Should you invest in Bitcoin & other Cryptocurrencies (2023)?

The first-ever Bitcoin rate (in the year 2009) was $1 = 1309 Bitcoins or BTC (source). That is, 1 Bitcoin was worth just $0.00076, or a mere Rs 0.05 or 5 paise in India. So Bitcoin price in 2009 in Indian rupees was 5 paise only! About a month back (April 2021), it hit an all-time high of $64,000 or Rs 47 lakh per Bitcoin!

Note – As of late May 2021, the Bitcoin prices have crashed to $30-35,000 in just a few days.

I have been exploring and reading about cryptocurrencies for some time but I can safely say that I don’t understand about these much. Please accept this as my disclaimer. So what I write here about cryptocurrencies in general and Bitcoin in particular, should not be considered as investment advice.

With that aside, let’s move on.

Whether we like it or not, cryptocurrencies or their technological basis is here to stay. So even though you and I may not understand it much, it still wouldn’t be wise to dismiss it just yet.

But does that mean that we should invest in Bitcoins and other cryptocurrencies?

Not sure how to answer that but let me attempt it nevertheless.

Cryptos generally get back in the news whenever there is a sharp price movement in the short term. A strong emotional euphoria occasionally sweeps through the investor/trader community around cryptocurrencies and their potential.

Despite limited to no understanding of cryptocurrencies or blockchain technology, people do get excited as if saying – God it’s so confusing and I can’t really understand it. It is got to be something good and profitable. Let me jump in.

Given the highly volatile nature, the fact (based on past price movements) is that you have a high chance of losing it big but also, a small chance of winning it big.

As they say, risk and reward are 2 sides of the same (bit)coin. 😉

If I remember correctly, Bitcoin itself has seen an 80% fall on three separate occasions in the last few years. So cryptos are notorious for their volatility and are not for the weak-hearted (unless you are comfortable routinely losing 80-90% of your initial investment, even if temporarily and on paper).

Bitcoin fall 80%

(Image source – link)

To be honest, I have been skeptical about it for some time. But it’s more because I am unable to value it (like stocks, etc.) and because it’s just too volatile and dependent on few strong entities and their jokes (like crypto tweets of Musk) as of now. This may change in the future though.

Given the past price behavior, it is difficult to find another investment option that offers such asymmetric return possibility. But it comes with too much risk no doubt.

And if you want to know how much to invest in cryptos, then do read What percentage % of portfolio to invest in Bitcoins? But generally, it is said that keeping 1% allocation to Bitcoin or cryptocurrency basket might be an interesting play.

Let’s think about it for a moment.

Suppose you have a Rs 10 lakh portfolio. In that you decide to invest 1%, i.e. Rs 10,000 in Bitcoins while the remaining 99%, i.e. Rs 9.9 lakh is invested in a combination of equity and debt.

Let’s say the equity+debt delivers on average annual 10% return.

While given the high-reward potential of cryptos, you have a shot (hopefully) at making 20x times in 5 years. Given the high risk, you also are exposed to the risk of your crypto investment going down to zero.

Let’s see what happens in 5 years to your portfolio of Rs 10 lakh:

  • Rs 9.9 lakh invested in equity & debt at 10% returns becomes Rs 15.9 lakh
  • Rs 10,000 invested in Bitcoins grows 20x and becomes Rs 2 lakh

So this is a total of Rs 17.9 lakh.

And what if your crypto investment goes down to zero?

You will still have your Rs 15.9 lakh in the core 99% equity & debt portfolio. It will be just that the overall portfolio return will be slightly lower than 10% (as bad crypto returns would have pulled down the overall portfolio %).

For comparison, a full 100% investment in equity & debt portfolio would have become Rs 16.1 lakh in 5 years.

To be fair, 1% exposure is too small to make a huge difference at an overall portfolio level. So why not increase crypto allocation to more than 1% (say 5% or 10%) of the portfolio? No doubt that by committing a higher % of the portfolio to cryptos, you will set yourself up for greater upside potential. But then, there would also be a greater downside risk.

As we have seen above, a 1% allocation isn’t going to materially harm you. The worst-case scenario of you losing 1% will not derail your financial goal planning or stop you from achieving your financial goals.

So to answer the question about how much of your portfolio should be in Crypto, I would say first that if you are risk-averse, then no need to invest in it. Avoid it. You might play with it for a few thousand bucks but nothing beyond that. On the other hand, if you are looking at it from a more serious angle, then your exposure would depend on your risk tolerance, ability to digest sharp swings with prices correcting 20-30% in a matter of hours (or 80% from highs regularly), available financial resources, enthusiasm, your belief or non-belief, familiarity with and understanding of cryptocurrencies among other things. It might be 0-5% in such cases.

