Rookie cryptocurrency investors see fortunes melt
BENGALURU: Two years ago, a stream of ads by Youtube influencers got Dheekshan KS thinking of cryptocurrencies. So in November, the hotelier from the coastal town of Udupi took the first tentative step, investing a portion of his income in crypto. “I just wanted better returns than FDS (fixed deposits).”
Most of his crypto investments were centred around Bitcoin and Ether, but Dheekshan also put ₹75,000 in Luna, the cryptocurrency backed by the Terra stablecoin UST. Luna was popular then. It promised investors a 20% annual yield and was backed by a stable coin, a cryptocurrency whose value is often fixed to the dollar.
In this case, 1 UST was supposed to be 1 dollar. On May 9, the Terra stablecoin was de-pegged from the dollar, sending it crashing. On June 13, crypto saw another meltdown, with the price of Bitcoin tumbling as global investors fled risky assets. Luna is now trading at nearly zero. Last month, a new set of Luna 2.0 coins dropped, but they have already slid 70-80% in value.
“It was a real slap in the face,” Dheekshan, 24, said.
Like most investors globally, Dheekshan has written off his investment in Luna though he still has his coins. His other investments in Bitcoin and Ether are also down. “I had invested over ₹3.5 lakh, about a third of my savings. It is a bit hard to look at the app and check the red marks, but my investments are down at least 55%,” he said.
Till he began investing in crypto, Dheekshan, frugal by nature and from a family that owns a small restaurant in the Karnataka town, had primarily invested in gold and FDS.
He was not alone. A larger set of crypto investors Mint spoke to also had little to no exposure to equities or other volatile assets. But as crypto entered mainstream consciousness through celebrity endorsements, especially during the Indian Premier League, they were drawn to it —perhaps not always aware of the risks involved. Many of them were from small cities, which have seen greater adoption of cryptocurrencies, according to Wazirx, the crypto exchange.
After a free run for a year, the Advertising Standards Council of India (ASCI) cracked down in February. It mandated that crypto ads follow a set of 12 guidelines and show a “highly risky” disclaimer.
Wazirx has over 7.3 million users and clocked over $21.8 billion in trading volume in 2021, with tier-ii and tier-iii cities cornering 55% of total user sign-ups on the crypto exchange. Of this, women from these cities contributed to 65% of the total signups from all over the country.
Takshak Pai, 26, another Udupi-based crypto investor, started investing in the asset class around March and April last year when prices were hitting new highs. “Later, I got into the ‘shitcoin trading’ phase. Randomly named tokens (mostly scams) on decentralized exchanges were making the most noise. You might have heard about Mars Coin, Elongate and others,” he said.
Most of these coins don’t exist anymore. “I’ve lost track of my losses,” Pai said.
He is now looking to diversify into mutual funds and stocks.