The cryptocurrency market has been on a rough bumpy ride since the early 2022s, especially after Russia invaded Ukraine which led to extreme volatility across global markets. But cryptocurrencies took the hardest hit as they were battered ruthlessly losing billions of dollars of market value and even ballooned with speechless $40 billion erosion in old Terra sisters, liquidation of assets and bankrupt crypto exchanges. There is still illiquidity in the system. Nevertheless, cryptocurrencies have shown significant improvement in 2023, with the leader Bitcoin gaining by double-digits. This market is still attractive and gaining popularity year by year.
As per Coingecko data, Bitcoin has gained by over 39% in 1 year, and it currently trades at over $27,000 levels. It was below the $20,000 level in early October last year. Similarly, Ethereum has advanced nearly 26%. Bitcoin is the leader of the crypto market in terms of market capitalisation, followed by Ethereum.
Also, the global cryptocurrency market cap has rallied from $974 billion in early October to over $1.2 trillion in recent times.
It’s not just about holding an intangible and mysterious cryptocurrency anymore. In fact, the market has advanced with technological shifts and more credible options are available for investing in cryptocurrencies, such as Systematic Investment Plan (SIP).
And as the name suggests, SIPs are popular for long-term wealth creation. This disciplined investment mechanism has the potential to offer even a Rs 1 crore corpus to investors in the long run. The potential of earning Rs 1 crore corpus through SIPs is well-known in mutual funds. Do they have the same potential as cryptocurrencies? Let’s find out!
Edul Patel, CEO and Co-founder of Mudrex, a global crypto-investing platform said, cryptocurrency is an emerging asset class that has been steadily gaining popularity year after year. Bitcoin, the leading cryptocurrency, has experienced a remarkable surge in value, soaring by over 122% in the last five years, achieving an impressive CAGR of approximately 18%. This substantial price increase has been accompanied by a significant influx of new investors entering the market.
Looking at data from Coinbase, Patel highlighted that the user growth in the same last 5-year period is ~400%. Globally, there are now over 200 million individuals who actively invest in cryptocurrencies. More and more investors are looking to make crypto a part of their portfolio and as the world moves towards clear crypto regulations this trend will only increase.
“It is crucial to understand that the cryptocurrency landscape is still in its nascent stages and characterized by high volatility. There are over 10000 crypto tokens and a lot of them will eventually go to 0. For the majority of investors in cryptocurrencies, it is a good idea to focus on core cryptocurrencies or blue-chip tokens, which are considered more stable. Investing in an index-like product for blue chip crypto tokens can be seen as the lowest effort approach to get to our goals,” Patel added.
Also, talking about Bitcoin’s evolution, Rajagopal Menon, Vice President, WazirX said, that cryptocurrencies have embarked on an extraordinary journey over the last decade, exemplified by Bitcoin’s evolution from ₹15,464 in 2015 to today’s staggering price of ₹21,24,503. This exponential growth underscores the immense potential of digital assets. A visionary investor who committed ₹1 lakh to Bitcoin in 2015 would now be sitting atop a substantial ₹1.374 crores, underscoring the wealth-generating capability of cryptocurrencies, best harnessed through a patient, long-term investment strategy.
Both of them believe that SIPs in the cryptocurrency market have the potential for Rs 1 crore corpus in future.
How the crypto SIPs work? In a blog, WazirX earlier referred to SIPs as a simplified form of the phrase “Rupee cost averaging,” It refers to the practice of investing a specific sum of money in Cryptos on a weekly, monthly, or quarterly basis.
The Rupee-cost averaging strategy helps reduce the risks involved with investing in volatile asset classes by distributing your investment over a long period, taking advantage of various market cycles, and lowering the investment cost. With this approach, regardless of the condition of the market, instead of investing a lump sum amount at a higher pricing point, you invest a small sum of money at several pricing points, it added.
So how you can build a Rs 1 crore corpus through Crypto SIPs?
According to Patel, a prudent approach also could be accumulating assets during bear markets when prices are lower, to capitalize on price increases during bull markets. Disciplined investing through Systematic Investment Plans (SIPs) in cryptocurrencies for the long term can be the best strategy to minimize risks through dollar-cost averaging. A simple analysis of lump sum vs. SIP in Bitcoin shows that SIP yields a 37% better return (122% vs. 89%) over the last 5 years.
Patel added, ‘At Mudrex, we provide investors with opportunities to diversify their portfolios and invest in cryptocurrency index products. For those aspiring to build a Rs 1 crore corpus in cryptocurrencies, a systematic approach is suggested. Investing Rs 10,000 per month through SIPs for 15 years would result in a total investment of Rs 18 lakhs. Looking at past data, this can potentially yield a Rs 1 crore corpus.”
This approach mitigates the impact of market volatility and aligns with the principle of long-term wealth accumulation, he said.
Meanwhile, as per Menon, for those aspiring to construct a ₹1 crore corpus through cryptocurrencies, recognizing this historical growth while navigating market fluctuations is key. As per the Crypto & Bitcoin Past Performance Calculator of WazirX, a visionary who invested ₹1,00,000 a decade ago would now command an impressive ₹2.53 Crore.
Adding Menon said, “This astounding return on investment illustrates the vast potential within the cryptocurrency market, far surpassing traditional investments like Gold, Nifty, and fixed deposits, which have paled in comparison during the same 10-year period.” But he also said, “For those who may have missed the crypto bus, there’s still a compelling opportunity on the horizon.”
Further, Menon explained that over the last 10 years, the Bitcoin (BTC) commodity has delivered a remarkable 70.98% compound annual return. In practical terms, assuming a 70.98% ROI, an investment of Rs 25,000 per month through a systematic investment plan (SIP) of BTC for 5 years would total ₹15,00,000, resulting in an impressive ₹1,10,39,338 in returns.
“These figures powerfully exemplify the transformative potential of cryptocurrencies, even for those starting their crypto journey today. It reaffirms the allure of cryptocurrencies as a pathway to significant wealth creation,” Menon said.
Lastly, Menon concluded, when venturing into the world of cryptocurrencies, prioritize well-established projects with over a decade of track record. Remember, this information is for educational purposes and should not be considered financial advice. It’s essential to acknowledge the crypto market’s high volatility; prices can fluctuate dramatically every day, making careful consideration a necessity for investments.
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Story first published: Sunday, October 1, 2023, 8:10 [IST]