By the way, in crypto lingo, Buy-and-Hold is often termed as HODL. In case you are ever confused What is HODL?

And what about investing in cryptocurrencies other than Bitcoin? Like Ethereum or other parody cryptos and meme-coins like Dogecoins (which Elon Musk jokingly says will take over the world financial market)? That is, Bitcoin vs. Ethereum vs. Dogecoin: Which One Is Right for You?

I don’t know the answer to this to be honest. I just feel that bigger established ones are comparatively better bets than chasing the latest meme-coins (just like large-cap mutual funds are safer than small-cap mutual funds) But who knows, I could be totally wrong.

Though the volatility of different cryptocurrencies offers a greater possibility of generating meaningful gains, the fact is that it’s currently too volatile for the comfort and appetite of common investors.

So technically and because of the currently inherent volatility of these cryptos, as long as you don’t bet everything you have on these, there is no doubt a possibility of making big gains without too much loss. But be cautious. This is a theoretical way of thinking. There is a difference between possibilities and probabilities.

Further reading: How to split portfolio allocation % between Bitcoin, Ethereum, and Altcoins?

Also, read – Is Bitcoin legal in India?

I know that a lot of people who have missed the crypto boat may feel like they made a mistake and if they had participated in it, it would have been life-changing for their finances. But the fact is that there are just way too many what-if’s here! So don’t bother yourself on those lines.

It is said that one should only invest in something that one understands. And most people, sadly don’t understand cryptocurrencies or blockchain technology that it’s based on among other technical concepts. Currently, cryptocurrencies have no underlying assets and primarily unregulated. And the price itself is too volatile and unpredictable. So investing a small amount 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 of its eye-popping returns in recent past.

A friend recently asked me if doing SIP in Bitcoin was a good idea? Given the highly volatile nature of cryptocurrencies, it goes without saying that lumpsum investments in cryptocurrencies are risky. Imagine investing when Bitcoin was trading at $60,000 and just a few weeks later, it was down to $30,000 (in Apr-May 2021). So just like in equity markets, timing the market in Bitcoins can be hard. So maybe, SIP in bitcoins will eliminate a bit of timing risk. However, SIP in Bitcoins does not make cryptocurrencies any less risky. And one must not forget that. Buying fractional amounts of Bitcoin or other cryptos regularly and accumulating them gradually is fine. But it’s still a risky investment option.

Related Reading: Bitcoin Vs Mutual Funds in India

Further Reading – Should you Buy & Hold Bitcoin for 10 Years?

Some people call Bitcoin as New Gold 2.0. But if not cryptos (or if one has a very small exposure to cryptos) then what should regular investors in India do?

Understand first that as of now, you cannot or rather should not rely on crypto investments for your retirement or overall financial strategy. The majority (95% plus) of your overall investment portfolio should be made up of proven asset classes like equity, debt, gold, real estate, etc.

Simply focus on your financial goals and how to reach them by investing properly in established asset classes like equity and debt. How can this be done? By getting yourself a proper financial plan that tells you how much to invest, where to invest, for how long to invest and answers all tough questions that need to be asked to put a person’s financial life on track. And if after that you have some extra money left and want to take some exposure to cryptocurrencies to try things out, then so be it. Go ahead and do so.

To get yourself a well-thought-through detailed goal-oriented financial plan, that tackles all goals like children’s education, retirement, house purchase, traveling, etc. you can consider professional Stable Financial Planning Service. If you are interested, then head to this page for the smart Financial Planning Service. You will increase the probability of achieving your goals on time without stress.

Investing in cryptos in India has another angle to it. There is a constant policy flip-flop here and it’s still not clear what the government wants to do in this space. At times, it virtually bans it (RBI in 2018). Then it overturns the ban (Supreme Court 2020 ruling or check on SC’s site here). 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. But as explained in this interesting tweet thread (link), at times, regulations come later. It is the law that eventually catches up with technology and not the other way round.

So for the time being, be careful with how much you put in cryptos. 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.

Disclaimer – Just out of curiosity, I had invested a few thousand Rupees in cryptos some time back.


  1. I also fell that one should have around 3-5% of investment in crypto. Investing step by step is more important to have sudden fall or rise in the crypto rates.

  2. Hi.. interesting article. Please also inform us, on how to invest? There seems to be multiple platforms. Are they genuine? Which is to be preferred? And which crypto currency is good to invest? Are there any options which invest a given sum in a basket of cryptocurrencies?

  3. Absolutely agreed to this. I only invested 10% of my savings into Crypto and I hope everyone should invest like this only. Majority should go for equities and options.

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