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After the FTX bankruptcy, Indian crypto exchanges are attempting to reassure investors
CoinDCX cofounder Sumit Gupta announced on Twitter that the cryptocurrency exchange will publish its proof of reserves by the fourth week of November after the collapse sent shockwaves across the cryptocurrency community. Ashish Singhal, a co-founder of CoinSwitch, has already said that the company’s crypto and fiat money holdings are greater than the entire amount held on its consumers’ behalf. The actions follow Changpeng Zhao, the founder of Binance, who pledged to fulfill his promise to fully publish the proof of reserves he has on hand to cover any future consumer withdrawals. The biggest cryptocurrency exchange in the world, Binance, invested in FTX and withdrew from negotiations to buy the exchange.
Indian cryptocurrency exchanges have acknowledged the necessity for strong self-regulation and have thus far operated effectively, pending clarity on potential rules and regulations governing cryptocurrencies in the nation. With the exception of a few instances where technical difficulties prevented customers from withdrawing money, India’s 100 million crypto investors have received consistent service from the country’s exchanges, which has prevented the financial irregularities that have plagued exchanges like FTX. The sharp decline in FTX’s native FTT coin is thought to have affected roughly half a million cryptocurrency investors in India, who are now facing a devaluation of their invested capital of over 90%.
Not only did the price of Bitcoin and other significant cryptocurrencies fall to their lowest point of the year, but the accompanying liquidity crisis also poses a threat to other crypto companies and heightened investor apprehension. Trading volumes will continue to suffer from the loss of investor trust more so than from the direct effects on exchanges. Leading cryptocurrency exchanges CoinDCX, CoinSwitch, and WazirX were quick to release statements regarding their sound balance sheets and assure customers that there was no impact of FTX’s bankruptcy on their operations after realizing the potential for widespread panic among Indian investors. Reiterating its decision not to launch a native token like FTX, CoinDCX. WazirX reaffirmed that it works with one of the greatest custodial services in the world. The exchanges have made it clear that they do not take on debt based on the crypto assets of their members and that their only source of income is from trading commissions or fees.
The FTX problem, however, may have an impact on crypto businesses that provide lending and staking services. Some Indian cryptocurrency investors have been inspired by this to transfer their digital assets to non-custodial storage options like hardware wallets. Others have switched to trading on more reputable cryptocurrency exchanges to prevent future holdings losses. In the wake of the FTX crash, the market capitalization of all cryptocurrencies declined by more than 20%, while trading volumes at exchanges like Zebpay (-40%) and Bitbns (-32%) declined by a greater margin.
WazirX and CoinDCX in India, however, reported higher trading volumes in the moments following the FTX drop, suggesting that some investors may have bought on the decline in prices to generate rapid short-term gains. Due to their low exposure to FTX and the FTT token, Indian cryptocurrency exchange trade volumes were hardly impacted, which is a key factor. The impact of the recent cryptocurrency tax imposed by the Indian government and the wave of negative news sweeping the larger crypto community is highlighted by the fact that monthly trading volumes for practically all Indian crypto exchanges are less than 50% of what they were in January of this year.
Indian crypto exchanges and investors have shown a steely endurance in the middle of the continuing crypto winter, yet it is unclear whether another wave of liquidity-driven challenges would have an influence on the global crypto ecosystem.