Exchanges struggle as Crypto Winter begins to follow a sharp drop in prices

Cryptocurrencies that were the flavor of the season until last year have seen a sudden drop on every matrix for trading – trading volumes, value and profitability – as the cryptocurrency winter begins after a steep drop in prices in recent months.

The sudden shift in market sentiment from exuberance to fear has led exchanges to resort to a combination of short- and long-term measures to manage working capital.

The exchanges saw a drastic drop in revenue and margins, up 80% and 60%, respectively, from a few months ago, according to industry trackers.

The troubled times may not be over yet, as India plans to implement the new TDS (withholding tax) regime on July 1st, which will impact the cost of buying cryptocurrencies.


“There has been a significant decline in Indian cryptocurrency exchanges and we have seen an approximately 70-80% decline in daily transactions year over year,” said Nischal Shetty, co-founder and CEO of WazirX, an exchange. cryptocurrencies.

From cutting jobs and reducing the number of coins traded on platforms, to cutting marketing expenses and moving to cheaper offices, exchanges are trying it all.

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“Like any stock exchange, volumes drive margins and volumes have fallen 50-60% since April, which has been reflected in our margins. We have been careful in risk assessment and in planning our capital to provide a long path that can propel us through the cryptocurrency winter, ”said Shetty.

People familiar with the matter have said that at the height of the cryptocurrency boom until November 2021, major exchanges were spending around Rs 5 crore per month to acquire customers.

The global bear market, coupled with India’s introduction of a 30% tax on cryptocurrency returns, has led most Indian investors to close or hold their positions.

Some of the exchanges that were looking to enter India or expand into the country are now holding money until more clarity emerges.

“As cryptocurrency exchanges around the world bear the brunt of the bearish phase, the impact on Indian trade is even more due to tax implications and regulatory uncertainties. Following our recent relaunch in India, we plan to accelerate our customer acquisition processes, but we have suspended marketing expenses until we understand the 1% impact of TDS from 1 July and how brokers and market makers manage it, “said Praveen Kumar, CEO of Belfrics Global, a cryptocurrency exchange.

Industry trackers are also concerned about the impact of TDS on liquidity and the spread of trading volumes on Indian exchanges.

Orders from cryptocurrency players are bound to be strained as investors may find it difficult to buy or sell such assets, with tax complications that could alienate market makers, they said.

With the 1% TDS on every cryptocurrency exchange, liquidity providers need to provide more free float, industry trackers said.

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