The hullabaloo over crypto has quietened despite the good year it had
In 2023, Bitcoin, the most popular crypto, rallied 155% in US dollar terms. The Bloomberg Galaxy Crypto Index—a broader representation of crypto as an investment asset class—gave a return of around 140% during the year, telling us that crypto as an asset class did very well in 2023. Now, when it comes to retail investors investing in a particular asset class, there is always a bit of a recency effect involved, as investors tend to favour assets which have done well in the short-term.
So, there is some fervour for an asset class once it has done well. But that fervour seems to have been missing for Bitcoin in particular and crypto in general during 2023. The volume of Bitcoin—or the total number of times it has been traded in a given period—seems to clearly suggest so.
The volume for a period of seven days ending 25 December was around a tenth of the volume for the period of seven days ending 22 February 2021, when the highest weekly Bitcoin volume was achieved. Further, in 2023, the total volume of Bitcoin traded was around 39% of the volume traded in 2021 and 61% of the volume traded in 2022. So, clearly there is significantly less interest despite the massive rise in its price.
Why is this the case? First, in the Indian case, a 30% tax on capital gains made in buying and selling crypto has been introduced. Further, if investors face a loss while buying and selling crypto, they are not allowed to offset these losses against other crypto gains or any other gains. This has lowered the popularity of cryptos in India.
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