Bitcoin is either the best or worst asset class every year. ZebPay CEO Rahul Pagidipati explains why

Bitcoin has been either the best performing asset class or one of the worst in any given year, offering investors outsized returns at the cost of extreme volatility. That binary performance is not a flaw but a defining feature of the cryptocurrency, according to ZebPay CEO Rahul Pagidipati.

The Details

As Indian family offices, high-net-worth investors and fund houses increasingly seek exposure to digital assets, Pagidipati argues that Bitcoin is moving beyond its image as a trading instrument. He sees it evolving into the next store-of-value asset after gold, real estate and stocks, though he cautions investors against putting all their money into it.

• Edited excerpts from a chat on the sidelines of India Blockchain Week:
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Has the pace of crypto adoption in India increased over the past couple of years?

Rahul Pagidipati

Definitely. I wouldn’t say the trader community has increased, but the investor community certainly has. We now see high-net-worth individuals, family offices and fund houses asking detailed questions about how they can hedge and participate in crypto—not just in their trading portfolios, but also on their balance sheets.

They are trying to understand the governance framework around crypto. They know that we have been doing this for 12 years. I have customers who initially came in asking for Bitcoin and now ask whether there is another asset with similar strength, utility, governance and infrastructure that can support artificial intelligence, real-world assets or payment systems.

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People also want to understand stablecoins and whether their use cases are real. Initially, stablecoins were mainly used to gain access to Bitcoin. Today, they can be used to store value, facilitate cross-border transactions and provide exposure to digital assets within regulatory limits.

It is not that customers do not understand crypto. They want to know how they can use it and what level of exposure is appropriate.

What are investors looking to hedge against: equities, inflation or something else?

Rahul Pagidipati

Equities and inflation. Equity returns are still decent, at around 10% to 12% for many investors, but the cost of everything is also rising. Bitcoin has historically performed better than inflation, although it has had significant ups and downs.

How do you see Bitcoin’s role evolving in India?

Rahul Pagidipati

India’s store-of-value assets have traditionally been gold and real estate. For people older than my generation, those were considered safe assets. Stocks were viewed as risky. Around my generation, stocks began to be seen as a safer asset, particularly when held through mutual funds.

The progression has been from gold to real estate and then stocks. I believe the next major store-of-value asset could be Bitcoin.

For my grandparents, the answer would have been gold. For my parents, it would have been real estate. For me, it is stocks. For my son, it could be digital assets. Each generation thinks about store-of-value assets differently.

This is also a question of perspective. Indians who have travelled abroad and experienced other markets are more open to owning global assets. Those who return to India influence the people and businesses around them.

Over the next 10 to 20 years, Bitcoin could become a more widely accepted asset. It is similar to the way people viewed stocks in the 1990s. They considered stocks risky. They were riskier, but perhaps not as risky as people believed.

Do you think Bitcoin can outperform stocks over the next 15 to 20 years?

Yes. I do not just think so—I know so.

Real estate is probably riskier than gold but offers higher returns. Stocks are riskier than real estate but offer higher returns. Bitcoin is riskier than stocks but also offers higher returns. The question is how you measure risk and reward.

The Sharpe ratio is one way to evaluate risk-adjusted returns. Bitcoin has an exceptionally strong risk-to-reward ratio. It looks risky, but it is volatile. It took me many years to understand that volatility is not the same as risk. Many people see volatility as a problem. It is actually a feature, not a bug.

Most people do not want that kind of volatility. But people who do want it are often traders. My view is that ZebPay should focus much more on long-term investing. If you buy small amounts and invest over time, you may do better. If you trade, you often lose because you buy high and sell low.

When we compare Bitcoin’s performance with other asset classes in the long run, what interesting data do you see?

Rahul Pagidipati

If you look at all asset classes such as real estate, small caps, emerging markets, AAA bonds, stocks and cash across a time horizon of 16 years, Bitcoin is either in first place or last place. It is rarely in between.

People imagine that the perfect investment should simply keep going up. But that does not exist. Everyone would like 25% annualised returns without drawdowns, but high returns come with volatility.

Bitcoin has been the best performing investment by far over this period. That also means it goes up and down sharply. You have to decide whether you want very high returns with significant downside. If you size the position properly, it can still be a valuable investment.

If you can handle the volatility, Bitcoin can be a strong investment.

The best time to buy is not after a major rise. It is when the asset is down. That does not mean it will rise forever. It means that after a major decline, it could potentially outperform over the next two or three years before falling back to the bottom of the rankings again.

You should not put all your money into Bitcoin. It is too risky for that. But people could consider allocating 1% to 10% of their wealth to it, depending on their risk appetite.

You also compared Bitcoin with cash. How should investors view the two?

Rahul Pagidipati

Cash can also be either a great investment or a terrible one, depending on the cycle. It is almost the opposite of Bitcoin. In most cases where Bitcoin is the best performing asset class, cash is among the worst while when cash does well Bitcoin falters.

Data shows that cash is almost anti-Bitcoin. Bitcoin tends to perform best when liquidity and risk appetite are strong, while cash performs best during periods of stress. The two assets represent opposite ends of the investment spectrum. That is why asset allocation and position sizing are so important.

Just as someone might consider allocating 1% to 10% of their net worth to Bitcoin, they could also hold 1% to 10% in cash. They represent very different ends of the investment spectrum.

Many young Indians are investing almost all their savings in crypto. What would you tell them?

Rahul Pagidipati

Younger people are generally more willing to take risks. Older people are more concerned about drawdowns and prefer to keep a larger portion of their wealth in cash or bonds.

The problem is that young investors can also end up gambling. If they buy at the peak, they can lose 80% of their money. If they buy at the trough, they could potentially multiply their investment several times.

I believe the older you become, the less crypto you should own because it is a higher risk asset. It is fine for younger people to have higher exposure, but that exposure should still be part of a broader asset-allocation strategy.

Is crypto adoption still concentrated among people in their 20s and 30s?

Rahul Pagidipati

Without a doubt, younger people have a higher allocation. But Bitcoin is gaining strength relative to other cryptocurrencies because it has been around for a long time.

Many young people invest in meme coins and smaller assets. However, Bitcoin is increasingly being viewed as a store of value, particularly after th