Statsguru: Seven charts explain India's tryst with cryptocurrencies

THE TOTAL VALUE of Bitcoins, the most popular cryptocurrency in the world, just crossed $1 trillion last week. This took more than a decade, but is probably the least time taken by an asset to reach that milestone from scratch. It has been termed as the biggest fintech disruption the world has seen to date.

The decade when cryptocurrencies gained legitimacy was quite eventful, with achievements growing year after year. Chart 1 briefly maps the last decade, and the price movement of Bitcoin (BTC) from 2013 to date. It is worthwhile to note that most of the gains have accumulated after the outbreak of the pandemic.

Bitcoin, which commands more than $50,000 on any exchange today, was founded anonymously in 2009. In 2013, the number of cryptocurrencies traded across the world rose to 66. Today, the number has shot up to more than 4,500, shows chart 2.

The jump in the number of such crypto assets was fuelled by demand, which shot up drastically into the pandemic. Chart 3 shows how traded value of Bitcoins jumped through 2020, and is continuing to do so in 2021. The exchanges where most Indians invest showed phenomenal growth in January 2021, shows chart 4.

Despite the growing popularity and financial flows, governments, institutions and lobby groups of existing asset classes such as gold, and stock markets have been critical of cryptocurrencies. They note that volatility in crypto assets is far more than in the stock market or gold (chart 5).

This probably was the reason why many countries began regulating cryptocurrencies, showing the first signs of institutional embrace. A study by Crebaco, a blockchain research agency, finds that only four among 31 countries studied do not have a crypto regulator, India being one of them (chart 6).

The Reserve Bank of India, the currency manager, financial sector regulator, and the banker to the government, has remained strongly against cryptocurrencies due to several reasons. But plans to impose a statutory ban on cryptocurrencies and introduce a Central Bank Digital Currency (CBDC) in India are underway. CBDCs across the world are still at a nascent stage, shows chart 7.

StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines; Source: Investopedia, ICS Digital, Coindesk, Statista, Exchanges, Institute and Faculty of Actuaries, UK, CREBACO, Atlantic Council and Belfer Center

Chart 1: A brief history of cryptocurrencies

2009: Satoshi Nakomoto, Bitcoin founder, makes first peer-peer electronic cash transaction under a decentralised ledger maintained by anonymous consensus

2010: First use of Bitcoin to buy two Papa John’s pizzas for 10,000 BTC

2011: Bitcoin gains popularity in the press, market develops, competition begins as new currencies come on board

2012:  Cypto exchange Coinbase was founded

2013: Bitcoin market cap crosses $1 bn, Ethereum blockchain whitepaper released

2014: Microsoft allows crypto payments for their games, Smart contracts and proof of stake

2015:  Ethereum Genesis block created, Linux’s Hyperledger boosts blockchain development

2016: Uber in Argentina, a website in Switzerland begin accepting cryptocurrency

2017: 1 BTC > 1 ounce gold; Japan gives legal status, Norway officiates use; crypto market touches $500 bn; India notices growth

2018: RBI bans use in India; Samsung to design chips for mining, multiple price crashes happen

2019: Govt panel submits report; BTC touches $10,000; Decentralised Finance movement begins

2020: Supreme Court strikes down RBI ban; PayPal allows BTC in wallet, Mastercard discloses crypto plans; BTC crosses $24,000

Jan 2021: RBI begins examining introduction of CBDC; BTC crosses $40,000

Feb 2021: Bitcoin market cap closes in on $1 trillion, price crosses $50,000; Tesla buys BTC worth $1.5 bn and says will accept cryptocurrency as payments soon