the amount of coins held in wallets with no history of spending, has surpassed its May 2021 peak, reaching 76%. These often represent coins locked in cold storage, or stores crypto offline, and wallets of hodlers who adopt a dollar-cost averaging strategy. “We can infer that this is a sign of accumulation,” Malhotra said.
2. Past Experience: Despite the currently heightened macro and geopolitical risks from Russia’s invasion of Ukraine, bitcoin (BTC), holders continue to accumulate because they know bitcoin has gone through these cycles before and It will bounce back and it’s a matter of time. All they have to do is wait for the time when they do so and then they can book their profits.
3. New Tax Rules: Implementation of new tax rules on crypto has ensured that investors will be very cautious while entering the Indian market as their gains will be taxed at 30% and losses cannot be offset in any other trading pair Is. More importantly, TDS is deducted in every transaction and the same is reported to the government. A lot of users are still not sure how to file taxes with their crypto returns and don’t want to enter the gray zone with regulators.
Furthermore, Malhotra said, “After a disastrous 6 months in the crypto market, holders are expecting some good news for the Indian crypto ecosystem. One is that the global crypto markets will recover and Bitcoin, Ethereum and The prices of other cryptocurrencies will soar up and touch new all-time highs. Seconds, they are expecting the government to ease some of the crypto regulations in the upcoming budget announcement.”
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