Did you know that 10 years ago, someone bought two pizzas with 10,000 Bitcoins?
Today the value of one Bitcoin is way over $19,000, i.e. 14 lakhs rupees per BTC.
So if you were the pizza guy who sold the pizzas in exchange for 10,000 BTC’s, you would probably be the richest pizza guy in the world.
This should answer the question, “Are Cryptos a high-return investment?”
Yes, they are one of the high return investments in India.
But are they the best high return investments?
Let’s dig a bit deeper to answer that question.
What Are Cryptocurrencies?
Cryptocurrencies are decentralized digital currencies designed to work just like money.
Essentially they are a bunch of limited entries in the database that cannot be changed under any circumstances without authorization.
Most of them are utilized as a medium of exchange as well as a store of value.
Most cryptocurrencies have a limited supply, which means the currency may be more valuable in the future. There are more than 7500 cryptocurrencies available globally, including Bitcoin and altcoins.
Cryptos & Indian Market: Are Cryptos The Best High Return Investment In India?
Cryptocurrency has reached its popularity in the Indian markets, especially after the supreme court’s verdict earlier this year in 2020.
In India, cryptocurrency trading is spiralling up, considering at least 1/5th of the population showing interest or awareness about cryptocurrencies.
Recently, Bitcoin trading volumes in India had surpassed the spike of December 2017 – a time when the digital currency was enjoying an unprecedented bull run globally.
I am taking the case of Bitcoin here since it is the most popular cryptocurrency in the world.
So, yes, cryptos like Bitcoin are the high return investment options in India, but they do have their differentiations in terms of risks & returns compared to other traditional assets.
Comparison of Crypto Returns With Other Assets
1. Crypto vs Stocks
There is a general fear that the volatile behaviour of crypto markets makes it an unsafe investment avenue.
But, although the extent of volatility may be lesser, stocks are known to be unpredictable too. Cryptocurrencies have attained humungous growth since inception.
According to data from Yahoo Finance, as of December 2019, Bitcoin witnessed a 9,150,088% return on investment, whereas the average returns from stocks are between 12-15%.
If someone invested ₹1000 in Bitcoin in 2009, that ₹1000 would have been ₹9.15 crores by the end of 2019.
Similarly, ₹1000 invested in reliance shares would have fetched ₹5030 by the end of 2019, which is about 503% in a similar 10-year frame.
The returns attached to the risk seem to be much more significant in cryptocurrencies than in stock markets but note, both stock and crypto markets are unpredictable & volatile.
2. Crypto vs Gold
Gold is another popular and safe investment vehicle in India.
It is both precious and scarce.
Gold cannot be manufactured like issuing new stocks, it has to be mined, and we do not know when we will run out of it. Similarly, cryptocurrencies, like Bitcoin, are also limited.
Gold has always been the most invested commodity in India. However, recent news suggests that cryptocurrencies are beating gold as a top asset this year.
The Bloomberg Galaxy Crypto Index showed that digital coins’ performance is up about 66% in 2020, while the gold index has gone up by just 20%.
But you have to understand that Gold investing is investing in something physical and tangible, but crypto investments are mostly virtual, so pick what you like and are comfortable with.
3. Crypto vs FD vs RD
Fixed deposits and recurring deposits are money market instruments offered by banks and other financial institutions.
When you invest your money in one of the deposits, the money is locked in for a fixed period of time. In turn, the banks pay a rate of interest around 5%-8%, depending on the economic situation.
They are low-risk instruments but carry low returns. The returns offered by such deposits after deducting tax fail to overcome inflation itself.
Cryptocurrencies, on the other hand, are extremely volatile. But, if invested carefully, it can fetch million fold returns in a shorter time. Though there is a significant risk attached to cryptos, they are on par with deposits regarding returns.
Let us say; you had invested ₹1000 each in cryptos and fixed deposits for a period of 10 years. The amount invested in cryptocurrency would have grown to lakhs, whereas the returns from fixed deposits would be just a few thousand.
But note: Both are a different kind of financial instruments for different purposes:
If you are looking for quick returns in a short time, Crypto might be for you, but it has huge capital risks. On the other hand if the return of capital is more important for you than the return on capital you should stick to FD/RD etc.
How Does It Work?
Investing in cryptocurrencies is very similar to investing in stocks.
Like in any trading, the mantra is to BUY LOW and SELL HIGH while taking only the risk you can afford. It is a process of exchanging INR to cryptocurrency or one cryptocurrency to another cryptocurrency.
You can trade in both Bitcoin and altcoins by converting fiat currency into cryptocurrency.
This process can vary a bit in different countries. Still, broadly the entire process happens through a trustworthy exchange platform where you can complete your KYC to convert INR like fiat currency to cryptocurrency or vice-versa.
Should I Invest In Cryptos?
That is a question to which only you have the answer as I have aptly highlighted the risks and rewards compared to other traditional investments.
However, keeping the facts mentioned above in mind:
Cryptos could be the next big investment opportunity owing to its resilience during bad situations such as pandemics, inflation, among others.
There are certain cryptocurrencies, which have been there for a long time, going through both good and bad times. And then there are the new ones, which have proved their worth, beyond imagination.
For a wider perspective, do read this: Why Should You Invest In Cryptocurrencies?
[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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