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Shift from gold into bitcoin? Indian investment into crypto surges - report

Kitco News

(Kitco News) India, the world's second-largest consumer of gold, is seeing a major shift into the crypto space, according to a new report from blockchain analytics firm Chainalysis.

The data from last year revealed that crypto investments in India went from about $200 million to $40 billion, the report said. The interest is booming despite India's proposed trading ban on cryptocurrencies. But the volumes are still well behind China's $161 billion, Chainalysis added.

Indian investors, like the Chinese, are known to prefer gold as the best store-of-value investment. This might be changing with the younger generation's mindset looking towards the crypto space as the digital gold.

"I'd rather put my money in crypto than gold," Bloomberg quoted entrepreneur Rishi Sood as saying in the report. "Crypto is more transparent than gold or property, and returns are more in a short period of time."

There are now more than 15 million Indian investors involved in the crypto trading space. In comparison, the U.S. has 23 million traders, and the U.K. has 2.3 million, the report said.

The future of crypto regulation in India remains uncertain as the government is not saying much on the topic after proposing a ban on trading crypto in March.

"I am flying blind," said Sood. "I have a risk-taking appetite, so I'm willing to take a risk of a ban."

In the meantime, India's gold demand remains sluggish due to the coronavirus disruptions over the past year. However, analysts do see recovery as very likely this year.

"Indian demand is still sluggish although as the lockdown eases there we should start to see some fresh interest – although the monsoon season has already started," said Rhona O'Connell, head of market analysis for EMEA and Asia regions at StoneX. "The forecast currently is that the rains will be 101% of the long-term average and will be well-distributed, which should point to a good harvest. This in turn leads to strong gold demand. Roughly 40% of the working population are farmers or farmworkers and 60% of the population relies on the sector for income. Gold is one of the first purchases that farmers make and there will be strong pent-up demand when the situation returns to more normal conditions."

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