Investing in cryptocurrency carries a lot of risk. Experts believe that while investing in cryptocurrencies, one should assess their risk appetite, so that in case of loss, there is no much regret. It is not only full of ups and downs, but there is no clarity in the rules and regulations related to it. In India, the Reserve Bank of India (RBI) has been warning investors to keep cryptocurrencies, but despite this people have not stopped investing in it.
You can invest in cryptocurrencies through SIP
Even after considering all the risks involved, if a person wants to invest in cryptocurrencies, there are several ways to do it. One of these methods is Systematic Investment Plan (SIP). Currently SIP is being offered by some exchanges in India. An individual can also do SIP independently by purchasing a certain amount of crypto on a daily or monthly basis and storing it in his preferred wallet or hardware wallet. Now a question that comes to mind is whether you should do SIP in cryptocurrency or not.
Know what experts say
Many financial experts believe that SIP can be the best way for first time investors to invest in cryptocurrencies. Dr. Vinay Asthana, Associate Professor at Alliance School of Business told FE Online that the biggest advantage of SIP is that there is no problem of timing in the market. Along with this, SIP is also a great option to avoid market volatility.
SIP is a great option for long-term investors in traditional assets like stocks and mutual funds. But when it comes to cryptocurrencies, Dr Asthana says that crypto has many times more volatility than traditional asset classes. This is a strong argument for supporting SIP for investing in crypto assets. However, Dr. Asthana made several arguments that undermine the support for SIPs in crypto.
- Crypto markets are not efficient like stock markets.
- Crypto-assets have generated the highest returns among all asset classes. But, is it sustainable? This is a question that has divided the whole world into two halves. Some believe that it is like a revolution, which can be compared to the Internet revolution. At the same time, some believe that it is nothing more than a bubble.
- The valuation of crypto assets differs from traditional assets in fundamental ways.
- Apart from all this, there is no clarity in its rules and regulations. This also increases the risk.
Asthana further said, “These facts suggest that SIP in crypto-assets is a sensible strategy, but should not be taken as completely correct, as many fundamental issues with respect to crypto-assets are still unresolved.”
RBI has issued several warnings regarding cryptocurrencies
Archit Gupta, Founder and CEO, Clear said, “Cryptocurrency is not a legal tender in India. There is ambiguity in the rules and regulations of cryptocurrencies. RBI has warned investors from time to time against holding cryptocurrencies. In addition, it is full of huge ups and downs. You should be very careful before investing your lifetime savings in cryptocurrencies.”
However, Gupta further said that if you want to invest in cryptocurrencies, then SIP can be the best way. Many platforms allow you to start a SIP in cryptocurrencies with just Rs 100-500 per installment. Also, many investors opt for daily SIPs instead of weekly or monthly installment options as the price of cryptocurrencies can fluctuate heavily within a period of one month.
(Disclaimer: The cryptocurrencies in this story are suggested by the respective commentators. Financial Express Online takes no responsibility for their advice. Please consult your financial advisor before investing in cryptocurrencies.)
(Article: Rajeev Kumar)
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