Doing a monthly SIP in Bitcoins or if you want to build a small portfolio of different coins, then doing a monthly SIP in cryptocurrencies of different types. Does it make sense for Indian investors?
This idea of a systematic investment plan (SIP) in Bitcoins is interesting as cryptocurrencies are very volatile. Falling 30-40% in a matter of few hours and then, regularly crashing 80% or more once every few years. Many other cryptocurrencies and altcoins at times plummet by 99% as well. So don’t forget these figures when planning to do SIP in Bitcoins or SIP in cryptocurrencies in India.
But seemingly, Bitcoins have been volatile yet lucrative for those who timed their investments in Bitcoins well (it is often said that Bitcoin is New Gold). But not everyone understands cryptocurrencies and hence, they can’t time it well.
So how is the idea of doing regular monthly investments via monthly SIP or weekly SIP in Bitcoins and other cryptocurrencies?
Before we discuss investing a fixed amount every month in Bitcoins, let’s get one thing straight – You should not rely on cryptocurrency investments for your retirement or overall financial strategy. The majority (95%) of your investment portfolio should be made up of well-established and proven asset classes like equity, debt, gold, real estate, etc. Investing in small amounts that you would not be worried to lose is fine. But you shouldn’t bet your entire savings on Bitcoin or other cryptocurrencies just because it seems like a fashionable thing to do.
Now coming back to SIP in Bitcoins in India (2021).
As I wrote in the article Should you invest in Bitcoin & cryptocurrencies, you should be careful about how much you invest in this investment option. That is assuming it’s legal in India to invest in Bitcoin or other cryptos. Do read Is Bitcoin legal in India? So for the time being, be careful with how much you put in your cryptocurrency investments. Be it lumpsum or via regular SIP type investments. Once there is regulatory clarity, you might consider thinking on the lines of having a 1% portfolio in a basket of Bitcoin and other cryptocurrencies (Do read What percentage % of portfolio to invest in Bitcoins?). And does it make sense to Buy & Hold Bitcoin for 10 Years? Once the concept matures (if and when), one can even consider increasing the allocation a bit higher. Also, you might wonder about Bitcoin Vs Altcoins and then try to find out which Altcoin other than Bitcoin to invest in? Do read my detailed article comparing the 2 major cryptos of today, i.e. Bitcoin Vs Ethereum: Which to choose? Once you have decided to invest in a few altcoins, do remember to figure out How to split portfolio allocation % between Bitcoin, Ethereum, and Altcoins?
By the way, in crypto lingo, Buy-and-Hold is often termed as HODL. In case you are ever confused What is HODL?
Just like SIP in mutual funds is the best bet for common investors, the same can be said about Bitcoin enthusiasts. I am using the word enthusiasts deliberately as 99% of those who are putting money in cryptos don’t know anything useful about the whole concept. This is the hard truth. So calling them investors or traders doesn’t seem like the right thing to do.
But nevertheless, if one is unsure about the right time to invest in Bitcoins or is unable to arrange the lumpsum amount (vs SIP) when the right time comes, then it would be smarter to do what many of us do with mutual fund investments. Regular fixed monthly investments via SIP. You can do SIP in Bitcoins or do SIP in Ethereum or do SIP in different cryptocurrencies in India.
Just a reminder that a SIP in Bitcoin or Systematic Investment Plan in Bitcoin means that you will invest a fixed amount in Bitcoin or other cryptos each month. This way, it averages out your purchase price and protects you from catching the prices high if you invest in one go via lumpsum in Bitcoin.
To be fair, no one knows how long this phenomenon of cryptocurrencies will go on. Or whether it will actually live up to its claimed potential. At least I don’t know. But assuming you want to take a shot at it, then I think Rupee cost averaging for the medium-to-long term, by investing small amounts regularly via monthly SIP or weekly SIP might be a better option than trying to be a perfect market timer. That is when you are willing to hold Bitcoin for the long term, something like holding Bitcoin for 10 or more years.
