More than 80% of crypto trading on Indian exchanges is currently done in futures and derivatives rather than in the spot market. Many traders are shifting towards avoiding the 1% tax deduction at source (TDS) on spot trading, but this move comes with higher risks. Industry estimates suggest that 70% to 80% of retail crypto futures traders are losing money.
Cryptocurrency futures are currently dominating the Indian market
More than 80% of crypto trades on Indian exchanges are in futures and derivatives rather than regular spot trades, according to industry data. According to the report, spot trading volumes fell by up to 85%.
This change started after the Union Budget 2022, which introduced a 1% tax deduction at source (TDS) on all crypto spot transactions. Similarly, for actual buying and selling of Bitcoin, Ethereum, etc., a 1% TDS is applied on all transactions.
As a result, active traders say the tax locks up their trading capital, making it difficult to buy and sell frequently.
As a result, many people have moved to crypto futures, which trade contracts based on the price of a crypto currency, but currently this 1% TDS does not exist.
70-80% of traders lose money trading with leverage
Cryptocurrency futures trading has grown in popularity, but it has also become much riskier for traders. According to industry estimates, 70% to 80% of retail crypto derivatives traders in India are currently incurring losses. Individual investors account for approximately 70% of all cryptocurrency futures trading in Japan.
This is simply because some crypto exchanges offer leverage of 25x, 50x, and even 100x. This means that even the slightest price movement can ruin an investor’s entire trade.
Experts also estimate that individual traders in India lost more than $12 billion in one year trading equity derivatives, highlighting the risks of highly leveraged trading.
Cryptocurrency trading in India moves to offshore exchanges
Unlike stock market derivatives, the virtual currency market in India is highly institutionalized and operates on a tax and compliance level.
Although it is completely legal to buy, sell, and hold digital assets, they are strictly classified as virtual digital assets (VDAs) rather than legal tender. There is no direct regulation from SEBI or RBI.
At the same time, an estimated 75% of India’s crypto trading takes place on offshore exchanges such as Binance and Bybit, with many traders looking to circumvent domestic tax rules.
