How to Invest in Cryptocurrencies like Bitcoin and Ethereum through SIPs in India?

Investing in crypto through SIPs can turn out to be the best strategy to invest in, as it will not only reduce the risk but will also stagger your investments and help you generate long-term wealth.

Should You Adopt a Systemic Way To Invest in Cryptocurrency

Cryptocurrency is the new centre of attraction because of the incredible gains investors have seen in the past few years. But in the past few months, there have been some ups and downs, which has made the investors to hold on and think about how can they reduce the risks involved with the investment in cryptos like Bitcoin, Ethereum, Shibu Inu, Dogecoin, etc.

The recent imposition of crypto taxes and wait for regulations have also made the investors conscious about what to do now and how to make sure that the hard-earned money doesn’t end up in the dark red. 

Thus, in this article, we will cover why you, as an investor, should adopt Recurring Buy Plan (RBP), a systemic way to invest in crypto assets through which you can not only reduce the risk but will also stagger your investments and ensure that you are generating long-term wealth. 

Also read: Cryptocurrency exchanges

How To Invest in Crypto?

One of the biggest fear among the investors in the crypto market is the risk involved with the investment and the high volatility of the market.

Thus, to solve these issues, crypto exchanges have introduced three products which are almost similar to each other, namely:

  • Systematic Investment Plans (SIPs)
  • Recurring Buy Plans (RBPs)
  • Crypto Investment Plans (CIPs)

A systematic investment plan allows you to invest a particular amount in a specific crypto every month so that you enjoy the power of rupee cost averaging and don’t go for impulsive buying.

Recurring buy plans are similar to systemic investment plans, which investors mainly use in the equity market (i.e., stock market and mutual funds).

Crypto investment plans are also similar to the usual systemic investment plans, but in addition, they provide the feature of investing a particular amount every week in particular cryptos.

The primary aim behind these products is to reduce the risk, stagger the investments and overcome impulsive buying/selling of cryptos. Along with that, these products ensure the investors enjoy compounding returns and build a long-term growth portfolio.

Thus, most of the investors are now shifting from investing a lump sum amount to invest every week or every month for some portion of the amount systematically.

Also read: Bitcoin OR Ethereum OR Dogecoin

The advantages of these plans are:

  1. Offers reduced risks
  2. Ensure stagger investments
  3. HOLD friendly
  4. Offer benefits of rupee cost averaging
  5. Avoids the headache of time the market
  6. Ensures long term wealth
  7. Avoids impulsive buying or selling trades
  8. Cultivates financial discipline

However, it should be noted that these plans are introduced for long-term investors, and thus, traders and short-term investors may not get many benefits from them.

Also read: Investing in cryptocurrencies

Taxation of SIP and Lump Sum Investments in Cryptocurrencies

The Finance Bill classified cryptocurrencies as virtual digital assets (VDAs) along with that in Union Budget 2022, the finance minister Nirmala Sitharaman introduced a 30% tax on the transfer of virtual digital assets besides cess and surcharge.

The income tax rules don’t allow for any deductions except the one incurred from buying the virtual digital asset. Thus, the expectation that the miners would gain an advantage by claiming deductions such as money spent on power to mine the cryptocurrency, money spent on purchasing expensive mining machines, and so on has now evaporated.

Along with that, investors won’t be able to offset any loss in one virtual digital asset with the profits of another virtual digital asset, i.e., if you had invested Rs. 1000 in Bitcoin and Rs. 500 in Ethereum, but during the time of selling, your investment of Bitcoin turned to Rs. 800 while the investment of Ethereum became Rs. 1000 in this case, you will need to pay tax on Rs. 500, which is your profit on Ethereum, and it can’t be offset with the loss of Rs. 200 in Bitcoin.

In addition to this, the finance minister also announced to charge 1% Tax Deductible at Source (TDS) from 1st June on all the transfers of virtual digital assets above a specific limit.

However, it should be noted that the finance minister didn’t clarify anything related to the taxation on crypto through SIPs in the Union Budget 2022. 

There are two accounting methods, one is First In First Out (FIFO), and the other one is Last In First Out (LIFO), to determine which virtual digital asset was sold first and which one will be the last, and in both the ways, there will be different taxes due to difference in buy/sell prices.

Also read: Crypto Trading platforms

Future of the Indian Crypto Market

The Indian crypto market is skyrocketing, with the new investors aggressively entering the market. As per the reports, back in 2021, around two crore Indian investors had invested in cryptocurrencies even though the prices of crypto were at an all-time high. Indians are also thought to own about $5.3 billion in cryptocurrency, according to reports.

Furthermore, according to CREBACO, India's crypto-asset industry is worth more than $15 billion, with over 6 million users accounting for around 0.5% of the population.

With such a bright future of cryptocurrency in India, if you will systemically invest in cryptocurrency through Systematic Investment Plans (SIPs), Recurring Buy Plan (RBP) or Crypto Investment Plans (CIPs), what you will ensure is that in the long term, you will sit on a vast accumulated wealth with a healthy portfolio.

Also watch: How to Invest your money In Cryptocurrency! step by step guide

Summary

The volatile cryptocurrency market, a murky area in terms of lack of regulations, currently imposed high taxes, and the danger of losing the entire investment are just a few of the considerable risks associated with cryptocurrency investment in India.

Cryptocurrency exchanges in India have tried to solve these issues by introducing products like Recurring Buy Plans (RBPs), Systematic Investment Plans (SIPs) and Crypto Investment Plans (CIPs).

