Challenges Faced by Indian Crypto Traders Due to USDT Premium Market
In the Indian cryptocurrency market, USDT is typically sold at a premium, imposing challenges on local traders and investors. The marked-up rate of USDT in India, ranging from 5% to 12% above global market prices, creates additional pressure on traders. This disparity in USDT value and the associated costs contribute to a unique environment for Indian traders, influencing their trading strategies and decisions.
Crypto.news conducted interviews with key figures from major cryptocurrency exchanges in India, including CoinSwitch and WazirX, along with members of the country's retail trading community to gain insights into the impact of the USDT premium market.
Why is USDT sold at a premium in India?
Contrary to global markets where 1 USDT is equivalent to $1 USD, the Indian market witnesses a premium on USDT prices. Balaji Sirhari, Business Head at CoinSwitch, highlighted that many Indian investors opt for long-term investments due to the USDT premium and cryptocurrency taxes, making day-trading less profitable. The regulatory framework in India poses hindrances for direct deposits of rupees into crypto exchanges, prompting traders to use USDT as an alternative. Additionally, the volatility of the Indian rupee against the US dollar incentivizes holding USDT as a hedge against currency fluctuations. The demand for USDT and regulatory constraints contribute to the elevated prices of USDT in India.
Are Indian traders leaning towards long-term investing?
The implementation of India's Tax Deducted at Source (TDS) and capital gains tax steers traders towards long-term investment strategies. Nischal Shetty, head of WazirX, emphasized that the TDS on crypto transactions and capital gains tax discourage short-term trading, leading traders to opt for long-term investment horizons. Data from WazirX's exchange indicates that the USDT premium market influences trading volumes and costs, making intraday trading less feasible for Indian traders.
The unique state of crypto investment in India
The perspective of end-users, such as traders and investors in India, sheds light on the challenges posed by the USDT premium market. Traders resort to peer-to-peer transactions, like those facilitated by WazirX, to acquire USDT, albeit at a higher cost. The limited avenues for direct purchase of stablecoins in India lead to reliance on P2P transactions, introducing risks of scams and regulatory violations. The preference for long-term investment strategies over short-term trading is evident among Indian traders, driven by tax implications and the USDT premium market.
Are Indian crypto regulations stifling the industry?
WazirX's efforts to absorb India's 1% TDS tax on crypto transactions indicate the regulatory challenges faced by the crypto industry in India. Recent regulations have affected trading volumes and the movement of digital assets between local and international exchanges. While regulatory clarity has somewhat restored confidence in Indian exchanges, regulatory developments continue to influence the industry's trajectory.
A unique situation for Indian crypto users
Despite the persistent USDT premium market in India, the cryptocurrency industry in the country continues to thrive. Indian investors endure higher costs for USDT compared to global rates, impacting trading strategies like day trading. Platforms like WaxirX and CoinSwitch witness substantial user engagement, signaling the growing interest in cryptocurrencies among Indian traders. Although challenges persist, the adaptability of the Indian crypto community underscores its resilience amidst regulatory uncertainties and market dynamics.
