According to cryptocurrency data aggregator CoinGecko, the total market capitalization of cryptocurrencies has shrunk by more than a third, falling to around $930 billion, from a high of around $3 trillion reached in November. 2021.
Singapore: India’s conservative stance on not encouraging cryptocurrency trading is quickly vindicated by the negative experiences of various crypto funds, the latest being Singapore’s Three Arrows crypto fund. In line with the decline in the overall crypto market valuation, Singapore-based crypto hedge fund Three Arrows Capital (3AC), one of the top crypto investment firms, has struggled and is reportedly struggling.
Considering the latest crash in crypto assets, many experts believe that India correctly predicted economic headwinds and may have saved many investors from economic ruin.
To put this into context, Bitcoin’s value as a crypto asset has fallen 55% so far in 2022. The crypto market, as a whole, has fallen by about a third since it peaked in November last year.
In line with the downturn in the crypto market, Bloomberg and Reuters Cited sources said the Singapore-based crypto hedge fund entered the liquidation process after failing to make payments on a loan of 15,250 bitcoins (about $324 million) and $350 million of USDC, a coin steady.
Press Agency Reuters reported citing sources that a court in the British Virgin Islands, where the Singapore-based hedge fund firm is incorporated, issued the winding-up order on June 27. The commercial court there orders the liquidation of a company if it is considered insolvent for lack of being able to pay its debts.
Singapore-based hedge fund firm 3AC was founded by former Credit Suisse traders Zhu Su, a Singaporean, and Kyle Davies at the kitchen table of their apartment in 2012. Zhu predicted the bottom of the last crypto cycle in December 2018 when bitcoin was worth around 3,850 USD.
Additionally, according to blockchain analytics firm Nansen, his blockchain holdings were once worth nearly $10 billion.
Adding to its woes, Singapore’s central bank, the Monetary Authority of Singapore (MAS), last week reprimanded 3AC for breaching financial regulations.
On the other hand, the Indian regulator had tried to ban cryptocurrencies only to be overturned by the Supreme Court.
In early 2020, India’s Supreme Court overturned a circular issued by the country’s central bank, the Reserve Bank of India, prohibiting banks and entities regulated by it from providing services related to virtual currencies (VCs), calling the circular of “disproportionate”.
Taking a further step to curb crypto trading in the country, a 1% withholding tax (TDS) on crypto transactions was introduced in the FY23 budget, which started on July 1. . The 1% TDS liability is India’s second major provision after the recently introduced 30% capital gains tax on all virtual asset transactions came into force on April 1, 2022.
India’s crypto community has railed against the new provisions and warned that it will have a severely negative impact on crypto trading in the country, especially with the latest global market crash.
Sumit Gupta, co-founder and CEO of CoinDCX in a tweet said that this tax would “do more harm than good”. He said developers and entrepreneurs could flee to friendlier jurisdictions, while adding that a 30% tax rate coupled with a 1% TDS was “unfair”.
The Indian government has been very careful not to legitimize crypto trading. The justification for imposing taxes on virtual assets stated by the government was that the taxation of crypto was imposed because people profited from it.
“We warned against crypto and look at what has happened to the crypto market now,” Reserve Bank of India (RBI) Governor Shaktikanta Das said in a statement. CNBC-TV18 interview earlier this year after the value of cryptocurrencies plummeted. He had warned of the dangers of investing in something that has no underlying value.
“Our position remains very clear that this will seriously undermine India’s monetary, financial and macroeconomic stability,” the governor said.
Recently, Das said that cryptocurrencies are an obvious danger and anything that extracts value based on imagination, without any underlying, is just speculation under a fancy name. He mentioned this in the foreword to the Financial Stability Report (FSR) published at the end of June by RBI.
“While technology has underpinned the reach of the financial sector and its benefits must be fully exploited, care should be taken against its potential to disrupt financial stability. cyber risks are increasing and require special attention,” he said. said further.
According to cryptocurrency data aggregator CoinGecko, the total market capitalization of cryptocurrencies has shrunk by more than a third, falling to around $930 billion, from a high of around $3 trillion reached in November 2021.
Although the crypto market is down this year, there is no specific reason for it. Analysts, however, suggested that the broader global economic picture of higher interest rates and a looming recession, coupled with lower investor risk appetite, caused the crisis.
It has caused various calamities in the market. Some believe a crypto winter has arrived. Besides 3AC, recent disasters include the collapse of stablecoin terra USD and its sister luna, as well as liquidity problems at lenders Celsius Network and Babel Finance.
Earlier, crypto lender BlockFi and prime broker Genesis said they had to liquidate one of their major counterparties recently. In June, crypto giant Coinbase cut 1,100 jobs. Crypto broker Voyager Digital, which is believed to have issued the default notice to 3AC, was also affected.
“I think given this price drop from the all-time high of $68,000 to $20,000 now, it will probably take some time to come back. It will probably take a few months or a few years,”
Changpeng Zhao, the founder of the world’s largest crypto exchange, Binance, told the Guardian.
Zhao added that bitcoin could take years to recover from the recent crash.
On the other hand, other market participants remain optimistic about the future of crypto.
“What I want from bitcoin is short-term volatility and long-term growth,” said Kiana Danial, founder of Invest Diva and author of Cryptocurrency Investing For Dummies.
PricewaterhouseCoopers’ fourth annual global crypto hedge fund report released in June showed that although the crypto market is currently bearish, 35% of fund managers in its survey predicted that bitcoin will trade above 50,000. USD by the end of 2022 and another 42 percent. cent predict that it will trade between $75,000 and $100,000 by the end of the year.
JPMorgan Chase & Co. believes that the current phase of cryptocurrency deleveraging will not last much longer. In a note published on June 29, he supported this prognosis saying that it has been observed that “the crypto entities with the strongest balance sheets are now stepping in to help contain the contagion.” It was also noticed that venture capital funding, which is “an important source of capital for the crypto ecosystem, continued at a brisk pace in May and June.”