The world of cryptocurrency is once again grabbing attention, with Bitcoin (BTC) crossing past the $ 48,000 mark last week and sustaining the level over the last two days. In the last seven days, BTC has gained 13.3%, and its fully diluted market cap is over a trillion dollars. The gain for BTC looks more substantive compared to levels from a year ago. Over the last year, BTC has gained a whopping 122.7%. When writing this report, 1 BTC is equivalent to Rs 39,85,026.
The upward price momentum of BTC this time is due to a combination of factors, and one of them is a 4-year cyclic halving of BTC. As part of this, the reward for BTC mining is cut in half, which reduces the speed at which the new BTC is minted. It creates a phenomenal deflationary momentum in the market, where the demand for existing BTC increases. Historically, BTC has witnessed a bull run after every halving, and the upcoming one is the fourth BTC halving.
In the crypto market, the event has ignited great enthusiasm. For example, CryptoQuant CEO Ki Young Ju predicts that BTC could reach a never-before-seen $112,000 in the best-case scenario. However, even in the “worst-case” scenario, it will still maintain a respectable $55,000.
Besides the halving, what has catapulted BTC and the crypto market as a whole to a new high is the entry of spot BTC ETF in the US market. It allows everyday investors to invest in BTC and ride with its success or failure. This is even without holding the BTC in the investor’s accounts. It’s an exchange-traded fund where the fund manager invests on behalf of its investors and money pooled from them. Ordinary investors can avoid getting into the nitty gritty of crypto investments. However, they can earn profits if the underlying asset (BTC) sees a price rise. They may also suffer losses if the price goes down. Well, that’s what all kinds of investments are.
Ju believes that spot BTC ETFs will ultimately attract $9.5 billion per month into the market, boosting the realised cap by $114 billion annually. For many Bitcoin enthusiasts, the $100,000 mark remains a tempting target. In 2021, when BTC touched $60,000, it became symbolic of their belief in reaching this milestone. While it didn’t happen then, Ju believes the ETF-driven bull run could finally make it a reality.
With the fourth Bitcoin expected in April 2024, speculation over its price impact is already high. But regardless of whether $112,000 is achievable, Ju’s prediction points to a potential year of significant growth for Bitcoin. Bitcoin halving is implemented where every 210,000 blocks are mined, which takes four years.
However, Indians can’t buy or sell BTC with the same convenience as many people in other countries. We have a prohibitively high taxation on crypto transactions. Reporting for tax purposes is even more complex and cumbersome. It leaves a huge grey area that anyone can interpret whichever way they want. In essence, Indians are systematically barred from entering the world of BTC, which, in terms of market value, is neck and neck with the world’s most profitable and prestigious brands — Apple and Tesla.
While Apple’s and Tesla’s founders are officially celebrated, BTC is an enigma only its supporters can realise what it means. While holding an Apple device or driving a Tesla is considered a status symbol, holding crypto coins in your wallets and trading them on crypto exchanges virtually makes you a dubious, doubtful, dark web character. But it doesn’t have to be so in a country of intelligent people!
At the root of Indian policymakers’ opposition to cryptocurrencies is the fear of Indian investors getting scammed because they lack the knowledge and expertise required to be crypto investment savvy. While the learning curve to use an Apple device or Tesla car is extremely low, the same is not valid for BTC investments or BTC mining, which requires a certain level of knowledge and technical proficiency. The government can’t afford to expose Indians with poor educational backgrounds and even poorer technical efficiencies to such a system.
But it comes at a cost; over 60% of the web3 companies by Indian founders are registered outside India. And the number of Indians emigrating to other countries is significant. India is rapidly losing educated talents and skilled workforce. Dubai, Singapore, and Hong Kong have become crypto-friendly jurisdictions with clear laws and regulations.
As India moves with full force to become the world’s third-largest economy, it seems apparent that the mission is driven by something other than our desire to create and be recognised for the value that we create for the global economy. We are going to become the backyard of China, which is transitioning from being a country producing cheap products to a country excelling in high-end and value-added products. (IPA Service)