The co-founder of Zerodha and True Beacon advised millennials to not put in anything beyond 1-5 per cent of their net worth in cryptocurrencies.
His reasoning: “A battle between the
central banks and private cryptocurrencies has been brewing for some time and now it seems we are getting closer to a climax.”
“Developments in China and some of the other parts of the world show that to some extent, cryptos do take away powers from central banks and governments. So they are bound to fight back, and when they come out and try to regulate it and change it in one way or another, it will be interesting to see what happens and which side wins,” says Kamath.
However, industry experts are not that pessimistic. They say it’s okay to allocate a fair share of your investment into crypto assets based on one’s risk appetite.
Hitesh Malviya, Founder of
itsblockchain.com said moderate risk takers can allocate 20 per cent of their portfolios to cryptocurrencies to fetch higher rewards.
“If one can take more risk, the allocation may be increased, but the investment should be made in fundamentally strong and well-backed tokens,” he said. Crypto adoption among various institutions and businesses has grown in recent times.
Sharan Nair, Chief Business Officer, CoinSwtich Kuber, said allocation to cryptocurrency in one’s portfolio should largely depends on the risk appetite of the investor.
“One can adopt a slow and steady approach and maintain a diversified portfolio, which can include crypto as one of the asset classes,” he said. “Start by investing small amounts and increase investment after getting familiar with the asset.”
Others say one should not have too much of allocation to any one asset class, and should know that crypto is a highly volatile asset class.
Volatility in an asset class varies with investors’ investment capability, said Nair. “A well-researched investment decision will naturally direct investors to the asset class they would like to take a risk on,” he said.
Investors with low to medium risk-bearing capacity can look at crypto exchange-traded funds or ETFs, which can be a simpler way of taking exposure to cryptocurrency. However, there is no prominent crypto ETF available currently.
“ETFs save investors from managing multiple digital wallets just for acquiring and tracking different cryptocurrencies,” said Nair of CoinSwitch Kuber.
Malviya said retail investors should look at direct investment in Bitcoin and major altcoins through exchanges, while institutional investors can look to invest through index funds and ETFs.
Historically, popular cryptocurrencies like Bitcoin and Ethereum have given multibagger returns in the long run, say at least three years.
“If an investor buys top-notch cryptocurrencies during marketwide dips and holds them for a longer periods, the probability of making multibagger returns increases,” said Malviya.