The recent Bitcoin rally has caused a commotion in the market. Because of the high returns, retail investors are investing in this new asset class more than ever before.
Buying and selling this cryptocurrency may have sounded like a time-consuming task reserved for techies a few years ago. Today’s scenario is completely different. Many emerging crypto startups, such as CoinSwitch Kuber, and venture capitalists are looking to fund such startups, with the goal of making the investing of this cryptocurrency easier than ever.
What is Bitcoin?
Bitcoin is the world’s first and most popular cryptocurrency or digital currency. It can be used as a medium of exchange (money) as well as a store of value (investment vehicle). It is a decentralised digital currency that cannot be controlled or altered by any individual or organisation because the network is not owned by a single entity.
How Do Bitcoins Work?
Each bitcoin (trading symbol “BTC,” however “XBT” is sometimes used) is a computer file that is kept in a digital wallet on a computer or smartphone. To understand how it works, it is helpful to grasp the following terminology and context:
- Blockchain: This cryptocurrency is driven by blockchain, an open-source technology that generates a shared public ledger. Each transaction is represented by a “block” that is “chained” to the code, resulting in a permanent record of each transaction. Blockchain technology is at the core of over 10,000 cryptocurrencies that have sprung up in the aftermath of this cryptocurrency.
- Private and Public Keys: A bitcoin wallet comprises a public key and a private key, which operate together to let the owner initiate and digitally sign transactions, therefore giving proof of authorisation.
- Miners: Using high-speed computers, miners — or users of the peer-to-peer ecosystem — independently confirm the transaction, generally within 10 to 20 minutes. For their efforts, miners are compensated in this cryptocurrency.
Why Invest in Bitcoin?
The introduction of Bitcoin, the world’s first fully functional and digitally native cryptocurrency, gave birth to an entirely new asset class. Cryptocurrencies, such as Bitcoin, have established themselves as a good asset class since their inception only a decade ago.
But what does this mean for investors? Why is everyone trying to get their hands on a piece of this scarce digitally coded currency? This is why:
High Yields and Top-Performing Assets
Cryptocurrencies are one of the fastest-growing asset classes, with Bitcoin accounting for roughly 69 per cent of the market. It’s price is highly volatile, which means that it can fluctuate significantly above and below the currency’s average price on an hourly basis. However, market volatility benefits risk-averse investors and traders looking for quick and high returns on their investments.
For example, if you look at the price data of this cryptocurrency, you will see that in just a decade, the value of this cryptocurrency has risen from zero to nearly 30 lakhs. It stands to reason that more investors will want to own a piece of this asset.
Alternative Hedge To Inflation
Inflation is the gradual increase in the prices of goods and services across the economy. It reduces money’s purchasing power. It was originally intended to be a deflationary asset. Its limited supply and Bitcoin halving act as inflationary catalysts.
Previously, people would invest in gold as an asset to protect themselves from inflation. Over the last few years, more people have discovered this cryptocurrency to be a superior alternative asset. Even institutional investors are converting their cash to this cryptocurrency to protect their assets from inflation.
How to Invest in Bitcoin?
Bitcoin is the most preferred cryptocurrency for investment because of the underlying reliable blockchain technology, security, and accessibility. The blockchain (blockchain technology) is a digital ledger. Where previous transaction information of this cryptocurrency is recorded in such a way that it is difficult to change, hack, duplicate, or fraudulently alter the details.
The records on a blockchain are secured using cryptography, and private keys are assigned to transactions to ensure their security. The digital ledger of transactions is made accessible by distributing it across the blockchain’s entire network of computer systems. This cryptocurrency is available for investment and trading on all cryptocurrency exchanges.
It is also accepted as payment by a variety of global online merchants. Microsoft, for example, allows it to be used to fund accounts. There is a good chance that merchants in India will begin accepting this cryptocurrency in the coming days.
Different Ways to Invest in Bitcoin in India 2021
There are three ways to buy/sell bitcoins for investment purposes in India.
1. Invest in Bitcoins Through Cryptocurrency Exchange
Unlike stock exchanges, where you can buy and sell shares, a cryptocurrency exchange is where you can buy and sell cryptocurrencies such as bitcoin, ethereum, or ripple.
Purchasing bitcoins from a cryptocurrency exchange is the most straightforward way to invest in this cryptocurrency. You simply need to open an account with one of the crypto exchanges, deposit funds into the account, and use the exchange platform to purchase this cryptocurrency.
You must pay transaction fees when purchasing bitcoins from a cryptocurrency exchange.
2. Invest in Bitcoins Through P2P Transaction
If you do not want to pay transaction fees or use an exchange trading platform, you can buy it through the P2P (Person to Person) method. The exchange/platform only serves as a facilitator in P2P transactions. They assist you in locating a bitcoin seller, after which you must complete the transaction.
Depending on the platform’s internal policies, this cryptocurrency may or may not be held in the escrow account until the money transfer is completed. In India, a marketplace like Paxful offers P2P transactions at a 0% fee for buyers, while sellers must pay a percentage of the fee, typically up to 1% of the transaction amount.
However, other platforms or exchanges may charge a small fee for P2P transactions, which you should check before using the P2P mechanism to buy this cryptocurrency.
3. Get Bitcoins Through Mining
Mining is another way to obtain bitcoins. Mining is the process by which you are rewarded with this cryptocurrency for successfully adding a block to the blockchain. Bitcoin mining consists of two distinct tasks. First, you must validate any previous bitcoin transactions that have occurred. A file containing details of bitcoin transactions with a size of 1MB must be verified.
