Can Festive Cheer Bring Back Crypto Exchanges’ Lost Sheen?

It has been a tradition on Diwali to exchange monetary gifts, in line with beliefs across the country. These monetary exchanges usually involve more fiat currencies in either cash or gold and silver. However, over the last few years, cryptocurrencies have emerged as a lucrative gifting option around Dhanteras and Diwali.

Even as strong headwinds persist in India, with high crypto taxation and strict regulatory framework and an adverse reserve bank, crypto exchanges would want to bank on the festive season to see a jump in trading volumes as Indians started exploring crypto tokens as gifts instead of the usual gold/silver coins.

This has been the case over the past as well. According to data from CoinGecko, WazirX’s daily trading soared from $142 Mn on October 21, 2021, to $503 Mn on October 28, 2021, a jump of more than 3.5X. 

By Diwali (November 4), the trading volumes had fallen to $358 Mn. Even so, the trade volume represented an increase of 2.5X as compared to October 21. The jump was similar for most of the crypto exchanges working in India.

While a reasonable assumption would have been to put high trading volumes down to a positive crypto sentiment in India, Diwali last year was special because several crypto exchanges brought in Diwali offers. These products included Muhurat Trading, which has been a staple of Indian stock exchanges, crypto gift cards and more.

This year, WazirX has taken the lead in Diwali offers, launching Muhurat Trading and gift cards. Similarly, Chinese crypto exchange Binance (the two had a public spat not too long ago) has launched gift cards as well.

Why Does Crypto Make For A Diwali Gift At All?

According to beliefs prevalent across several parts of India, it is a tradition to gift something of value during the festive season. 

The festivals of Dhanteras (October 23 this year) and Diwali (October 24 this year) are considered to be auspicious occasions to buy and gift assets. These assets include gold, silver and other asset classes (FDs, stock options, bonds, etc.).

However, over the past few years, Indian customers have started to look for unique value propositions in their gifting options, with assets such as digital gold and gold bonds also making it to the gifting shortlist. In other words, Indian customers are looking for conversation starters in their gifting options.

This has made crypto an asset class to consider as a gift in the festive season.

Further, crypto is known to be a high-risk, high-reward investment. Though as of now, major global cryptocurrencies are down significantly as the industry worldwide faces a crypto winter. The price of Bitcoin has fallen by almost 60% to $19,210.80 apiece from $47,733.40 one year ago.

However, this also represents an opportunity. If market cycles are anything to go by, Bitcoin prices may be up for an increase soon. In fact, over the past month, prices have improved marginally, signalling the beginning of another rise.

While cryptocurrencies are known to be volatile (also read: Terra-Luna crash), the perceived promise of future returns (again, read: Terra Luna crash) might just convince people to buy crypto this festive season. Catching onto this sentiment, a few crypto exchanges have curated gifting options for the Indian market.

From WazirX To Binance: Crypto Offers For Diwali

Among India’s many crypto exchanges, WazirX is the only one which has announced any Diwali-related offerings. The Indian crypto exchange launched crypto gift cards and Muhurat Trading.

According to WazirX’s blog post, KYC-verified users can send crypto gift cards to their family and friends via the exchange’s mobile app. 

However, the crypto gift card can only be sent using WRX, the exchange’s native token. It is prudent to mention that WRX has fallen 84.90% in value over the past year and is currently trading at $0.198 apiece, per data from Nomics.

The Indian crypto exchange has introduced three Muhurat Trading time slots on October 22 through October 24. During these time slots, users can trade with zero trading fees.

The Chinese crypto exchange Binance has also launched crypto gift cards to celebrate the festivities around the world. While Binance did not make clear whether users could choose between cryptos in their offering, it seems that the option would be limited to either the Binance USD (BUSD) or Bitcoin.

Taxes, Controversies & More: India’s Complicated Relationship With Crypto

While crypto might position itself as a lucrative asset class, it is also important to note that India is not exactly the kindest place for it right now.

In February 2022, India introduced the crypto tax – a 30% haircut on all gains made on cryptocurrencies. What’s more, the law specified that a holder won’t be able to offset the losses made on one crypto with the gains made on the other.

Further, the government said that it would also charge a 1% TDS on all crypto transactions above INR 10,000 as a way of tagging them. This further exacerbated the situation in India, as crypto exchanges saw trading volumes vanish overnight on July 1, when these laws came into force.

Meanwhile, the government and the Reserve Bank of India (RBI), have been making antagonistic statements against crypto and its usage in India. The National Payments Corporation of India (NPCI) effectively shadow-banned India’s crypto exchanges from UPI, making it more difficult for them to onboard new users.

Late in July, Union Finance Minister Nirmala Sitharaman said that the RBI was looking to ban cryptocurrencies in India, but needed global support to do the same.

However, crypto exchanges have not exactly covered themselves in glory. They have come under fire for alleged tax and GST evasion, which many of them were found to be rightly accused of. 

More damningly, the Enforcement Directorate (ED) is investigating all of the crypto exchanges operating in India for their roles in facilitating the operations of China-backed fake loan apps. The ED alleges that these fake loan apps remit the proceeds of crime via these crypto exchanges abroad, mostly to China and Hong Kong.

Therefore, while people might buy crypto gift cards for their loved ones this Diwali, a quick look at the current state of India’s crypto landscape would serve well before making any decisions.