Triple trouble for crypto: Liquidity crunch, bear market, new tax rules

economictimes.indiatimes.com:

Mumbai: It’s a triad of negative factors, and not only the new rules relating to crypto currencies that kicked in on July 1, that’s giving jitters to crypto investors and driving some out of the market. Veterans of the trading space (stocks, bonds, commodities, etc), however, feel that the current phase, popularly being referred to as the ‘crypto winter’, is a passing one in the evolutionary process of cryptocurrencies and the prices of these new age assets would soon stabilise. Consider this: Between January and March of this year, the average daily turnover on three of the leading crypto exchanges in India — WazirX, CoinDCX and Bitbns — was $110 million, data from CryptoWire showed. In the June quarter, after the initial round of tax rules relating to crypto trading kicked in on April 1, this number less than halved to $54 million. And now after the latest round of rules kicked in on July 1, one of which requires every buyer to pay a 1% TDS on each trade, this number again fell sharply to about $23.5 million. There are three reasons for this drastic drop in turnover on Indian crypto exchanges and can’t be attributed to the change in tax laws alone, CryptoWire MD & CEO Joseph Massey said.

Did you Know?

In the wake of the crypto market crash, the prices of hardware used to support the mining of crypto assets are also falling dramatically. For example, a high-end graphic card is now almost 45% cheaper compared to its price a few months ago.

Most central banks are on a monetary tightening spree, which is sucking out liquidity from the system. Since the pandemic struck in early 2020, central banks were pumping in unprecedented amounts of money to