Cryptocurrency's Risk and Return Analysis in India

Studies Management and Finance Economics, of Journal 0504-2644 (online): ISSN 0490,-2644 (print): ISSN 5202 October 10 Issue 80 Volume 8.317 Factor: Impact ,17-i10-10.47191/jefms/v8 DOI: Article 5673-6733 No: Page JEFMS, Volume 08 Issue 10 October 2025 www.ijefm.co.in Page 6733 Cryptocurrency’s Risk and Return Analysis in India Gopal Sharma1*, Prof. Kushendra Mishra2, Prof. Amit Kumar Singh3 1,2,3 Department of Management Studies Babasaheb Bhimrao Ambedkar University (A Central University), Lucknow. 1Orcid Id: 0009-0004-8798-8687 ABSTRACT: This study examines the risk and return of cryptocurrencies, a new and highly volatile asset class. Using quantitative methods, the research compares cryptocurrencies to traditional assets such as stocks and gold. The findings show that cryptocurrencies offer significantly higher returns but with a much greater level of risk. This distinct risk-return profile suggests they act as a unique, largely uncorrelated asset class. The study concludes that while they can aid in diversification, cryptocurrencies are best suited for investors with a high tolerance for risk, emphasizing that understanding their unique characteristics is key to informed investment decisions. KEYWORDS: Risk, Return, Analysis and Modelling, Cryptocurrency. INTRODUCTION The emergence of cryptocurrencies, a type of digital or virtual currency secured by cryptography, has fundamentally shifted the landscape of global finance. Since Bitcoin's inception in 2009, thousands of alternative cryptocurrencies have been created, attracting a new generation of investors. In India, the cryptocurrency market has experienced exponential growth, driven by a tech-savvy young population and the promise of high returns. However, this market is also characterized by extreme volatility and regulatory uncertainty, making it a highrisk, high-reward investment avenue. This research aims to analyze the risk and return characteristics of cryptocurrencies in the Indian context. Understanding the unique risk-return trade-off for Indian investors is critical for making informed decisions. The study will not only focus on the inherent volatility of these assets but also on external factors, such as India's evolving regulatory environment, which significantly influences market behaviour. The rate of return of bitcoin investment is the highest compared to the other investment instruments: stock, exchange rate and gold. Meanwhile, the bitcoin investment also has the highest risk compared the others investment instruments (Sunita Dasman, 2021). Analysis of risk profiles reveals volatility and drawdown. Bitcoin is more volatile, indicating susceptibility to price fluctuations. Overall, cryptocurrencies exhibit dynamic and unpredictable markets, which highlights the need for risk management (Chaitali Mahadik, 2024). The primary objectives of the research are as follows: 1) To measure and analyze the risk and return of a diversified portfolio of major cryptocurrencies accessible to Indian investors and 2) To compare the risk and return of cryptocurrencies with traditional Indian investment instruments. RESEARCH HYPOTHESIS Hypothesis 1: Cryptocurrencies have a higher average return and a higher standard deviation (risk) compared to traditional Indian stock market indices. Hypothesis 2: There is a significant positive correlation between the returns of major cryptocurrencies and the Indian stock market indices, suggesting limited diversification benefits. RESEARCH METHODOLOGY This research study will adopt a quantitative approach using a mix of descriptive and inferential statistics. For this study, a quantitative research design is employed to investigate the challenges faced in adopting cryptocurrency. Quantitative research aims to collect and analyze numerical data to answer research questions and test hypothesis, identify patterns or trends. In this case, the research design allows for a comprehensive exploration of the various challenges encountered in adopting cryptocurrency. Cryptocurrency’s Risk and Return Analysis in India JEFMS, Volume 08 Issue 10 October 2025 www.ijefm.co.in Page 6734 Data Collection: ❖ Secondary Data: Daily price data of the top 10 cryptocurrencies (by market capitalization) will be collected from reliable and reputable financial databases and publications such as yahoo finance and Coin Market Cap as shown in Table 1. The data will span a specified period (e.g., the last 5 years) to ensure a robust analysis. ❖ Traditional Assets Data: Daily price data for the Nifty 50 and Sensex will be gathered from financial databases to serve as a benchmark for comparison. RESULTS AND DISCUSSION This analysis is among the cryptocurrency which have analyzed the correlation of their trading price from 2017-2021, here we tried to get the famous 10 cryptocurrencies with a large market cap in the world. All of them are contained in the table 1. The table observed that Bitcoin has highest capitalization in market, price, circulating supply and volume (in dollars) followed by others cryptocurrencies. The table showed that Risk and Return Calculation: Daily returns is calculated using the logarithmic return formula. The table observed Risk is measured using the standard deviation of these daily returns. The Pearson's correlation coefficient is calculated to examine the relationship between cryptocurrency returns and Indian stock market returns. A regression model used to determine the influence of a set of independent variables (e.g., daily returns of specific cryptocurrencies) on a dependent variable (e.g., portfolio return). Table 1: Cryptocurrency Characteristics Name Symbol Capitalization in Market (in dollars) Price (in dollars) Circulating Supply Volume (in dollars) Ethereum ETH 316,327,093,482 2,728.37 115,939,767 ETH 76,081,227,984 Ripple XRP 42,484,880,360 1.21 35,108,326,973 XRP 20,300,135,013 Ethereum Classic ETC 7,935,801,671 68.23 116,313,299 ETC 9,467,323,983 Lite Coin LTC 13,903,967,713 208.29 66,752,415 LTC 10,210,875,902 Bitcoin BTC 710,169,231,729 37,949.16 18,713,700 BTC 111,499,352,365 Monero XMR 4,253,695,000 243.43 17,912,977 XMR 614,168,151 Dash Dash 2,350,968,883 233.99 10,137,997 DASH 1,468,599,054 NEM XEM 2,025,543,035 0.2215 8,999,999,999 XEM 299,606,569 Siacoin SC 982,528,623 0.02051 47,812,582,992 SC 220,155,748 Stacks STX 1,171,186,418 1.06 1,120,206,745 STX 34,706,024 Source: Coin Market Website CONCLUSION The study confirms that cryptocurrencies offer the potential for high returns but are accompanied by substantial risks, particularly due to their extreme volatility. The findings demonstrate that the Indian crypto market is unique, influenced not just by global trends but also by the country's evolving regulatory landscape. The results of this research provide valuable, data-driven insights for Indian investors, enabling them to better understand the true nature of their crypto investments. This information is crucial for making more informed decisions, managing risk effectively, and building diversified portfolios that align with their individual risk tolerance. While the crypto market in India is still maturing, this research contributes to a deeper academic understanding and provides a critical guide for investors navigating this complex and dynamic asset class. ACKNOWLEDGEMENTS It is great pleasure for me to acknowledge the kind of help and guidance received during the research study work. I would like to thank my faculty advisor Dr. Kushendra Mishra, Dr. Amit Kumar Singh and other faculty members. This work is my thesis part of master degree programme. Cryptocurrency’s Risk and Return Analysis in India JEFMS, Volume 08 Issue 10 October 2025 www.ijefm.co.in Page 6735 REFERENCES 1) Sunita Dasman (2021). Analysis of Return and Risk of Cryptocurrency Bitcoin Asset as Investment Instrument. Accounting and Finance Innovation. 2) Chaitali Mahadik (2024). A Study on Risk and Return Analysis of Crypto Currency. International Jounral of Advanced Research in Science, Communication and Technology.