Shortly after a spot bitcoin ETF was approved by the US market regulator Securities and Exchange Commission (SEC), there was an increase in the bitcoin price. On Tuesday, the bitcoin traded at $42,837, 1 percent higher.
Several industry spokespersons representing Indian crypto exchanges gave the move a thumbs up.
“The introduction of Bitcoin ETF is – without a doubt – an encouraging factor, contributing to the growing belief in this asset class. Considering that crypto is unlimited, the ETF approval by the SEC will affect general market sentiments. In the immediate term, the focus is on the price of Bitcoin, which is up more than 60% since early October,” said Sumit Gupta, Co-Founder, CoinDCX.
Participation in foreign equity and ETF markets by Indian investors is regulated by the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India. Under this scheme, investors from India can allocate up to $250,000 for investments, including in US ETFs.
However, despite the encouraging words, Indian investors have much more to consider amid repeated words of caution given by Reserve Bank of India (RBI) governor and Finance Minister Nirmala Sitharaman in the recent past.
So, investors continue to struggle with the question of whether one should invest in this cryptocurrency or not? There are many reasons to consider investing in bitcoins.
Reasons investors in India may consider investing in bitcoins:
1. The cryptocurrency is unlimited and the decisions taken by the American regulator will see its impact on the prices, acceptability and money flows around the world.
2. When the price starts to move up, some investors will be motivated to make quick bucks in the near term trading by selling the rallies.
3. Although cryptocurrencies are not yet legal in India by any express set of regulations, they are not illegal either. The government has even introduced 1 percent TDS and capital gains tax on virtual digital currencies (VDA) in 2022, thus setting the tone of legitimacy and regulatory framework.
4. Indian investors can invest in bitcoin ETFs through Liberalized Remittance Scheme (LRS).
However, the jury is still out on this when it comes to making hay while the sun shines on cryptocurrencies.
Reasons Indian investors may not want to invest in bitcoins:
1. The approval of spot ETF is given only by the US markets and it obviously does not apply to Indian crypto exchanges. Although Indian investors can invest through LRS, not everyone would want to take that route.
2. By their very nature, cryptocurrencies are highly volatile. And bitcoins too. They fluctuate wildly and touched $68,789 in November 2021.
3. They are not yet regulated in India and the general sentiment about their regulations is not positive. RBI Governor Shaktikanta Das issued statements condemning the mania of bitcoins.
No wonder some experts continue to push for regulatory clarity on bitcoins before investing in them.
“Perhaps it is prudent to wait for clear regulatory developments before considering investments in cryptocurrencies. The launch of the Bitcoin ETF was expected to inject billions into the crypto economy, but instead, we witnessed a trend of investors liquidating their holdings, causing prices to hover around $47,000, far from the peak price of $60,000. It is recommended to prioritize regulatory clarity over Wall Street events, as the latter may not fully capture the essence of decentralized Bitcoin,” says Gaurav Mehta, CEO and co-founder of Catax – Simple Crypto Taxes.
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Published: 16 Jan 2024, 18:08 IST