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Crypto's Eureka Moment

Updated: Feb 20

Crypto is rage, we know it. Thanks to the Instagram and YouTube influencers, we all have considered holding cryptos in our portfolio at least once. But ever thought who benefits the most from these unpredictable swings of the cryptocurrencies out there?

Investors?...There are only a handful who have made quick bucks, the others are either living in FOMO or are bruised by the bloodshed of the last 3 months.

Regulators are having a hard time dealing with the nuances of the Crypto bill.

Banks are having nightmares about the existence of alternative currencies.

Exchanges? ... Yep probably them! ‘Cause everytime we make a transaction, it's the exchanges that earn brokerage. Well, investors were quicker than us to spot this gold mine as in 2021 alone, Indian crypto exchanges have witnessed over $170 Mn of capital inflow.


But why so much money in a sector that’s riddled with changing regulations?

Here's what we think is driving it:

  1. With a population of 1.4 Bn, India is considered to have the second highest level of cryptocurrency adoption. Volume attracts everyone! The world has just scratched the surface of crypto and cannot seem to get enough of it. It’s so hyped up that it's commonplace to find at least 1 crypto rising by as much as 300% on any given day. So a ballooning sector gets all the attention.

  2. The cryptocurrency bill, though still a work-in-progress, seems unlikely to impose an overarching ban as was dreaded earlier. So the overall investor sentiment is a net positive.

Okay fine, Crypto investors are bullish. But who are they betting on?

There are a dozen Crypto Exchanges that have already opened shop in India since our apex court lifted the ban on crypto transactions in March last year. Out of them, 3 have caught the investors’ attention. But there’s this one that got more footage than others: CoinDCX.


Let’s find out why CoinDCX deserves the attention:


Headlines first: CoinDCX turned Unicorn in Aug'21 with a valuation of $1.1 Bn in just 3 years of existence! (Something which is so common these days that it shouldn’t be as surprising). In the past 1.5 years this Startup has received investments in very short intervals.


What’s actually impressive is that its Post Money Valuation to Total Funding Ratio comes to a healthy 10 times, which means that the Company is able to command a high valuation despite running light on capital. Sanity check: the same ratio comes to 4.74 times for CRED and 4.35 times for Paytm.


Let’s see what made sense for coinDCX:

  1. USP: While everyone was #working-from-home, CoinDCX said “let’s bring it home”. It differentiated itself from other players who provided one dimensional services like spot trading and margin trading, by bringing together all the financial instruments in one single platform, accessible through a single wallet. A one stop crypto shop.

  2. The only sane option?: There were 3 key players in the market last year: CoinDCX, WazirX and CoinSwitch Kuber. WazirX, having the highest number of users, volume and liquidity was acquired by the world’s largest crypto exchange- Binance in Nov’19 and hence was no longer available for investment. CoinSwitch Kuber launched its exchange only in Jun’20. Therefore between Mar’20 and Jun’20, CoinDCX seemed to be the only viable startup that deserved the investment. The investors basically came in with money and grabbed the most sane looking person in the room.

  3. Right lobbying: Right from inception, the IIT alum founders of CoinDCX have upheld the need to maintain dialogue with the authorities regarding crypto and its importance for India.

  4. Right place, right time: In Mar'20, just before we were locked inside our homes, it committed $1.3 Mn towards increasing awareness and adoption of crypto in India and pledged to introduce 50 Mn Indians to the world of crypto.

  5. Right side of the law: Well, currently there’s no such thing for the Crypto market in India. But in an attempt to show that it cares, law or no law, CoinDCX deployed award winning anti-money laundering platforms to strengthen the security of the crypto economy in India.

  6. Tunnel vision: The founders have always believed that the global crypto market is tiny when compared to the global equity markets which has resonated well with all stakeholders. Leaving no stones unturned, now they will bring financial products like spot, margin and derivatives to the world of Indian crypto and will rope in Global exchanges like Binance and Coinbase as liquidity partners. Ambitious!

  7. It boasts its own Cryptocurrency: Let’s admit it, we all thought that an Indian exchange like CoinDCX will be a pure play service provider at best. But in Jul’21 CoinDCX launched its own crypto Liqueth (LQTH) which is a big time tech-flex.

  8. Big plans: CoinDCX is also launching its own prime service, targeting the high net worth individuals (HNI) and enterprise space.

  9. Numbers don’t lie:

  • Even though the volume of transactions in CoinDCX is lower than WazirX, the average liquidity is much high - shows that a large number of small ticket transactions are done on its platform.

  • Its favoured by investors as it has highest numbers coins and crypto pairs available for trading.

  • Unit economics and fundamentals shall improve with every incremental user added. Currently it has 3.5 Mn users on it's platform and targets expand it's userbase to 50 Mn users.

Now it’s clear why CoinDCX deserves a seat

in the Unicorn room. But it dare not get too comfortable there because Tiger Global recently invested $25 Mn in CoinSwitch Kuber at a valuation of $500 Mn. Post Money Valuation to Total Funding ratio you ask?

A whopping 12.5 times!! And Tiger Global never bets on companies. It bets on sectors by funding all potential players.


From drawing interest from investors like Mark Cuban to the Government of India planning to run the pilot phase of CBDC, we are standing at a pivotal point in India's crypto journey.


 

This article is a part of August'21 edition of our Startup Newsletter. Here's the complete publication:


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