Cryptocurrencies are taking the world by storm, the absence of any regulation and skepticism of the mass notwithstanding. From business tycoons to millennials looking for newer investment avenues, everyone is investing in these currencies and making profits. The biggest advantage of cryptocurrencies is that they can be invested in very small amounts. So even if you incur losses, the amount will not be much.
Trading in cryptocurrencies takes place through various exchanges. There are a few trusted and reliable cryptocurrency exchanges in India and each exchange works in its own manner. This is the reason that the prices vary from one exchange to another. The operations of the exchanges are pretty different from traditional stock markets.
There are various kinds of coins in cryptocurrency sector and there can be different denominations of the same coin. The pricing of the coin might be in INR or USD and customers can purchase in these denominations. But the interesting thing is that there might be price differences between the two. One of the best examples in this regard is that of Doge-INR and Doge-USD. There are some valid reasons for these price differences. We will discuss about these points in detail here.
What does impact pricing of cryptocurrencies?
There are no underlying assets which determine the prices of cryptocurrencies- in most cases. One of the best examples to explain this point is that of Bitcoin. We know that there are fixed 21 million coins in totality and currently almost 18 million are in circulation. By the time the remaining stock is mined, the pricing of this cryptocurrency will depend on the demand and supply of the market. It is obvious and well understood that when the demand is higher with low supply and availability, prices are sure to soar. Basically, it is the demand and supply equation, which determines the price of cryptocurrency in India and all across the globe.
Probable reasons as why do crypto INR and USD prices vary?
The difference in the prices of cryptocurrencies in INR and USD is a common thing. There are many contributing factors to this issue. Some of these are:
- Taxes and fees
When you go for equity share transfer, you have to pay not only taxes, but also a minimal fee. However, for transferring a cryptocurrency like Bitcoin in India, users have to provide various kinds of additional charges like transaction fees, margins and taxes. The volume of these charges is not as less as that of equity share transfer.
Moreover, there will be differences in exchange rates, which will affect the price which you will receive post selling your holding. As a result, people don’t show an interest in shifting from one exchange to another to make profits. Therefore the variation persists for a longer time.
- Trading volumes of the exchange
The price of a cryptocurrency in a stock exchange is directly impacted by the volume of trade that is carried out in that exchange. A bigger crypto exchange will have more trade volume when compared to a smaller exchange. This definitely leads to differences in the prices of crypto in INR and USD.
- Transactional hazards and complications
There are various processes for converting one currency to another. But when it comes to conversion of INR to USD to crypto, the process is a long and complicated one. Even when you are moving your money across the best crypto exchanges of the world or in India, it will need good amounts of time and collateral. This will also help in minimizing arbitrage profits considerably.
Summing it up
If you are a newbie in the cryptocurrency market, it is advisable that you do ample research on the prevailing prices in leading cryptocurrency exchanges worldwide and in India before investing an amount. Understand the terms and conditions well regarding margins and exchange rates so that you have no confusions.