A month or so ago, I wrote a couple of articles about why VC firms are pumping money into India's cryptocurrency sector despite all the risks. In another article, I also wrote about how TikTok had banned ads related to cryptocurrency and why it was a good thing. Today, I came across some articles that kind of link to the two posts I mentioned above and talk about the growth of crypto users in India.
Against my expectations, more like hope, India is seeing strong growth in sig-ups on equity trading platforms and cryptocurrency exchanges. Link
Clearly, the money being pumped into cryptocurrency exchanges is being used for marketing and the marketing is reaching the right target audience. Not only that, the COVID-induced work-from-home phenomenon has given plenty of time to people to run trading applications online while sitting on a boring zoom call. I am also certain that while binge-watching content on Instagram, YouTube, and TikTok, young viewers are being constantly bombarded by ads related to trading and bitcoin. FX day trading is often presented as a guessing game in which users can earn easy money if their guess turns out to be right - a very dangerous way of generating passive income and more like an easy way to lose one's meager disposable income.
The user growth is shocking! India's most populous state, Uttar Pradesh has seen an increase of 60% in new investors. India's investor population now stands at 70 million, far higher than my expectations. Rising equity markets and mouth-watering/eye-opening returns in IPOs are also aiding this trend of people flocking to equity and cryptocurrency markets. Wait till the tide turns and many will be left swimming naked in the sea.
Many are claiming that the reasons behind investor growth are all positive -
What the image above is missing are misleading marketing tactics, users feeling overconfident riding the momentum in markets, and lack of financial knowledge about risk management among new investors.
The best way to learn anything about investing is to risk capital. However, one should know how much to risk. It is not all bad that there are now tools available through which anyone can trade and invest. However, this current rush of investors to the cryptocurrency markets in India reminds me of the movie "The Big Short" in which Steve Carell (Mark Baum's character) is talking to a stripper, who tells him she has 4 or 5 houses and his head explodes listening to her careless actions. I am happy that young users are entering the investing space and trying their hands at trading. However, I hope when the market turns, they burn their hands only to the extent that can be healed.