The launch of cryptocurrency exchange platform by TCS and association of other IT majors such as Infosys and Wipro with block chain technology increased attention towards block chain technology and also cryptocurrencies. It may be funny yet interesting that the Reserve Bank of Kailasa, the central bank of the new nation ‘Kailasa’ established by the self-claimed godman Mr. Arunachalananda Rajsekaran (popularly known as Nithyananda Swamy) declared to accept cryptos on par with Kailashian Dollar and other currencies.
Cryptos vs digital: The digital payment forms such as Google Pay, Paytm, etc use regulated currencies. However, cryptos are based on block-chain or similar technologies which are decentralized and are therefore unregulated. Advantages of cryptos include real time remittances, anonymity, data security, near zero cost of transaction, availability of trail, transparency, and decentralized usage. The shortcomings include lack of regulation, involvement of high-end technology and mathematical approach, consumption of huge electricity for creating cryptos, lack of proper pricing methodology, huge volatility in their values, etc.
Market Cap: In a way, cryptos may be compared with dematerialized shares. There are about 5,000 crypto brands, almost the same as number of BSE listed companies. The popular are Bitcoin, Ethereum, XRP, Tether, Bitcoin Cash, Litecoin, EOS, Binance Coin, Bitcoin SV, and Tezos. The market capitalization of the cryptos is astounding as can be noted from data of a normal day on 20th August 2020:
The market cap of 30 cryptos is $334.4674 billion which is more than 99.99% of total market cap of cryptos. In turn, crypto market is concentrated with top 3 cryptos viz., Bitcoin, Ethereum, and Ripple which have more than 80% market share.
Crypto Exchanges: There are about 200 crypto exchanges in the World spread over San Francisco in US, Vancouver in Canada, Amsterdam in Netherlands, Tel Aviv in Israel, Zurich in Switzerland, and London in UK. The world’s leading and most popular crypto exchanges are Binance, Huobi, Bitflyer, HitBTC, Okex, Bitasset, Citex, EXX, Bittrex, FloatSV, etc. Summary of trading volume of top 16 crypto exchanges, out of the top 100 exchanges, on 23rd August 2020 is as follows:
US Dollar, being the World’s de-facto reserve currency, is the most widely used fiat currency for exchange of almost all of the cryptos with buy-sell quotes being made in US Dollar.
Volumes: Liquidity and volume are essential for investors to trade in cryptos. The volume and number of trades of top 100 crypto exchanges on 23rd August 2020 are as follows:
Crypto acceptance: Cryptos are accepted by certain businesses including Microsoft, AT&T, Burger King Restaurants, KFC Restaurants, Subway Restaurants, Wikipedia, BMW, Etsy, Shopify, Real Watches, Lola-Lingerie, Undead Coffee, Bees Brothers, Wholesale Roots, Lamborghini Newport Beach, etc.
Volatility: The prices of cryptos are fluctuating wildly. For instance, during normal period between July and August 2020 being less than 30 days, ‘Bitcoin’ fluctuated by about 12.41%. The maximum and minimum annualized volatility is 4,531% and 505% respectively. Even within 1 hour trading, the volatility was high at 0.29% which is 2567% when annualized.
Indian scenario: India has homegrown exchanges such as Zebpay, Unocoin, Wazirx, Bitbnb, Belfrics, Bitxoxo, BTCXIndia, BuyUcoin, Coinsecure, Coindelta, Coinswitch, Flitpay, Koinex, Pocketbits, ThroughBit, Coinnome, Redipay, etc. Few global exchanges such as Binance have their branches in India.
Indian Regulation: RBI’s 6th April 2018 circular prohibited dealing with virtual currencies. Internet and Mobile Association of India has filed a writ petition with Supreme Court which set aside the circular resulting in resumption of trading and dealing in cryptos due to which the volumes are almost back to their earlier levels.
Challenges: Do cryptos constitute ‘on demand promissory notes’ to the bearer and therefore prohibited if issued by anyone other than RBI, whether cryptos are equivalent as real currencies, do cryptos possess the features of store of value, medium of exchange, and unit of account are the aspects that need to be resolved before fairness and reliability in the usage and trading of cryptos can be expected.
In fact, RBI and Govt of India have contemplated an official digital currency. Meanwhile, China completed its prelaunch tests and is shortly launching its official digital currency ‘Digital Currency Electronic Payment’.
Conclusion: The need of the present day includes crypto advantages such as real time world-wide transfers, near zero cost, usage of block-chain or similar technology having trail and transparency, etc. However, unless there exists some sort of underwriting or regulation, the volatility of crypto prices make dealings in cryptos as speculative and gambling. Thus, while cryptos are welcome, suitable regulation accords reliability and trust thereby being acceptable to all sections of the economy. Until then, the ascent and assent of cryptos as currency equivalent is not absolute or complete.
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