Cryptocurrency exchanges: Crypto exchanges look at institutional investors, college students as volumes fall

Mumbai: Cryptocurrency exchanges are hoping to rope in large institutional investors on one hand and trying to get college students to explore blockchain deals on the other to stem the drastic drop in daily trading volumes after India introduced tax on virtual digital assets.

Many investors and traders are shunning crypto assets as profits will attract 30% tax from April 1. Not just the recent announcement of disallowing set-off would result in loss for most investors, shrinking risk appetite.

All exchanges in India have seen a drop of at least 50% in the last few days compared to the trading volumes last year. This also comes at a time when exchanges are grappling with how exactly to compute the 1% tax deducted at source on each transaction.



Exchanges hope that institutional investors would be more open to investing in crypto assets as introduction of tax also confers legitimacy for cryptocurrency.

“We are moving to work on the traction seen from institutional investors and we’re also set to go aggressive on educational initiatives based on crypto and blockchain to empower and penetrate deeper into the active crypto ecosystem,” said Shivam Thakral, CEO of BuyUcoin, a cryptocurrency exchange.


Daily volumes are important for the exchanges as it’s often used as a barometer for valuation during investment rounds, say industry trackers.

Many exchanges are hoping the lull period is intensified due to the downward trend in top cryptocurrencies.

“The trading volume was the highest on March 31 as users/ investors squared off their positions before the start of the new financial year. Starting April 1, there has been a decline, which is a usual trend at the start of every financial year. However, this year, we are seeing a sharper decline due to the stringent tax laws,” said Minal Thukral, Executive Vice President, Growth and Strategy, CoinDCX, a cryptocurrency exchange.

This also comes at a time when order books of top exchanges are under stress.

Order books of cryptocurrency players are under renewed stress as investors found it difficult to buy or sell such assets after liquidity providers decided to stay away, deterred by tax complications, ET reported on Thursday.

Till March, liquidity providers helped exchanges with float or the difference between buying and selling price for concluding a transaction.

In most cases these liquidity providers would provide such a float for a small margin.

Youngsters from tier 2 and tier 3 cities had flocked to cryptocurrency platforms during the Covid-19 pandemic and crypto exchanges recorded steeper growth in smaller cities than metros.

Crypto exchange WazirX had earlier told ET that most of its users are below 35 years of age and the exchange had recorded 2,648% growth in user signups in 2021 from Tier-II and Tier-III cities of the country.

Other exchanges had recorded similar trends with most of the new cryptocurrency investors coming from cities such as Lucknow, Ahmedabad, Patna, Bhopal, Vadodara, and Kolkata. As per data available with BuyUcoin, a cryptocurrency exchange, Bhopal had seen the highest jump in new investors last year.

But now that the taxation regime has started, many of these youngsters are taking a back seat.