aWarnings from Indian cryptocurrency exchanges that a disputed fresh transaction fee would curtail trading are about to come in reality, with volumes plummeting since the tax was implemented.
According to CoinGecko, the three exchanges – ZebPay, WazirX, and CoinDCX – saw trading volume drop by about 60% and 87% immediately after the 1% tax cut on July 1. A fourth exchange, Giottus, was traded. According to its CEO, a 70% drop.
Such a severe drop occurred when there was already low trading volume, a combination of falling prices, negative tax conditions and difficulties moving capital on exchanges crushed the market.
Potential traders are gone
According to data from CoinGecko, Binance-backed WazirX traded $3.8 million on July 2, just after TDS was implemented. Achieving that level may require only 2 hours of trading in early July 2021. (Crypto exchanges operate round the clock and seven days a week.)
According to Rajagopal Menon, Vice President of WazirX, market participants and potential traders are “dead” while long-term crypto investors continue to buy and sell. Also, according to him, investors are also doing more and more peer-to-peer transactions and moving to decentralized exchanges.
In the month of February, the government announced a tax structure for virtual currencies that included TDS and a flat 30% tax on gains from crypto holdings. It also prohibited loss on such investments, classifying them separately from equities and bonds.
Huge setback for Indian crypto exchanges
Due to unfavorable government restrictions, liquidity is a major concern for various worldwide markets, especially Indian exchanges. On Monday, July 4, Peter Thiel endorsed suspended withdrawals to Indian exchange Wold.
Following the collapse of Terra, Wald disclosed that it was facing major cash flow concerns, with more than $200 million in withdrawals. The massive shock of these crypto exchanges has raised serious questions about their ability to protect customers’ money.