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Investments are about managing risks and maximising gains. Over the past few decades, risk averse Indian investors have enjoyed the choice of picking assets such as fixed deposits, gold and even realty for assured gains. Assets with higher risks involving stocks, derivatives and other managed funds have remained exclusive to some top tier investors who have the means and the knowledge to access such markets. Beating inflation with low risk assets alone is proving difficult in the post-pandemic world. Enter cryptocurrencies, a new asset class with high potential, accessibility and with possibilities of managing risks.

The global crypto market runs 24x7 with equal access to all investors without a bias for geography or nationality. It is a nascent, decade-old market with potential to grow multi-fold over the next few years. More than one crore Indians have already embraced cryptocurrencies with a 600+ per cent growth in cumulative investments in the last one year, according to Chainalysis, a leading compliance provider.

For those ready to dip their toes into the cryptocurrency world, discerning the best time to invest is key. The crypto market is notoriously volatile with as much as 30 per cent variance in prices within a day. However, managing risk is possible and within everyones reach. We continue to advise investors to only invest a minor share of the overall portfolio (up to 3 per cent) in cryptocurrencies. Strategies vary according to individual goals and risk appetite but the following approach works in general even for amateurs.

The entry pointA proven method of managing entry points is to do Dollar Cost Averaging (DCA). DCA is a straightforward investment strategy that works irrespective of the current price of an asset. Investors following DCA split the investment pool and buy assets at regular intervals of time. This strategy minimizes volatility risk as it would prevent an entry at a single price point.

2021 is still earlyGlobally, there are about 120 million investors in cryptocurrencies in a world with a population of 7.8 billion. The adoption is growing rapidly but there is potential for more. Compared to the global stock market capitalization of about $100 trillion, the cryptocurrency market is valued less than 2 per cent today. So, entering any day in 2021 will still be good enough for most investors.

The only consideration for investment today is to determine which cryptocurrencies will continue to exist five years from now. Bitcoin, Ethereum and other large market cap coins have a higher probability of existence and hence are relatively safer to start with.

(Vikram Subburaj is Chief Executive Officer & co-founder, Giottus Cryptocurrency Exchange. Views are his own)

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What is the best time to invest in cryptocurrency? - Economic Times