What is fashionable and what is happening in the crypto space?
Cryptocurrency prices are determined by three things: one, which has nothing to do with cryptocurrencies, which is macroeconomics. US interest rates are 19 times higher than a year ago, so from 0.25 to 4.75, this has been the biggest driver of the crash, but it's also been the driver of some relief that we saw recently. The other two issues are very cryptocentric. One is that there are many protocols and tokens that came on the market and were only able to survive in the bull market. One by one they are crashing and then of course the ever persistent scams and frauds that can crop up. This is the buzz in the cryptocurrency market.
Talk about prices first because we saw that there was some momentum lately and some heat in cryptocurrency prices hitting a new record high. What was it about and why not continue? Can we say that the crypto winter is over?
It would require me to have astrological ability to answer that accurately. Absent that, I'll give you my guess with a disclaimer that I'm not a financial advisor. According to me, the crypto winter is far from over. Again, we should be testing lower prices, if not lower lows. We have seen some relief as money has entered the market in the hope that there will be no more interest rate hikes. Also, the FTX crisis and before that the Luna crisis have now started to fade and in the absence of more new fraudulent activity, people are feeling confident again.
You are saying that the crypto winter is far from over, which means that there will be more price declines. What does it mean for investors or traders?
Unlike the stock market, which has such a long history, in crypto we have only had four bull markets so far. So we don't have much of a track record. What we have seen is that in all cases, when the bear market ended, it was preceded by well over a year of sideways price movement.
In the previous bear market, the sideways movement was around the $10,000 mark. This time it's around the $20,000 mark. So even if we're seeing new players coming in or we're seeing money coming into the market. There are plenty of people waiting to sell even at slightly improved prices. Therefore, it is highly unlikely that prices will rise in the near future or rise substantially. There are a few reasons why it might go down. I'm gritting my teeth and even preparing for Q1 25, although I suspect it will happen much sooner, perhaps early 24.
Do you think specific cryptocurrencies would perform better and even if they are falling, they wouldn't fall as much?
One very interesting statistic that your viewers may not know is that only Bitcoin and Ethereum are two tokens that have survived more than one bull market and that is very interesting. That means that when the bear market hits, the previous heroes are no longer heroes. This time, except for Luna and FTT, which is an FTX token called FTT, we haven't seen any major tokens disappear and that worries me. Some of them might be emerging especially because crypto projects actually use their own tokens as if it were a currency and when the value of these tokens and coins goes down, their ability to buy and trade goes down. Right now they are just laying people off. We have not seen worse action than that. My concern is that if any of that happens, prices could drop even further.
Looking at the FTX fiasco, do you think sentiments have improved now because there are a certain amount of findings and people are following this development? What do feelings look like?
If you look globally, about 1% of people who are involved in all asset markets, real estate, forex, stocks, mutual funds, etc., are involved in crypto markets. The fact is that the feeling of this 1% is very different from the feeling of the remaining 99% who have not yet entered. The remaining 99% are still skeptical. They're not even sure Bitcoin won't go to zero, for example, but that's not the sentiment of people inside the crypto markets. They are trying to be selective and they are looking for companies that may have more survival, some are looking for the main tokens, which are Bitcoin and Ethereum. The sentiment among crypto investors is pretty decent. Non-crypto investors stay away.
Looking at the prices, are they accumulating at the current time?
I always have purchase orders at various prices and based on percentage, not quantity. I have bought up to 15,700 in Bitcoin and my highest buy has been around 21,500 marks, which was going down, not up, which is very important. At present, I am afraid that all my buy orders that are much lower than the current prices may not be fulfilled.
Let's talk about the cryptocurrency ban, which has reportedly hit a snag as the nation fell short of passing an outright ban. Where do you think the global understanding of cryptocurrency e India'a understanding in terms of regulation to now?
Yesterday, one of the Emirates in the United Arab Emirates called Ras Al Khaimah opened a cryptocurrency free zone. In the last week, Hong Kong has announced favorable crypto regulations. What we are finding is that there are various pockets around the world where more and more favorable regulations are taking place. Even in the US, in the state of Wyoming, in the last year, we've seen very positive regulation.
On the India front, although they may not agree officially, I always feel that there is a difference of opinion between the Reserve Bank of India and the Ministry of Finance. Even at the G20, the Finance Minister continued to mention repeatedly that she would work with international collaboration, while the Governor of the Reserve Bank of India spoke about the fact that we should consider a ban. Given that the next discussion in the G20 is only in October, it's fair to say that we have a little rest and respite of at least the next 10 months before this ban issue comes up again.
The managing director of the IMF also showed his interest in regulating cryptocurrencies instead of having an outright ban. Do you think it is the right approach and that it is time for India to consider along the same lines as well?
Let's consider two scenarios; one, eventually the whole world will ban cryptocurrencies, in which case India will look like a visionary. I think the world is going in the opposite direction and that is regulation. If that happens, given India's tech talent, given India's English-speaking population and India's young population, I'm afraid we'll miss the bus.
I'm afraid that as we've done on the internet, e-commerce, and social media, where we had to play catch-up, and by the way, we did catch up pretty well, even here we're going to be doomed to do that. So it would require farsighted thinking from the central bank and finance ministry to recognize the direction the winds are blowing globally and align India to maximize its benefit from that.
Here, there's this end of regulation that we're discussing and initially you mentioned cryptocurrency scams. Now these are also making headlines and a large number of scams and frauds are being reported. What is the latest and is this something global that we are seeing?
Unfortunately, yes, and scams arise for three reasons; one is that people make up fraudulent activities, as they are literally fly-at-night operators. If regulations come in, that should be reduced.
The second are technological failures like the one we saw on Luna. Now, in this situation, we are too early, more or less like when debit cards arrived. Debit cards they had all the time. Even though there are more debit cards today, we are seeing fewer. I think that's the industry we're moving up to.
The third is that nowadays people who are in the crypto industry and I'm talking about exchanges and other startups, are fundamentally focused on customer acquisition and not customer education. As a result, clients, even those who make a profit, are actually doing so out of ignorance. When the audience is ignorant, there will be people who will take advantage of that ignorance.
Do you also think that the onus, to some extent, falls on policy makers as well to bring clarity so that things can be speeded up here?
If you look at India versus the rest of the world, we have a distinction. In India, the conservative financial investor largely steers clear of crypto markets. People who invest in mutual funds, people who have been investing in the stock market for decades, most of them haven't touched cryptocurrency. It is people who are in the 18-32 age group that make up 85% of cryptocurrency investors. Now these people are investing despite hearing once every two or three months from the RBI that there should be a ban. So that means these people are wild. risk takers. So if a policy comes in, we bring in a new generation of relatively more conservative larger investors. At that point, we should see a reduction in the type of speculative activity you see, and therefore a reduction in scams.
What would you recommend to all those cryptocurrency investors or traders who are now facing severe losses and have lost all hope?
There are two different categories although it sounded like one. Those who have suffered severe losses are not necessarily those who have lost all hope. So this is the question. Just like any asset class, just because you've lost 50%, 80% doesn't mean you're going to have to hold on to it because it has to go up. Although it may go up, that doesn't mean it won't go down first.
Secondly, those who are considering switching from one token to another may have a very interesting strategy. Move to larger, higher-cap, more established tokens. The really bad tokens that some of us may have bought in the hope of getting rich overnight have been shown to have no future. To believe that they will appear is a bit of an exaggeration.
Finally, do as much research as possible before going into this. This is definitely a high risk asset class. I think it's a very promising asset class. This is all I invest in, but a lot of research is still required.
