In September 2020, the 1 bitcoin price was above 7.6 lakh that now has crossed 36 lakhs which is above 5x gains within 1 year.
Bitcoin prices spiked with the start of the 2022 year and that also increased its popularity to multifold because of the charm of making huge profits.
If you are also among the beginners who want to invest in bitcoins but don’t know much about the process, then this article is for you.
You will learn about how to invest in bitcoin in India along with other aspects like what things you should keep in mind while investing in bitcoins. So that, you don’t lose your hard-earned money in the expectation of getting huge profits.
Let’s start with an overview of bitcoin.
Bitcoin – An Overview
Bitcoin is the world’s oldest and largest truly decentralized currency. Decentralized means no central authority such as government or any financial institution like RBI governs bitcoin.
Bitcoin cryptocurrency works on blockchain technology in which the data is stored as information blocks linked together to form a “chain.”
When a new transaction happens, a new block is added to the chain, and you can’t modify or delete the previous blocks. This process makes each block more secure over time.
This restriction of not to change information block make it ideal for doing peer-to-peer transactions between unknown persons without any intermediary.
Just like any other currency, the value of bitcoins also keeps on changing. However, the bitcoin price is highly volatile as compared to other currencies. You can also invest in bitcoin (just like investing in forex) to gain profits.
But before understanding how to invest in bitcoin, let’s have a look at what factors you must be aware of before you start investing.
Things to Consider Before Investing in Bitcoin
#1. Risk Appetite
Risk appetite is the ability to take risk of losing money for better returns. Since bitcoins are highly volatile, it is better to first think about how much money you can invest that won’t give you stress if you lose it.
For example, bitcoin tumbled down -11% on 19 May 2021 from Rs. 32 lakh per coin to Rs. 29 lakh, losing more than Rs. 3 lakh value in a single day.
Now suppose if you have invested Rs. 5,00,000 in bitcoins in May 2021, you would have got a straight loss of Rs. 55,000 in one day.
No doubt today bitcoin price is around Rs. 37 lakh, so your same Rs. 5 lakh worth bitcoin would have become worth Rs. 5,70,000 adding Rs. 70K to your corpus.
But you should invest in bitcoins only if you can handle such sudden loss or you are thinking of investing for the long term that we would discuss in our next section.
#2. Investment Period
The investment period matters a lot in bitcoin because if you trade on daily basis without any strong research, you may end up losing money as you can sell in fear while seeing a sudden fall in the price.
Emotions play an important role while investing in the short term whether it’s bitcoins or the stock market.
The best way to invest in bitcoin is to know for how long you want to invest. Keeping a wide horizon will protect you from daily market fluctuations and based on bitcoin’s historical analysis.
Bitcoin proved to be highly profitable in the long term of above 3 years.
If you analyze the past 5 years (2015 to 2020) returns of bitcoins, it has risen to the sky with a whopping 3000% returns as compared to other global stock market indices.
#3. How Much to Invest
Bitcoins as a currency are still in infancy in India, and you won’t find many people ready to do monetary transactions with bitcoins.
The Indian government still has no clear stand about the regulations of cryptocurrencies in India. (will discuss in next section).
It’s better to invest only 10% of your investment money in bitcoins to avoid any major loss in case of any negative scenario arises around it.
Secondly, you can easily cope up with market volatility when you know only a small portion of your money is at risk.
#4. No Regulations
If you remember RBI had banned investing and trading of cryptocurrencies in April 2018, which was later challenged by all the Indian crypto exchanges operating in the Supreme Court of India.
The Indian Supreme Court has put a stay on the RBI circular and since then investment or trading in cryptocurrencies including bitcoins is operational.
The Indian government has mentioned a proposed Cryptocurrency Bill many times but you must keep in mind that there’s no clear stand from the Indian government whether they are going to regularize the crypto investments soon or not.
In case GOI passes a bill against cryptocurrency trading or investing, then it would become illegal and that may affect your investment portfolio.
If you are not worried about Government’s decision or you are not planning to invest heavily in bitcoins, then you have a clear road ahead.
Once you have gone through the above points, now the next step is to know about the best crypto exchanges operational in India.
