As the cryptocurrency market continues to trade below the $1-trillion mark, crypto investment firm Mudrex plans to launch the fixed deposit (FD) equivalent of crypto, which aims to generate up to 14 percent fixed returns, this year, Co-founder and Chief Executive Officer Edul Patel said, adding that he expects the market to remain largely unchanged at least for the next six to nine months.
“We are piloting a fixed income product, something like an FD equivalent product where you can deposit your crypto and get a fixed fee at the end of it. That's a product that we are piloting right now. It's in early stages, and hopefully over the course of the next couple of months (launch it),” Patel said.
FDs have been one of the safest methods of investing for Indian households for years. It assures users of a "fixed" return along with the principal back in full. FDs are now not only limited to fiat currency but are also adopted by the digital currency world.
Firms in the crypto space are coming up with various FD plans. It is not an entirely new concept but is something that many investors are unaware of yet.
Given the volatility of the crypto market, not many investors are risk-averse. So, believing in long-term investment methods like FDs in cryptocurrency become difficult.
The global market cap of cryptocurrencies stood at $936.54 billion at 8:45 pm on June 27, down 2.70 percent over the previous session, CoinMarketCap data showed.
On the volatility of the market, Patel said, “Cryptos can indeed be volatile. I expect the current state of the market to remain as it is for at least six to nine months. However, tech innovations open up many more possibilities than traditional banking. Decentralised finance allows one to deploy different methods of generating returns.”
He believes that long-term investment methods like staking, lending, and yield farming are crucial to help support a blockchain network.
Further, the Mudrex CEO said that investing is supposed to be done over a longer period for it to work. “If you're investing for the long run, short-term market cycles don't make any difference.”
He believed that retail investors in India are growing rapidly. He expects the number to double in the next two years, and then double again in the next two years.
Mudrex is an all-in-one crypto investment platform having access to over 70 crypto exchanges across the globe. The company caters to both long-term investors and traders in the field of crypto.
Industry voices: Are crypto FDs a haven for investors?
Moneycontrol spoke to several crypto industry experts to gauge whether the idea of crypto FDs is worth a try or not.
Shivam Thakral, CEO, BuyUcoin, an Indian crypto exchange, believes that FDs have the potential to be a better store of wealth amid the current crisis. He recommended investors choose plans that provide options of flexibility in withdrawing principal amounts and return on investment.
He further said that FDs may prove to be great for stablecoins and crypto assets with less volatility.
Tarusha Mittal, COO, and Co-founder, Unifarm, a group staking platform, believes that though FDs in the crypto space is a newer terminology than crypto systematic plan, it can provide much higher returns than traditional banking. However, investors should have long-term risk-taking capability.
“While interest rates offered by banks on FDs can range between 3-7 percent, the returns in the crypto space are much higher — sometimes, as much as 17 percent to 100 percent, or even 2,000 percent. But essentially, that is a function of how long the individual has staked,” she said.
Bharat Vivek, Co-founder, and COO, of Kassio, a crypto management platform, said that products like crypto FDs have the potential to establish themselves quickly and complement crypto trading.
“Such products will help in diversifying the overall crypto investment strategy. Investors will be able to balance their crypto portfolios broadly as per their risk appetite and financial goals, similar to diversifying investments in traditional finance between FDs and stock markets,” he said.
However, being an investor himself, Vivek suggested spending time on each crypto deposit product offered in the market and understanding its risk profile, profit margins, and time horizon.
“Investors should not solely decide on the crypto deposit product based on the higher interest promised. There are some crazy returns promised on yield / defi-based products which over time are not sustainable and are considered very high risk,” he said.
What about staking, yield farming?
On the other hand, industry insiders believe that methods like staking and yield farming are already proven to be good for long-term investments.
Just as investors in the Web2 space earn interest on their saving bank deposits, staking and yield farming are the ways to earn interest in the defi or decentralised finance space, except for the interest rates on offer. While interest rates offered by banks on savings accounts can range between 3.5 percent and 7 percent, the returns in the crypto segment are generally much higher.
Raj Kapoor, the founder of India Blockchain Alliance, said, “I had earlier recommended that staking and yield farming are going to be the trend as markets move south. Also, traditionally the investor psyche is to move to safer investment options in these unpredictable times. In fact, the low entry point and instant liquidity offer investors (the opportunity) to still invest in crypto with limited risks.”
Kapoor believes that instruments like these will evolve amid the current state of crypto winters. “As options emerge so will the investor, for the winter may be long, but all clouds also have a silver lining,” he said.Further to it, Mittal said that staking and yield farming offer investors opportunities to earn passive income with relatively higher returns and a chance to diversify. As a result, they are here to stay for the long term.