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EducationalFebruary 9, 2021

Crypto Trading in India: Top Challenges For Users in 2021

Shubham Goyal
Product Specialist
February 9, 2021

2020 proved to be a great year for crypto trading in India in particular, as well as across the world in general. This is especially due to the Supreme Court’s order in March 2020 that lifted the Reserve Bank of India’s 2018 ban on cryptocurrencies, which barred banks and other such financial institutions from enabling crypto trading.

Most banks in the country – including HDFC Bank Ltd., State Bank of India, Kotak Mahindra Bank Ltd. and ICICI Bank Ltd. – have once again started facilitating crypto transactions at this point, resulting in an overwhelming number of new users within the Indian crypto space. In fact, in 2020, the crypto exchanges in India have witnessed sign-ups rising around 10 times, as compared to the reports from 2019. According to YCharts, as of January 2021, Bitcoin price has gone over so far as INR 40,000.

This goes on to show how the confidence and acceptance has increased for crypto trading in India. If you are someone looking for alternative, diverse investment opportunities, you might want to look into crypto trading as well. However, if you do plan to enter the Indian crypto trading space, along with knowing how to trade cryptocurrency, you must also be aware of the many challenges for crypto traders.

Without further ado, in this post, we hope to give you some detailed insight regarding the top challenges for crypto traders in 2021.

Top Challenges for Crypto Traders in India in 2021:

1. A Rise in the Number of Fraudsters:

Cryptocurrency scams are not a new phenomenon, of course – they have been among the primary challenges for crypto traders around the world since Bitcoin’s launch in 2009. In recent times, as Bitcoin price reached new highs, quite a few reports of huge cryptocurrency scams have also shown up, not unlike in 2017 when a number of hackers and fraudsters duped Bitcoin buyers.

If you have been in the know of how to trade cryptocurrency for a while now, you have probably heard about the crypto wallet scam where an Indian businessman lost INR 28 crores. There’s also the case of a man allegedly robbing 45 investors of about INR 2.5 crore through his cryptocurrency venture Pluto Exchange back in September. Thankfully, he was arrested at the Indira Gandhi International Airport recently on January 1.

The reports of frauds don’t end here. In October last year, three Bengaluru-based companies were accused of getting over 11 lakh people to invest in a new cryptocurrency called the Morris coin, which was later identified as a ponzi scheme.

Now, cryptocurrency scams have been around as long as the crypto coins themselves have existed, just like the phishing threats associated with dealing in fiat currencies. If you are aiming to opt for crypto trading in India, just some basic cautiousness can help you avoid most of these fraudsters and hacking attempts.

For instance, any companies that encourage you to participate in frankly bizarre sounding schemes like getting over double returns on your cryptocurrency if you deposit a certain amount of money with them – that too within a short period of time – are definitely planning a big scam. So it goes without saying that you should not believe any information you find on online cryptocurrency forums without verifying first.

More necessary measures to take to safeguard yourself against cryptocurrency scams: never click on any unrecognized links, and never ever share your passwords or any other personal information anywhere. Sticking to reputed, well known exchange platforms for crypto trading is another obvious step you should follow.

2. A Lack of Regulation Within the Indian Crypto Markets:

As many crypto experts have already pointed out, the recent increase in the number of crypto scams in India is directly related to the fact that the Indian authorities are yet to impose a firm regulatory framework for the crypto markets. Therefore, this also arises as one of the foremost challenges for crypto traders in India.

After all, as Kunal Pande, partner at KPMG in India, has already pointed out, “Cryptocurrency frauds do not happen because of any weakness in the blockchain technology, but in surrounding processes and the ecosystem around it.” Most frauds within the crypto markets, according to Pande, happen mostly because of the weakness in the systems built around them.

The Indian government has evidently shown quite a bit of skepticism when it comes to cryptocurrency in the past, trying to decide between regulating crypto trading in India and banning digital assets altogether. This has led to a wide number of potential Indian investors shying away from cryptocurrencies.

However, with the nearly steady increase in Bitcoin prices and cryptocurrencies having emerged as a hedge against the uncertainty brought forth by the collapse of the broader financial markets due to COVID-19, the Indian government has reportedly finally chosen to take another look at the Indian crypto markets. Hopefully, the lack of clarity surrounding the regulatory mandates regarding crypto trading in India stands to be resolved very soon.

3. A Lack of Necessary Trading Knowledge Among New Traders:

Finally, the constant high of Bitcoin and the speculatively bright future of Bitcoin prices has led to an influx of novice traders within the crypto trading space, as mentioned above. As per reports, the maximum interest has been shown by young first-time investors. Now, why exactly is that a challenge, you ask? Well, the downside of all these excited, new traders trying their hands at crypto trading is that they might not have done the necessary readings and research before joining the more experienced crypto users.

What you should keep in mind, as a new user learning how to trade cryptocurrency, is that there’s no hard-and-fast route to successful crypto trading. Investing in any crypto coin is largely predictive, and you should only get into crypto trading in India when you have some funds lying around. It’s important to remember that the crypto industry as a whole is still at the development stage, making efforts to do away with issues in terms of scalability, efficiency, and security.

The closest thing you can do to ensure a fortunate trade is deal in the top cryptocurrencies worldwide, according to market cap. These cryptos include Bitcoin, Ethereum, Tether, and Ripple. As someone new to crypto trading, it might also be helpful to join a community of fellow crypto traders, so you can keep your own investments in check.

Staying informed about both the past and present of the market you’re operating in is, of course, an absolute necessity. You can also use some charting tools to perform technical analysis before performing a trade, and develop a concrete crypto trading strategy. To find out more about technical analysis in cryptocurrency, you can give our blog post on the topic a read here!

And there you have it, the challenges you should be aware of as you learn how to trade cryptocurrency! We hope this post has been informative for you!

Happy crypto trading!

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