Following that, you must solve a complex mathematical problem in order for the block of verified transactions of this cryptocurrency to be successfully added to the existing blockchain. When you successfully complete both tasks, you will be awarded 1 bitcoin for your efforts.
The fact that both tasks cannot be completed on your home PC demonstrates the level of complexity involved. To mine this cryptocurrency, you’ll need ASIC (Application Specific Integrated Circuits) computers dedicated solely to bitcoin mining, as well as a lot of electricity.
For a beginner, the simplest way to invest in this cryptocurrency in India is to buy it on an exchange platform.
Some Of The Easy Ways To Invest In Bitcoin In India
There are several methods for investing in this cryptocurrency in India. However, just because it is entirely digital which does not make it easy to obtain. In return for this cryptocurrency, the ways listed below demand your time, money, or both. Consider broadening your collection tactics in order to attract more.
Buying Bitcoin through an exchange is the simplest way for any retail investor to add a fraction of it to their portfolio. Many Indian exchanges facilitate Bitcoin transactions for their customers.
All you have to do is sign up with your preferred exchange and complete the KYC process. This procedure entails verifying your documents, such as your PAN, Aadhaar, and so on. To prevent the illegal use of such currencies, most exchanges have strict KYC policies in place.
Once you have registered, you can add money in INR to your wallet and use that amount to place an order of this cryptocurrency. In India, you can purchase this cryptocurrency for as little as 100 rupees.
How to Choose a Good Exchange?
An ideal cryptocurrency exchange is one that is simple, adaptable, and easily accessible to its users. While many platforms are highly technical, a few are designed for retail investors, simplifying the technical process.
When selecting a platform, make sure it is simple to use. Verify the platform’s team’s credentials. Most importantly, avoid platforms that do not have a KYC in place, as they may be insecure.
Though selecting a secure and simple platform is critical to the security of your investment, you must also conduct research before investing in cryptocurrency.
Is it Legal To Buy Bitcoins in India?
The RBI prohibited regulated entities (such as banks) from dealing with this cryptocurrency in 2018. The market went into a tailspin as a result of this. Later that year, the Supreme Court backed this decision as well. However, the ban was overturned by the Supreme Court last year. While holding this cryptocurrency was never made illegal, the Supreme Court decision means that companies in this space will be able to conduct business more easily.
Online tax preparation Cleartax also stated that there are no rules, regulations, or guidelines in place to resolve any disputes that may arise when dealing with this cryptocurrency. This increases the risk of dealing with cryptocurrency in India. In India, however, it is legal to buy and sell this cryptocurrency.
How Do I Ensure That My Bitcoin Is Stored Safely?
After purchasing Bitcoins, you must ensure that they are safely stored. These are typically stored in Bitcoin wallets, which can be offline storage like a USB drive, referred to as cold wallets, but there are also online wallets available, including, most recently, PayPal, referred to as hot wallets.
Even Bitcoin wallets have been hacked in the past, so many people prefer to keep at least a portion of their investment in a cold wallet.
What Are The Taxes You Should Be Concerned About If You Own Bitcoins?
In India, there is still a lack of clarity on the taxation of Bitcoin investment. According to CoinDesk, a digital currency news site, Indian investors may soon have to pay taxes on investment returns of this cryptocurrency.
Because of the soaring value of this cryptocurrency, income from selling Bitcoin is taxed at 30% for short-term investments and around 20% for long-term investments. However, as long as you do not sell this cryptocurrency, you are not required to pay money simply because its value has increased.
Bitcoin Exchange Wallet In India
Bitcoin wallets are similar to mobile wallets, where we store our money and conduct transactions. We keep it and other cryptocurrencies in the Bitcoin wallet. A Bitcoin wallet is a piece of software that allows you to store and manage this cryptocurrency.
A bitcoin wallet is distinct from a traditional wallet in that it contains bitcoin private keys. A wallet is typically password-protected or otherwise safeguarded against unauthorised access. In contrast to blockchain technology, which is distributed and shared, a Bitcoin wallet is operated solely by its owner.
There are a variety of bitcoin wallets available, each with its own set of features. To be able to send and receive funds, all bitcoin wallets must adhere to the Bitcoin protocol, regardless of how they are implemented. Indian companies include WazirX, Unocoin, and Zebpay. Other Bitcoin wallets come from various countries.
Types of Bitcoin Wallets
Desktop, mobile, web, and hardware Bitcoin wallets are available:
Desktop wallets are wallets that are activated on a computer device and provide the user with complete control over the wallet. They also enable the user to keep a private key.
In terms of functionality, mobile wallets are similar to desktop wallets. In physical stores, mobile wallets enable “touch-to-pay” and the scanning of a QR code with near field communication (NFC).
Users can use web wallets to access this cryptocurrency from any browser or mobile device. Because your private keys are stored online, you must exercise caution when selecting a web wallet.
Hardware wallets, which store this cryptocurrency on a physical piece of equipment plugged into a computer via a USB port, are by far the most stable type of Bitcoin wallet.
Wrapping It Up
The nicest thing about Bitcoin is that it is decentralized, which means you have a payment system that can settle worldwide transactions without having to deal with currency rates and extra fees. Furthermore, you do not need to go through a third party, such as a bank, to perform your transactions.
As it is independent of government intervention and manipulation, there is no Federal Reserve System to raise interest rates. It is also transparent, so you know exactly what is going on with your money. You may begin taking this cryptocurrency immediately without investing money or time in technicalities such as opening a merchant account or purchasing credit card processing equipment.
So, this was all about how you can invest in this cryptocurrency in India. If you are having any questions regarding this cryptocurrency then don’t forget to mention it in the comment section below.