How rookie crypto investors are seeing their fortunes melt away

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Most of his crypto investments were centered around Bitcoin and Ether, but Dheekshan also put 75,000 in Luna, the cryptocurrency backed by the Terra UST stablecoin. Luna was then popular. It promised investors a 20% annual return and was backed by a stablecoin, a cryptocurrency whose value is often pegged to the dollar.

In this case, 1 UST was supposed to be 1 dollar. On May 9, the stablecoin Terra was unlinked from the dollar, sending it crashing. On June 13, the crypto experienced another meltdown, with the price of Bitcoin falling as global investors fled risky assets. Luna is now trading close to zero. Last month, a new set of Luna 2.0 coins dropped, but their value has already dropped by 70-80%.

“It was a real slap in the face,” said 24-year-old Dheekshan.

Like most investors around the world, Dheekshan canceled his investment in Luna despite still having his coins. His other investments in Bitcoin and Ether are also down. “I had invested more 3.5 lakh, about a third of my savings. It’s a bit difficult to look at the app and check the red marks, but my investments have gone down by at least 55%,” he said.

Until he started investing in crypto, Dheekshan, frugal by nature and from a family that owns a small restaurant in the city of Karnataka, had mainly invested in gold and fixed deposits.

He was not alone. More of the crypto investors Mint reached out to also had little to no exposure to stocks 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 came from smaller towns, 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 required crypto advertisements to follow a set of 12 guidelines and display a “high risk” disclaimer.

WazirX has over 7.3 million users and had a transaction volume of over $21.8 billion in 2021, with Tier II and Tier III cities capturing 55% of total user registrations on the crypto exchange. Of this, women in these cities contributed 65% of the total registrations nationwide.

Takshak Pai, 26, another Udupi-based crypto investor, started investing in the asset class around March and April last year when prices hit new highs.

“I didn’t want to get involved in equities – it sounded boring, to be honest, when crypto looked like the next big thing,” he said.

The early days of trading were exhilarating. At the time, he was completing a master’s degree in England and had initially lost a few hundred dollars. “Later, I entered the “shitcoin trading” phase. Randomly named tokens (mostly scams) on decentralized exchanges were making the most noise. You may have heard of Mars Coin, Elongate and others,” he said.

Most of these pieces no longer exist.

“I lost track of my losses,” Pai said.

He is now looking to diversify into mutual funds and stocks, but most of his money is still invested in crypto. “At least in the short term, I will stick with established cryptocurrencies and average them out for the next few months,” he adds.

Like Pai, 24-year-old Nishant Sarda, who runs a printing company with his family in Siliguri, is looking to diversify away from crypto. He said he had minimal exposure to stocks when he started trading cryptos seven months ago. He had invested up to 1.5 lakh for longer term exposure, but that’s a 40% drop. From this he lost 50,000 in trade. “About 20% of my net worth is invested in crypto. I will slowly average out and focus on long-term investments,” Sarda said.

Some of the withdrawals have been painful for investors, even those working in the Web3 ecosystem.

Take, for example, a Guwahati-based marketer who declined to be named. At the end of 2020, she started working for a few crypto startups. She had dabbled in stocks before, but crypto seemed like a calling for the 25-year-old.

“I saw potential in the vision. I started researching and investing in different projects. I also invested and traded NFTs (short-term trading) during this time,” she said.

All last year she was one of the bulls. “The majority of my investments were in Polygon, Ether and Solana. I’m still confident about them, but the bear market hit so suddenly it was difficult. I tried not to panic because I had faith in these projects, but the prices kept going down,” she said.

She had invested more than 5 lakh, which is worth approximately 50,000 now, after the crash.

She says that India has imposed what it calls a “death tax,” in reference to the levy introduced in the budget on crypto revenue. According to a report by blockchain data platform Chainalysis, the Indian cryptocurrency market has grown from $923 million in April 2020 to $6.6 billion. in May 2021. Over 15 million Indians have invested in crypto. Among 154 countries, India ranks second in cryptocurrency adoption, the report adds. With a tax, this could go down in the future. Meanwhile, many Indian crypto users have found themselves bagged.

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