Cryptos On A Crash Course

Cryptocurrencies have been tumbling worldwide as the Ukraine war prolongs and the spectre of still higher crude prices and inflation haunts countries.

- M.G. Arun

In over six weeks, the global crypto market has lost around $830 billion, hurting investors, even as stock markets remain highly volatile globally. On May 16, the global cryptocurrency market capitalisation (m-cap) was $1.27 trillion, less than half the $2.83 trillion in November last year. Bitcoin, the most valuable cryptocurrency, was trading at $29,505 (around Rs 23 lakh) per coin, compared to $64,862 (around Rs 50.5 lakh) in November. The big fall, however, came in the second week of May, led by the crash of “stablecoin” TerraUSD (code-named UST) which fell to $6.16 billion (Rs 47,934 crore) in m-cap, a 63 per cent fall from a month ago. A stablecoin like TerraUSD uses complex codes to create new coins or destroy old ones to maintain a steady price. But with big investors dumping the coin, it dropped below $1 and further collapsed to $0.30 on May 11. Its sister coin Terra (codenamed Luna) has also been in a free fall, erasing billions in investor wealth. Indian crypto exchanges delisted Terra (Luna) from trading as its price crashed below zero on May 13.

For investors in India, the fall in crypto could not have come at a worse time. Already hurt by the 30 per cent tax the Union budget imposed on proceeds from crypto trading in February, its continuing slide has left millions of investors in the lurch. As many as 15-20 million Indians had invested around $6 billion (Rs 46,695 crore) in cryptos on digital platforms, as per industry estimates in November last year.