Go with exchanges that have a big client base, they are backed by top international exchanges or who provide insurance to your crypto assets.
For example, WazirX is the biggest crypto exchange in India with a client base of over 70 lakh and is backed by the USA’s top crypto exchange Binance. Or CoinDCX which offers insurance of your crypto assets in case any security breach happens.
Let’s discuss the top 3 best crypto exchanges in India –
- WazirX Exchange – Ideal for beginners with an easy to use interface
- CoinDCX Exchange – Ideal for experienced crypto investors with insurance
- Zebpay Exchange – If you are interested in crypto trading because of the low trading fee
#6. Secure Storage of Bitcoins
Before discussing how to invest in bitcoins, another important thing you must know is storing bitcoins securely.
Since bitcoin is digital money, you never know when a crypto exchange gets hacked, and you may lose the coins that you have bought from your hard-earned money.
If you are planning to heavily invest in bitcoins in the future, it’s better to know about bitcoin storage which is also called crypto wallets.
Bitcoin (or crypto) wallets are different from exchange wallets because they come with a set of public and private keys that help you store Bitcoins making them more secure.
The Public and private keys are made up of long alphanumeric characters required to send or receive Bitcoins without using any exchange account. So you have full control over your cryptocurrency.
Wallets are of two types – hot wallet and cold wallet.
#1. Hot wallet
A hot wallet is a software or an app that is secure enough to protect your coins from hackers. Most of the hot wallets like Coinbase wallet are available free to use.
#2. Cold wallet
A cold wallet comes in the form of Pendrive type USB stick that stores your bitcoin or other cryptocurrency information on the highly encrypted chip.
Secondly, the cold wallet is disconnected from the internet making them safe from hackers or malware attacks.
You can buy a cold wallet like Ledger Nano from their official portal.
How to Invest in Bitcoin in India
Once you have finalized the crypto exchange, you have to create your account and complete your KYC verification.
You need the things mentioned below ready before signing up for any crypto exchange in India.
- A valid email address and mobile number
- Scanned copy of Aadhaar card/Driving license/Pan Card for KYC
- Bank Account number and UPI ID
Once the KYC is done, then link your bank account and UPI ID for a money transfer.
Let’s understand the whole thing through an example of the WazirX account opening process.
#1. Create an Account on WazirX
Go to the WazirX website and click on the Signup button.
Enter your email address and set a password. Then tick on the “I agree to WazirX Terms & Services” checkbox.
Finally, click on “Sign up”.
You’ll get a verification email on your email id. Click on the verification link in the email to complete the signup process.
Now you will be asked for mobile verification. Enter your mobile number and you’ll get an OTP. Enter the OTP and click on verify.
Complete Your KYC
To complete the KYC verification process, choose the country you reside in from the given list.
You will now be asked to enter personal information.
Enter your PAN card number and address proof ID detail. Upload the photo of your documents.
Wazirx will verify your documents and your account will be opened within 24 hours.
#2. Deposit Money
Add Bank Account
- Login to your WazirX account and click on Funds, click on INR and then deposit funds.
- Now enter bank account details and IFSC code
- Click on Submit.
You’ll get an OTP on your registered mobile number. Enter the OTP and click on Authenticate.
You’ll get 3 types of fund deposit options –
I would suggest you opt for the UPI option as it is the fastest and cheapest way to deposit money in a Wazirx account.
Adding Money through UPI
Click on the UPI option as shown above. Enter the amount you want to deposit and click on continue.
Once you complete the process, you’ll get a deposit successful message as shown below.
#3. Buy Bitcoins
- Open the list cryptocurrencies and you’ll find bitcoin at first place. Click on the bitcoin
- Enter the amount you want to buy the bitcoin and click on buy.
- Confirm your order and that’s done.
Once your order is executed. You can check your completed orders in the history tab.
No doubt bitcoins have made people lakhs by investing a few thousand rupees and it seems to have a long way ahead.
But as we have discussed earlier, it is wise to understand your risk-taking capacity before diving deep into the bitcoin world.
An impulsive decision may burn your hands with a loss of money. So it’s better to start small and learn more about this digital currency for long-term high gains rather than indulging in short-term profits that may be a bit risky affair.