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Crypto exchanges face funding dip amid low trading

May 20, 2022

Crypto exchanges face funding dip amid low trading
Indian cryptocurrency trading are set to face lower valuations, longer negotiation cycles, and hard bargaining by venture capital firms due to plunging trading volumes, talk of more restrictive tax regulations, and the impact of the Terra Luna collapse on retail investors. 

Market watchers say at least six transactions, both funding, and M&A, are stuck due to valuation mismatches between crypto platforms and investors and strategic buyers. 

A leading crypto platform, which recently announced a funding round, started reaching out VCs in September 2021 when valuations were at their pinnacle. Conversations dragged until the organization closed a smaller round at a lower valuation recently. 

Trading activity, which accounts for the bulk of revenue at exchanges, will contract further when tax deducted at source (TDS) kicks in on June 1, squeezing profit or even leading to losses for players with higher cost. 

Experts said even the exchanges that have closed deals at high valuations will find it tough to meet projected numbers. 

“The big investments were based on certain growth rates and well that is not materialized,” said BitBns pioneer and CEO Gaurav Dahake. “Assuming that we continue to get all the worse news, we could know about down rounds and a few ventures being required to be postponed. The TDS regulation will lead dealers facing working capital issues 1% of their capital will be locked up in every trade. Also, it will end up dragging down volumes further.” 

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