Can you understand the alphanumeric string?
It’s the crypto equivalent of ‘Bitcoin’ – the cryptocurrency that traded at $46,578 (35 lakh) per unit on December 20, which translates to a global market cap of $881 billion. This is 3.36 times the GDP of Pakistan, 2.72 times that of Bangladesh, and 10 times that of Sri Lanka. Having started at $1 in 2009 at launch, Bitcoin remains by far the most expensive cryptocurrency in history. If an investor invested $100 in Bitcoin in 2009, the investment would be worth $4.67 million today (equivalent to Rs 35 crore)!
It is this non-linear composite that has generated a 24-hour open crypto market teeming with over 15,700 coins and a cumulative market capitalization of $2.37 trillion. It involves trading coins, tokens for cents, and even small fractions.
Among all these 10 cryptocurrencies that have captured investor interest include Bitcoin, Ethereum, Cardano, Dogecoin, Litecoin, Bitcoin Cash, Filecoin, Ethereum Classic, Monero and Helium, with a market capitalization of $1.45 trillion (see: Top 100). Local crypto exchanges in India together offer a basket of 500 currencies to choose from, according to Crebaco, a cryptocurrency research and analysis firm. Cryptocurrency investing in India began in 2013 when Bengaluru-based Unocoin became the country’s first cryptocurrency exchange.
Since 2013, the cumulative investment made by Indians in cryptocurrency has been around $1 billion as of March 2020, and today it is worth nearly $8 billion (Rs.60,000 crore), according to Crebaco. However, a handful of the country’s leading exchanges, including WazirX, ZebPay, CoinDCX, CoinSwitch Kuber and others, published an announcement in a leading pink daily newspaper adhering to the Blockchain and Cryptocurrency Commission for Self-Regulatory Conduct in India under the Internet and Mobile Association of India, noting Tens of millions of Indians have invested $80 billion (Rs 6,000 crore) in crypto. However, Siddharth Sujani, founder and CEO of Crebaco, believes the number is exaggerated. “It should be the volume, not the value invested, because the average investment of Indians is very low,” he adds.
Even as governments and central banks continue to grapple with the enormity of digital assets, their returns have proven to be more than just an inflationary factor. Bitcoin has a YTD return of 60.40%, higher than other asset classes, including real estate and gold (see: More than an inflation hedge).
In fact, the yellow metal – a traditional inflation hedge – lost its luster during the year, yielding a negative 8%. With central banks releasing liquidity by cutting interest rates to near zero, the money was supposed to turn into gold. But she didn’t. Since the global financial crisis in 2008, central banks have pumped more than $25 trillion into the global economy with more than $9 trillion in the pandemic period alone. But gold failed to shine as cryptocurrencies stole the show.
According to Morgan Stanley, the market value of gold has, historically, hovered around 5-15% of global GDP, rising to 10-15% after economic crises when demand for safe-haven assets tends to increase and re-inflation policies are used. If, according to the report, Bitcoin will capture 50% of the demand for gold generated by its use as a store of value, its market value could reach $6 trillion by 2025 – more than 2.5 times the current market value.
And this is not without reason. “In this inflationary period, bitcoin has outperformed gold. Bitcoin and other digital currencies are widely viewed as a shield against inflation mainly due to limited supply, which is not affected by its price,” says Nigel Green, CEO and founder of DeVere Group, It is an independent financial advisory firm.
For example, only 21 million units of Bitcoin have ever been programmed to exist, unlike other digital currencies and tokens whose supply can increase based on demand and supply. Not surprisingly, they represent a significant portion of the cryptocurrency market capitalization.
Unlike Bitcoin, the basket of cryptocurrencies has more than enough to offer – some promising, some failing.