Why India’s Wealthy Are Choosing Bitcoin Over Gold for Investment
India’s Wealthy Turn to Cryptocurrencies Amidst Market Uncertainty
A Shift in Investment Strategies
As traditional Indian equity markets stagnate and gold prices stabilize, a notable trend is emerging among the nation’s affluent investors: an increasing interest in cryptocurrencies. High-net-worth individuals (HNIs), family offices, and institutional investors are diversifying their portfolios by allocating funds to digital currencies such as bitcoin and ethereum, according to a report from the Economic Times.
Changing Perspectives on Crypto
The sentiment among wealthy investors has undergone a significant transformation. Atul Ahluwalia, Vice President of HNI & Institutional Investments at CoinSwitch, remarked that the initial skepticism surrounding cryptocurrencies has shifted towards strategic investment planning. Investors are now focused on determining the appropriate allocation of funds, selecting which cryptocurrencies to invest in, and understanding the best custody solutions.
Surge in Trading Volumes
Crypto exchanges are witnessing a remarkable increase in trading activity from India’s elite. CoinDCX reports that nearly half of its trading volume is now attributed to approximately 3,500 HNIs, family offices, and institutional clients. Unlike casual traders, these investors are taking a long-term approach to their cryptocurrency investments.
Beyond Just Returns
The motivation for this shift extends beyond merely chasing profits. Many investors are eager to gain exposure to blockchain technologies and decentralized finance (DeFi), viewing them as integral to the future of the financial landscape.
bitcoin‘s Record-Breaking Performance
Recently, bitcoin surpassed the $120,000 threshold, achieving a staggering 90% return year-on-year. This impressive performance has attracted attention, especially as traditional investment options offer limited growth potential. While equity markets remain stable, they have become increasingly expensive and volatile, and bonds continue to struggle with low real returns. In contrast, cryptocurrencies, despite their inherent volatility, are being perceived as a worthwhile risk.
Crypto as a Core Investment
Wealth advisors note that cryptocurrencies are evolving from a niche investment for the ultra-wealthy to a fundamental component of diversified portfolios, particularly for those with a long-term investment horizon of five to ten years.
Global Influences on Indian Investors
Indian investors are also responding to global trends. Political developments in the United States, including favorable stances on cryptocurrencies from prominent Republican figures, have rekindled confidence in digital assets. The introduction of bitcoin ETFs in the US has further legitimized the market and simplified access for institutional investors.
Regulatory Challenges Ahead
However, the path to widespread adoption is not without challenges. India’s stringent tax regulations on digital assets, including a 30% capital gains tax and a 1% Tax Deducted at Source (TDS) on each transaction, have driven many retail investors to seek opportunities abroad. The crypto sector is actively advocating for tax reforms, arguing that current policies hinder innovation and drive capital out of the country.
The Need for Regulatory Clarity
While affluent investors can manage the tax implications, broader acceptance of cryptocurrencies will require clearer regulations and a more favorable tax environment, according to a senior executive at a leading Indian exchange.
(With contributions from various agencies)
