SIP in cryptos bitcoin, ethereum. How much return to expect?

Cryptocurrency exchanges have started to offer the Systematic Investment Plan (SIP) route of investing in cryptocurrencies such as bitcoin, ethereum, and many others. Crypto industry is preparing to launch more products to the investors as the virtual digital coins have finally gained legal status in our country. Just like SIP in mutual funds, crypto exchanges like Bitbns, ZebPay, BuyUcoin allow you to invest in cryptos via the SIP route. On the same lines, CoinSwitch, which claims to be the largest crypto investing app with 15 million registered users, has recently launched a recurring buy plan (RBP), a systematic way to invest in crypto assets.

Crypto is an attractive asset class and has a higher degree of volatility in comparison to traditional assets. A systematic way of investment will eliminate the risk of temperamental decision-making. Also, the recurring buy plan will allow investors to experience the power of compounding by systematically buying cryptos and making regular and distributed purchases, says Ashish Singhal, Founder and CEO, CoinSwitch.

Arihant Bardia, CIO, Valtrust Capital says crypto is an emerging asset class both in India and globally. He says, “The time has come for sophisticated investors to better understand the risk and access investment opportunities in this space.”

"As more Indians continue to diversify their investment portfolio with crypto, the recurring buy plan, as per Singhal, will allow long-term investors to invest systematically and avoid the impulse to time the market and make emotional trading decisions. “It will also empower users with a lower risk profile to explore this new asset class,” Singhal adds.

Going by the Bitbns SIP calculator, investment of ₹1,000 per month in bitcoin for five years would give a return of ₹3.72 lakh. Total invested amount in the five years would be ₹60,000.

Similarly, investing the same amount in bitcoin on a monthly basis for the last three years would have become ₹1.64 lakh. In the case of Ethereum, the returns would have been gigantic. A total of ₹36,000 invested via an SIP of ₹1,000 every month would have become ₹4.56 lakh in the same time horizon.

However, the huge returns in the past should not be the only reason to invest in crypto assets. Crypto assets carry high risk. Investor should not act on the fear of missing out (FOMO).

The government has put an end to the long time speculation on cryptocurrencies when the Finance minister Nirmala Sitharaman introduced the much-awaited crypto tax regime in the Budget last week. The FM announced a blanket tax rate of 30% applicable on transfer of ‘virtual digital assets’ (VDAs). Few hours after the Budget announcement, the FM, in the post-budget-conference, made it crystal clear that while crypto cannot be a currency, it will be treated as an asset in the country.

"A currency is a currency only when it is issued by the central bank, even if it is a crypto. Anything outside of that, loosely we refer to them as cryptocurrencies, are not currencies,” Sitharaman said.

Amitabh Kant, CEO, NITI Aayog, confirmed that the government is not banning cryptos in the country. “Once you start taxing, it means you will have a regulatory mechanism whether some aspect of it will have to be regulated by RBI or SEBI. The Budget provides absolute clarity. Government has not banned cryptos, it has in fact, treated crypto as an asset class, defined as a virtual digital asset,” Kant told Fortune India.

As per a report by CREBACO, crypto asset market in India is worth $15 billion, consisting of over 6 million users, which is 0.5% of the Indian population.