The future value of your SIP investment in Bitcoin will depend on how Bitcoin prices move over time. But remember that till now, the journey has been pretty volatile and scary.
One of my friends who does SIP of more than Rs 1 lakh per month SIP regularly buys Rs 1000-2000 worth of Bitcoin every month. He says he will continue to do so for several years and not sell them for at least 10 years. He is doing this as he wants to try it out and also because, he believes that putting 1% in cryptocurrencies every month may not hurt much, even if it ends up going to zero. Just sharing as it’s something that I remembered while writing this post.
And don’t be under the assumption that if you do SIP in Bitcoins, then you are playing it very safe. It is still an extremely high-risk investment option. It’s just that SIP in cryptocurrencies reduces the risk a little bit when compared to lumpsum crypto investments.
I don’t think many cryptocurrency platforms in India provide an option to do monthly Bitcoin SIP. But one can do it manually too.
You may now ask that what if you want to invest regularly in a basket of cryptocurrencies and not just Bitcoin? Are there any good cryptocurrency mutual funds or ETFs in India?
The answer is no. As of now, none exists. But there are Bitcoin ETFs and cryptocurrency ETFs in other countries. Though I am not very sure about crypto mutual funds.
Related Reading: Bitcoin Vs Mutual Funds in India
But in India, leave alone the discussion about crypto ETFs or mutual funds, it’s still not clear what the Indian government wants to do in the crypto space. At times, it bans it (RBI in 2018). Then it overturns the ban (Supreme Court 2020). At times they want to ban everything and launch government-backed crypto. As of now, the government is still contemplating a bill on cryptocurrencies that may provide the final dose of clarity. Let’s hope it clears things up one way or the other.
So don’t get too excited about Bitcoins after seeing high returns in the last few months. Be reasonable. Do not go overboard with your crypto investments. The fact is that it is not for everyone. If you are fine losing some money (if it comes to that) and know what you are getting into, then go ahead and put money in cryptos. Whatever amount you think is comfortable to you whether it’s about doing SIP of Rs 500 in Bitcoins every month or SIP of Rs 1000 in Bitcoins every month or SIP of Rs 2000 in Bitcoins every month or SIP of Rs 3000 in Bitcoins every month or SIP of Rs 4000 in Bitcoins every month or SIP of Rs 5000 in Bitcoins every month or SIP of Rs 10,000 in Bitcoins every month or SIP of Rs 20,000 in Bitcoins every month.
If you have a question like Where can I buy Bitcoin as monthly SIP or is it possible to buy Bitcoin through SIP in India, then I would suggest you do a bit of online search. If there are no platforms offering such a service that you can do manual monthly investments to replicate a SIP.
By the way, if you are looking for SIP calculators similar to mutual fund SIP calculators for cryptos, then let me tell you that given the highly (highly) volatile nature of cryptocurrencies (both Bitcoin and other altcoins), using a Bitcoin SIP Calculator or Ethereum SIP calculator may be of much use. Ofcourse such a Bitcoin calculator or Bitcoin profit calculator will throw up some numbers. But those Bitcoin calculator outputs should not be the sole factor in your decision to invest in Bitcoins and other cryptos in India.
So that was about your questions on Can I do SIP in Bitcoin? Or I’m planning to invest in Bitcoin through SIP in India. ‘SIP in Bitcoins’ does allow you to get the benefit of rupee-cost-averaging. But don’t be under a false impression about the safety of crypto SIPs. A SIP in Bitcoins does not make the cryptocurrency lesser risky.
I am sure you already know about how much wealth you can create via SIP in mutual funds. Though I will still strongly suggest that you park/invest a major chunk of your portfolio in a well-thought-out mix of established asset classes like equities, debt, gold, real estate, etc. and get yourself a financial plan, I still hope this article on Bitcoin Monthly SIP that gives you some clarity about doing SIP in Bitcoin and buying Bitcoins under a Systematic Investment Plan (SIP) in India 2021.