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What are Crypto SIPs and Why Should You Invest in Them

05 Sep 2022 By : Harshil Shah
Southeast Asia’s Lar

Traditional investors witnessed the great crypto ascent when Bitcoin gave unbelievable returns in the crypto markets. The rise and expansion of blockchain technology have pushed the use cases of cryptocurrencies to a different level. But as we tread towards substantially increased crypto trading, time-tested investment mechanisms are making their entries into the cryptocurrency ecosystem.

One such proven investment instrument to counter the unreasonable market volatility of crypto markets is systematic investment plans or SIPs. As the new crypto SIPs are making their entries in the crypto exchanges, it becomes vital to understand the principles behind their effectiveness.

In the article ahead we are going to understand what crypto SIPs are and what are some reasons that make them a lucrative investment option.

What is Crypto SIP

Systematic Investment Plans or SIP as popularly known, are a method of investing in an asset at specified regular intervals as per one’s investment capabilities. These systematic plans ensure a habit of regular investments irrespective of the current market conditions.  Crypto SIPs are no different from traditional mutual fund SIPs offering almost the same perks and stability within crypto investments.

In crypto SIPs, a fixed amount of money is invested in a chosen cryptocurrency at specified intervals. These crypto SIP investments can be as low as 50 INR, making them affordable for all classes of investors. Crypto SIP assures a stable return for investors without worrying about the volatile market dynamics.

Cost averaging and the compounding effect cancels out the risk in long-term regular investment, making crypto SIPs one of the safest options to invest in cryptocurrencies.

Benefits of a Crypto SIP

New crypto investors see cryptocurrencies as an absolutely speculative asset which in turn incites a sense of disbelief while reckoning their investments. This sentiment adversely affects market capitalization and restricts cryptocurrencies from achieving their true potential.

These risk quotients of investing in cryptocurrencies can be reduced drastically by investing in crypto SIPs. In this segment of the article, we are going to cover some of the major benefits of investing in crypto SIPs.

The Great Compounding Effect

Money stacked in lockers does not give any returns while also depreciating in its value as inflation increases. To avoid this deflation, money is put into multiple investment options to earn a stable interest on investments. This is where compounding comes into the picture.  

The interest or return you will generate on your crypto SIPs will be reinvested in the crypto market. From that time being, you will earn a collective return on the earned returns along with the initial principle. This might sound little in the starting of your crypto SIPs but you will witness exponential growth once your invested capital reaches a significant mark.

Time is another crucial player in long-term SIPs as the compounding effect needs adequate time to show its effects. Thus, the earlier you start investing in a crypto SIP, the larger pool of money you would be able to generate over time.

Smaller Investments for Bigger Returns

If you believe that investing is only for those having grand investment funds and deep crypto knowledge then crypto SIPs break these myths by significant margins. Crypto SIPs allow investors to start their crypto journeys from investments as low as 50 INR and 100 INR, making crypto investments accessible for all.

These small investments help new investors to gain insights into the crypto markets and educate them about the investment processes in cryptocurrency. These small but regular savings in crypto assets benefit from the compounding effect in the long term. Investments as small as 100 INR per month could become the foundations of multi-bagger returns in cryptocurrencies.

Rupee Cost Averaging 

One of the most basic concepts for making profits in the market is to buy at low and sell at high. This might sound like common sense to all of us, however, achieving this in real-world scenarios is not that easy. Most people end up buying assets while the market is surging and become the hostage of a sudden but lasting low market.

Rupee cost averaging is a crypto SIP characteristic that enables investors to buy more in low market situations and buy less when markets are moving up. This causes a reduction in the average cost of the assets in which you are investing via a crypto SIP. In crypto SIPs, rupee cost averaging happens automatically and does not require any external interference from the investor.

Ditch the Market Volatility

As we have discussed earlier, market fluctuations are a common phenomenon in crypto investments. The sudden price drops and unexpected high rises cause massive buying and selling within the market. This frequent trading could be counter-productive for those investors who are not seasonal trading experts. Apart from that, governments are also willing to levy heavy taxes on crypto profits, taking away a major chunk of the pie.

Crypto SIPs are long-term investments and future crypto regulations could specify the taxes on long-term profit gains for cryptocurrencies. This change could substantially reduce the pressure on crypto investors and that makes crypto SIP an excellent tool to avoid present rates of taxes.

Disciplined Investment

At times cryptocurrency markets are driven by internet trends and that makes us prone to deviate from our investment strategies. When we are looking for investing long-term in the crypto markets, short-term trends must not affect our investment discipline. Crypto SIPs are automatically debited from your bank accounts as recurring payments, leaving no space for speculating on social media trends.

Successful investment strategies have their foundations in the long-term investment discipline and crypto SIPs are a great tool to foster this behavior. As your portfolio matures, this investment habit will result in a portfolio to be proud of.

Who Should Invest in Crypto SIPs

Even after reading about all the benefits of crypto SIPs if you still wonder whether you should invest in crypto SIPs then here is a list of categories of people who must invest in crypto SIPs.

You should do a Crypto SIP

  • If you have long-term monetary goals such as early retirement, marriage, children’s education, and long travel plans

  • If you want to develop a regular investment habit

  • If you understand the potential of crypto investments and want to invest in its future

  • If you are new to cryptocurrencies and do not want to take risks by trading regularly

  • If you are willing to avoid the crypto market fluctuations

  • If you want to gain a better return from traditional market investment and have sufficient risk-bearing capacities

  • If you are someone who could resonate with these reasons, you must start your crypto SIP as soon as possible.

Final Take

Crypto investments are volatile by nature and that makes it unwelcoming for those who do not have high risk-bearing capacities. To deal with this, comparatively safer crypto investment options have become the dire need of the day. Crypto SIPs are a lucrative investment option when compared to traditional mutual funds, however, choosing the right SIP through the right vendor becomes extremely crucial.

Amidst some major pump-and-dumps, progress towards crypto SIP investments and crypto ETFs should not only be welcomed but also encouraged. These developments can drive the stability that crypto markets have been looking for long and could be foundational for a strong crypto future.

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