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What is the Cryptocurrency Potential that can Disrupt Online Brokerage

05 Jan 2023

Cryptocurrency represents a new-age currency, albeit nascent and just about evolving. The scene in India has market experts and analysts already predicting some doom in the future outlook of aspects of trading that cryptocurrency can influence. Online brokerages and businesses involved with exchanges may just about be coming to terms with a kind of saturation point related to the products they offer and the value of these. Apart from a heavy reliance on a handful of traders and investors, numbering some 1 million active trading professionals, there is no other source of revenue for online brokerage firms. Moreover, when you open a broking account online to trade in conventional assets, the whole activity is regulated by official entities to provide seamless and secure trading. 

  • The Way Cryptocurrency Moves

Cryptocurrency, by its very definition, is a digital form of currency. It is, by design, a tool that works as an exchange medium through a digital network. As such, it is not affected by, or reliant on, any authority, such as a bank or government, in order to uphold or operate and maintain itself. Cryptocurrency literally has the ability to cancel out stocks where high leverage, long market duration and volatility is concerned. This is a fact, in spite of the high risk that trading in cryptocurrency poses. While trading in cryptocurrency, there is no fundamental or technical analysis involved, as this is a novel digital form of currency. However, its advent has garnered several investors and a slow, but sure, revolution is taking place in the way it is gaining momentum in trading. Some key brokerages in the USA have reported that crypto asset bases are presently at an average of some 11 billion USD. 

  • Cryptocurrency in India

The crypto wave is still low in India, but there is the fear that with no regulatory authority in place for the trading and investment in this kind of asset, cryptocurrency may overturn the successful applecart of online broking firms altogether. Regulated online brokerage platforms are not permitted to make available trading in cryptocurrency. Hence, individual traders and investors may move away from trading at these platforms and virtually destroy the industry of broking as we know it. At the present moment, India is ranked at number two in the adoption of cryptocurrency globally (2021 Global Crypto Adoption Index). Actually, a famous cryptocurrency exchange in India, CoinSwitch, managed to strike gold with 10 million users, becoming the biggest platform for this currency trading. The monthly value in the volume of transactions hit a whopping Rs.15,138 crores, defying any good to average brokerage’s monthly transaction values. Seventy-five percent of these crypto traders/investors fall within the average age of 25 and the majority are located in tier 2 metros (55%). The tier 2 and 3 cities in question are notably Patna, Karnal, Ghaziabad and many more. In a month, the average investment in cryptocurrency stands at Rs. 9,000 per investor. 

  • A Threat?

So does cryptocurrency and its investment pose a foreseeable threat to traditional online broking companies? Not if the government intervenes to bring in some regulation to trading activity with cryptocurrency. The Central Government, in a recent report, stated that plans are underway to establish a bill, making the digital token akin to a commodity, to which applicable taxation will pertain. Shedding more light on this, cryptocurrency will be treated like an asset, categorised according to its end-use. This end-use will represent purposes of utility, payments or investment. Nonetheless, this, if it happens soon, will urge investors, venture capitalists and entrepreneurs to shift into the cryptocurrency sphere. It's worth exploring this subject more and if you wish to find out about what is on the horizon, you must visit the top Indian broker, Motilal Oswal.

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