Various platforms have started offering crypto SIPs to safeguard investors’ wealth and deliver decent returns. Some crypto exchanges have simplified the SIPs by allowing investors to start by investing small amounts, to make it affordable and accessible for a wider audience. Those trying to get their feet wet in cryptos can start by investing as little as Rs 100 a day and buy complete or fractions of tokens such as Ethereum and Bitcoin. SIPs can offer good returns if the tokens are chosen meticulously.
SIPs: Tested Method
Systematic investment plans enable an investor to get a better entry price in a volatile asset, such as cryptocurrencies, by making regular and timed purchases of the asset.
Vikram Subburaj, Co-founder and CEO of Giottus Cryptocurrency Exchange, said SIPs are mathematically and psychologically proven to be the best approach to beat volatility. “In cryptocurrencies, SIPs are more useful and valid for the large market cap coins such as Bitcoin and Ethereum, which account for the majority of crypto investments,” he added.
Most SIP services out there offer daily, weekly and monthly options. Quarterly SIPs do not yet exist in the crypto world.
“Monthly SIPs are the most preferred time frame,” said Ganesh Kompella, Partner, Tykhe Block Ventures. “For long-term accumulation of tokens, it is advised to go with monthly SIPs.”
Sharat Chandra, a blockchain expert and a member of the IET Future Tech Panel, said investors can also opt for a daily SIP. “One should believe in the power of compounding,” he said.
Time Horizon for Crypto SIP
Just like in equity SIPs, analysts and experts suggest investors have a long-term vision for crypto SIPs so that they can be wealth compounders. “SIPs anyways do not appeal to most day traders,” said Chandra.
There are several advantages of having a longer investment horizon and newcomers should especially have this view. “For the new fad-chasers in town, we suggest a longer horizon to maximise your gains and to eliminate the risk of temperamental decision-making due to highly volatile swings we see in this crypto market from time to time,” said Subburaj.
How to pick tokens?
Just like stock picking, choosing a crypto requires some homework. Analysts suggest that investors pick a token that has solid community backing.
Newbies should stick to Bitcoin and Ethereum as they are bigger and less volatile. They are the safest bets in the crypto spectrum as of now, said Kompella. “If investors are looking for aggressive returns, they can take riskier bets in altcoins.”
Choosing the right token mix holds the key to earning higher returns, say analysts. “Apart from the usual favorites, make sure you have stablecoins and tokens from layer-2 solutions such as Polygon, Solana, Arbitrum in your SIP portfolio, which are growth-bound due to rampant adoption of DeFi and NFTs,” said Chandra.
Investors should allocate 80-90 per cent of their cryptocurrency budget for SIPs and keep the balance for an ideal opportunity in a small or medium cap, said Subburaj.
Risks of Crypto SIPs
Experts are unanimous that investors first understand that the crypto world is an emerging space and so cryptocurrencies are highly volatile and a risky asset class. They should carefully select the minimum investment, redemption of tokens, tokens included in the plan and lock-in period for the SIPs, experts say.
“One should not lose sight of the basics when it comes to investing, be it crypto or any other financial instrument,” said Chandra, adding that deep research on performances and projects of cryptocurrencies are required before taking the plunge.
Subburaj said investors should have a room for safety during turbulent periods and their plans should have stablecoins to avoid such volatility. “Such a practice will give them the comfort to stick to their original long-term plan.”