Last Updated on April 23, 2026 by Hemant Beniwal
“The four most dangerous words in investing are: ‘this time it’s different.'” – Sir John Templeton
A friend who works in tech asked me about Bitcoin in 2017. My answer then was “I don’t understand it well enough to recommend it.” That answer has not changed – but the context around it has changed enormously.
Bitcoin is now over Rs 80 lakh per coin. The Indian government taxes crypto gains at 30% with no deduction for losses from other assets. SEBI has issued warnings. RBI has changed its position multiple times. And the conversation about whether crypto belongs in an Indian investor’s portfolio has become more complex than it was in 2017.
Here is my honest assessment.
⚡ Quick Answer
Cryptocurrency in India is legal to hold and trade but is taxed at 30% on gains with no offset for losses from other assets (Budget 2022). It has no intrinsic value in the traditional sense – no underlying earnings, no dividend, no coupon. Its price is driven entirely by supply and demand expectations. For most Indian investors building retirement wealth, it has no place in a core portfolio. If you choose to allocate, it should be a small speculative allocation (below 5%) from funds you are prepared to lose entirely, not from retirement savings.
What Is Cryptocurrency, Really?
Bitcoin is a decentralised digital asset. It exists as cryptographic code on a distributed ledger called a blockchain. There is no central issuer, no government backing, and no underlying asset. Bitcoin’s value is determined entirely by what the next buyer is willing to pay for it.
This is not necessarily a disqualifying feature – gold also has no earnings, no dividend, and derives its value from collective belief in its store-of-value properties. But gold has 5,000 years of human consensus behind it. Bitcoin has 15 years and a price history that has seen 70-80% drawdowns on multiple occasions.
The Indian Regulatory Reality
The regulatory environment for cryptocurrency in India has shifted significantly since the early days. In 2018, RBI tried to ban banks from servicing crypto exchanges; the Supreme Court overturned that in 2020. In Budget 2022, the government took a practical stance: crypto is legal but taxed punitively.
The current tax treatment: gains from virtual digital assets (VDAs) are taxed at a flat 30% with no deduction for expenses other than acquisition cost. Losses from crypto cannot be set off against other income – not even against gains from other crypto assets. A 1% TDS applies on transactions above Rs 10,000. This regime makes crypto trading in India expensive and creates a significant drag on any active trading strategy.
At 30% flat tax with no loss offset, crypto’s effective return hurdle is much higher than most investors realise.
RetireWise advises on building core retirement wealth through regulated, tax-efficient investment structures – with a clear view of what belongs in a retirement portfolio and what does not.
The Volatility Problem
Bitcoin has experienced drawdowns of 70-85% on at least four occasions since 2010. Each time, it eventually recovered and reached new highs. This history has created a generation of investors who believe that holding through any drawdown will eventually be rewarded.
That belief may be correct. But it requires holding through periods where the asset falls to Rs 20 lakh from Rs 80 lakh, and staying invested for the years or decades it takes to recover. Most investors who claim they can do this find, in practice, that they cannot. The psychological reality of watching a Rs 10 lakh position become Rs 2 lakh is different from the theoretical confidence expressed before it happens.
The standard metric for investment risk assessment is volatility relative to expected return. By this measure, crypto has among the highest risk profiles of any mainstream asset – comparable to highly leveraged venture capital positions, not to equity mutual funds or gold.
The Greater Fool Problem
Warren Buffett’s critique of Bitcoin has not changed: an asset with no underlying earnings stream can only be valued by what someone else will pay for it in the future. This is the “greater fool theory” – profit depends on finding a buyer willing to pay more than you paid.
This does not mean Bitcoin cannot go higher. It can and has. But it means that the analytical tools used to value a business – earnings, cash flows, asset value – do not apply. You are making a bet on collective sentiment, which is inherently harder to evaluate and inherently more vulnerable to sudden reversals.
The Small Allocation Question
The most thoughtful argument for including Bitcoin in a portfolio is the asymmetric return profile: the potential upside is multiples of the current price; the downside is capped at 100%. Some portfolio allocation models suggest that a 1-3% allocation improves the Sharpe ratio of a diversified portfolio if you hold through cycles.
This is an intellectually honest argument. If you have a diversified core portfolio of equity and debt mutual funds that are on track to meet your goals, and you want to allocate a small amount to Bitcoin as a speculative position, that is a legitimate personal choice. The conditions are: the amount must be genuinely affordable to lose entirely, it should not come from retirement savings or goal-specific funds, and you must be honest about why you are doing it (speculation, not investment).
What is not defensible: allocating significant retirement savings to crypto, taking loans to invest in crypto, or treating past returns as evidence of future reliability.
The Lessons From Financial Bubbles
Every major asset bubble has shared certain characteristics: a genuinely new technology or narrative, early adopters who made extraordinary gains, widespread media coverage, retail participation near the peak, and eventually a repricing that destroyed latecomers while rewarding early holders.
Dutch tulip bulbs. South Sea Company shares. Dot-com stocks. Real estate in 2006-07. These are not identical to Bitcoin – Bitcoin has demonstrated more staying power than any of them. But the pattern of narrative-driven price appreciation decoupled from any underlying value generation is worth noting.
The honest answer for most Indian retirement investors is: crypto does not belong in a retirement portfolio. The evidence base for its long-term role as a store of value is 15 years old. The equity markets have 100+ years of positive real return data. The risk profiles are not comparable.
Read: The Greater Fool Theory and Indian Real Estate
When something is too good to be true, proceed very carefully. When you do not fully understand something, allocate only what you can lose. When it is retirement money, apply the strictest standard – because there is no second chance at retirement.
Speculation is not investment. Know which one you are doing.
Is your core retirement plan fully in place before you consider any speculative allocation?
RetireWise ensures the core is solid first – adequate insurance, clear goals, properly allocated corpus – before any discussion of speculative asset classes.
Your Turn
Have you allocated to crypto – and if so, is it from your core savings or a ring-fenced speculative amount? The answer matters more than the allocation size. Share in the comments.
Its a usefull artical for knowing about bitcoin and cryptocurrency. In cryptocurrency its include terms like cryptocurrency charts ,cryptocurrency prices, cryptocurrency price charts its not papaer currency its new define currency in general currency to buy in market its a new term for world now and all world people want to know more about bitcoin and cryptocurrency capitalization market.
Hi Pankaj,
I heard this story with respect to Share market. This story was circulated to warn people about investments in shares, as Indian Share market is mostly driven by FII funds (as per the analogy here man and assistant are FIIs). When they take out the money our markets fall as a pack of cards. Even today it is true. People should be careful while investing in Shares or MFs.
Thanks,
Harsha
how do I buy a cup of tea? a railway ticket? vegetable etc. I would never term is as currency as it is indivisible and unacceptable by masses. Read the story below which I heard and loved many times to understand fundamentals …. (I am not author)
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort.
He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms.
The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers; “Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each.”
The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere!
LOL – we all have small monkey inside us. We behave like a monkey in investment world 🙂
Very nice article..
Bitcoin, and for that matter all the other crypto currencies, are a mirage. Normally, currency is a piece of paper that you hold in hand but whose value is guaranteed by the govt. Other assets such as gold are something which can be physically seen and traded. Digital transactions are extensions of all these but the underlying asset is still physical. In the case of bitcoin, everything is virtual and there is no physical asset supporting it. It’s simply based on hype. It might grow ten-fold from where it is now but eventually it will be worth zero. Like they say, you can fool some people all the time or all the people some of the time but not all the people all the time.
Well said Pravin – will add your comment in the post ☺