The major advantages of these products are to reduce the risk, stagger the investment and avoid impulsive buying/selling.

Cryptocurrency is the new centre of attraction because of the incredible gains investors have seen in the past few years. But in the past few months, there have been some ups and downs, which has made the investors to hold on and think about how can they reduce the risks involved with the investment in cryptos like Bitcoin, Ethereum, Shibu Inu, Dogecoin, etc.

The recent imposition of crypto taxes and wait for regulations have also made the investors conscious about what to do now and how to make sure that the hard-earned money doesn’t end up in the dark red. 

Thus, in this article, we will cover why you, as an investor, should adopt Recurring Buy Plan (RBP), a systemic way to invest in crypto assets through which you can not only reduce the risk but will also stagger your investments and ensure that you are generating long-term wealth. 

Also read: Cryptocurrency exchanges

How To Invest in Crypto?

One of the biggest fear among the investors in the crypto market is the risk involved with the investment and the high volatility of the market.

Thus, to solve these issues, crypto exchanges have introduced three products which are almost similar to each other, namely:

  • Systematic Investment Plans (SIPs)
  • Recurring Buy Plans (RBPs)
  • Crypto Investment Plans (CIPs)

A systematic investment plan allows you to invest a particular amount in a specific crypto every month so that you enjoy the power of rupee cost averaging and don’t go for impulsive buying.

Recurring buy plans are similar to systemic investment plans, which investors mainly use in the equity market (i.e., stock market and mutual funds).

Crypto investment plans are also similar to the usual systemic investment plans, but in addition, they provide the feature of investing a particular amount every week in particular cryptos.

The primary aim behind these products is to reduce the risk, stagger the investments and overcome impulsive buying/selling of cryptos. Along with that, these products ensure the investors enjoy compounding returns and build a long-term growth portfolio.

Thus, most of the investors are now shifting from investing a lump sum amount to invest every week or every month for some portion of the amount systematically.

Also read: Bitcoin OR Ethereum OR Dogecoin

The advantages of these plans are:

  1. Offers reduced risks
  2. Ensure stagger investments
  3. HOLD friendly
  4. Offer benefits of rupee cost averaging
  5. Avoids the headache of time the market
  6. Ensures long term wealth
  7. Avoids impulsive buying or selling trades
  8. Cultivates financial discipline

However, it should be noted that these plans are introduced for long-term investors, and thus, traders and short-term investors may not get many benefits from them.

Also read: Investing in cryptocurrencies

Taxation of SIP and Lump Sum Investments in Cryptocurrencies

The Finance Bill classified cryptocurrencies as virtual digital assets (VDAs) along with that in Union Budget 2022, the finance minister Nirmala Sitharaman introduced a 30% tax on the transfer of virtual digital assets besides cess and surcharge.

The income tax rules don’t allow for any deductions except the one incurred from buying the virtual digital asset. Thus, the expectation that the miners would gain an advantage by claiming deductions such as money spent on power to mine the cryptocurrency, money spent on purchasing expensive mining machines, and so on has now evaporated.

Along with that, investors won’t be able to offset any loss in one virtual digital asset with the profits of another virtual digital asset, i.e., if you had invested Rs. 1000 in Bitcoin and Rs. 500 in Ethereum, but during the time of selling, your investment of Bitcoin turned to Rs. 800 while the investment of Ethereum became Rs. 1000 in this case, you will need to pay tax on Rs. 500, which is your profit on Ethereum, and it can’t be offset with the loss of Rs. 200 in Bitcoin.

In addition to this, the finance minister also announced to charge 1% Tax Deductible at Source (TDS) from 1st June on all the transfers of virtual digital assets above a specific limit.

However, it should be noted that the finance minister didn’t clarify anything related to the taxation on crypto through SIPs in the Union Budget 2022. 

There are two accounting methods, one is First In First Out (FIFO), and the other one is Last In First Out (LIFO), to determine which virtual digital asset was sold first and which one will be the last, and in both the ways, there will be different taxes due to difference in buy/sell prices.

Also read: Crypto Trading platforms

Future of the Indian Crypto Market

The Indian crypto market is skyrocketing, with the new investors aggressively entering the market. As per the reports, back in 2021, around two crore Indian investors had invested in cryptocurrencies even though the prices of crypto were at an all-time high. Indians are also thought to own about $5.3 billion in cryptocurrency, according to reports.

Furthermore, according to CREBACO, India's crypto-asset industry is worth more than $15 billion, with over 6 million users accounting for around 0.5% of the population.

With such a bright future of cryptocurrency in India, if you will systemically invest in cryptocurrency through Systematic Investment Plans (SIPs), Recurring Buy Plan (RBP) or Crypto Investment Plans (CIPs), what you will ensure is that in the long term, you will sit on a vast accumulated wealth with a healthy portfolio.

Also watch: How to Invest your money In Cryptocurrency! step by step guide

Summary

The volatile cryptocurrency market, a murky area in terms of lack of regulations, currently imposed high taxes, and the danger of losing the entire investment are just a few of the considerable risks associated with cryptocurrency investment in India.

Cryptocurrency exchanges in India have tried to solve these issues by introducing products like Recurring Buy Plans (RBPs), Systematic Investment Plans (SIPs) and Crypto Investment Plans (CIPs).

The major advantages of these products are to reduce the risk, stagger the investment and avoid impulsive buying/selling.

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