“The market has not bottomed out yet,” says ANC, a small-time investor of cryptocurrencies who is still sanguine about its future. “I expect Bitcoin, (currently trading at less than $20,000) to go down to $12,000-15,000 though some even expect it to touch $10,000. That is when I will buy,” he says, explaining the bear-and-bull cycle.

ANC is one of the nine million crypto owners in Pakistan, according to triple A which estimates that about four per cent of the population in the country has invested in blockchain assets. And the adoption rate at the grassroot level had been growing astronomically with a 711pc increase in 2020-21, according to Chainanalysis.

But the global recession, and the current horrifying economic crisis in Pakistan, have thrown a monkey wrench into the works.

“I am not really that active anymore because the market has crashed and is finding new lows,” laments another investor DR. “The value of the coins in my portfolio is half of what it used to be. However, everyone I know is holding strong to their portfolio, rather than selling at a loss and divesting coins.

“The first rule of crypto is that you put in money and forget about it. It cannot be your main investment, it cannot be your primary source of income. You can have some crazy good days or some crazy bad day losses.”

For an average investor, holding on to their portfolios hoping for better days appears to be the best bet

Hedge against depreciation

Taken in the light of drastic rupee depreciation, crypto enthusiasts appear to be in a better boat than investors of more stable assets.

Coins are purchased using a stablecoin, a currency within the crypto universe. In Pakistan, a popular stablecoin is Tether, widely known as USDT. Rupees are used to purchase USDT which in turn can be used to buy coins.

USDT is pegged to the value of the US dollar. If the dollar exchange rate is around Rs208, a single USDT would cost about Rs220, estimates an investor. This makes stablecoins an asset in themselves, similar to investing in traditional foreign currencies.

“If I look at my investment in terms of USDT, I am down by 25pc. So for every 1 USDT I invested, the value is now 0.75USDT. But in the light of rupee depreciation, if I convert my investments to rupees, I may actually make a profit since I invested when the dollar was around Rs160.

“However, this is not the indicator through which I view my investments. My key interest lies in increasing the value of my investments in terms of USDT,” explains ANC. “If the market picks up, I may convert some of my coins back to USDT but my investments will remain in crypcurrencies.”

Inflation affect

All the small investors were unanimous about the effects of inflation. In basic terms, the money comes from the people and inflation is preventing people from purchasing coins. Investments that were previously gushing in have slowed to a trickle, making cryptocurrencies crash.

Given the recent repeated petrol price shocks, multiple investors spoke in terms of fueling their vehicles. “I have a 50-litre tank in my car that I could top up for about Rs6,000-7,000 but now I am paying Rs15,000. It is not easy to squeeze out money to invest anymore especially given the exchange rate,” says ANC.

Echoing similar words about inflation, recession and the global state of economic affairs, all investors that were reached out to for this article were confident that the market will revive as soon as the world emerges from recession. Part of those hopes was pegged to the ending of the Russia-Ukraine war, whenever that may be.

“We rode out the 2017-18 crash, we will ride this one out as well,” says ANC optimistically.

Published in Dawn, The Business and Finance Weekly, June 20th, 2022