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Over the last 12 months, the market capitalisation of the cryptocurrency universe has increased almost 600 per cent to a massive $2.4 trillion.

Emerging as an asset class whose popularity is growing exponentially, there have been some fast-paced developments on how the ecosystem should be regulated, with Prime Minister Narendra Modi chairing a high-level comprehensive meeting recently.

The Central government is set to introduce the much-awaited Cryptocurrency and Regulation of Official Digital Currency Bill 2021 in Parliament during the ongoing Winter Session.

IANS spoke with Nischal Shetty, Founder and CEO at WazirX, which is India's largest cryptocurrency exchange, to understand what attracts the youth towards crypto, the best practices investors should keep in mind in terms of safety, return expectations and risk management as well as how crypto exchanges are leveraging Cloud technology to scale and provide a seamless experience to their users.

Excerpts from the interview:

Q: India has among the highest number of individuals owning cryptocurrency globally. In your view, what is it about cryptocurrencies that has garnered the interest of so many Indians in only a matter of a few years?

A: If you look at the data, the number of crypto holders has been increasing year on year. Globally, crypto began gaining momentum since the onset of the pandemic. At about the same time, the Supreme Court of India quashed the banking ban which also paved the way to crypto adoption in India, and the pandemic accelerated it. It has led to more people trying to educate themselves about crypto and find newer ways to earn online by becoming traders or exploring different career options. At WazirX, our trading volume has grown by over 18,000 per cent since the reversal of the banking ban.

Q: The pandemic induced a surge in online gaming, retail participation in the stock markets, etc., in India. Do you think crypto as an asset class also benefited during the last 18 months as more people learnt about blockchain and cryptocurrencies?

A: In the past few months, pandemic-induced inflation has further boosted crypto adoption. Bitcoin has become popular in hyper-inflationary economies around the world, and India is no exception. Bitcoin's pre-programmed limited supply makes it a great hedge to protect the fiat portfolio. Like gold, crypto's value as a hedge lies in its inflation-beating qualities. Moreover, with renowned players like MicroStrategy, Grayscale, Square, Paypal, and more jumping into crypto, it has helped create more awareness around crypto and blockchain.

Q: With almost a parabolic run up in prices over the last 12 months, how would you recommend new investors to start building their portfolios in terms of risk management and returns expectations?

A: The first thing that first-time investors should acknowledge is that crypto is not a get-rich-quick scheme. Bitcoin is an emerging alternative asset class that should be seen as a high-risk high-reward investment option. Moreover, while investing in Bitcoin and other cryptocurrencies, please be mindful about the product you use. I'd strongly recommend using a legitimate exchange that follows KYC and AML guidelines. Like any other industry, it's important to beware of get-rich-quick scams or people who promise to double the invested amount, etc.

Q: Globally, we are seeing a lot of institutional interest with some of the large investment banks and hedge funds setting up crypto trading desks? Do you expect the same trend to follow in India soon?

A: Over the next few months, we'll see crypto go mainstream much faster with more retail investors, and first-timers are entering the market. Regulatory clarity is one of the major drivers of institutional participation in crypto which in turn leads to retail participation. Compared to the US and other countries, India has lesser institutional participation in crypto. Due to lack of regulatory clarity, people are worried about getting involved in unregulated markets as it carries a natural risk. Regulation will certainly help the crypto industry in India.

The Blockchain and Crypto Assets Council (BACC) has met with the members of the standing committee on Finance and the conversation is a positive step in the right direction.

Q: What does cloud technology enable you to do better?

A: By using cloud technology, we don't have to manage our data centres. Plus, there is no need to spend time and resources on the networking between different components in data centres. In comparison to other cloud providers, AWS offers more services and is the most widely-used cloud provider. It's also because of AWS cloud-managed services that we can easily spin popular databases, caches services, etc.

In the crypto business, spikes are huge and sometimes during the peak markets, the spikes are 10x. With the help of the AWS auto-scaling group and our custom scaling policy we can scale our application and serve users.

Cloud enables an effective use of resources. We can scale when required and it's great that the AWS team also helps us understand our usage and provide assistance in managing our resources efficiently.

Further, there are services that help us to keep our application latency low. For example, we are using dynamo DB for keeping low latency in applications.

Lastly, with proper AWS Identity and Access Management (IAM) policies, roles, security groups on our VPC network allowed us to isolate our environment. And with the help of the AWS cloud trail service, we are able to audit our system which is great.