Nowadays you must have heard a lot about something called Bitcoin and cryptocurrencies. You might also have heard about people that are investing a lot of money in Bitcoin or other cryptocurrencies. I am not talking about USA or Europe or any other place. Instead, I am talking about India.
Since we’re living in India, we should know whether or not to invest in Bitcoin and other cryptocurrencies. Today, I am going to speak about this very important topic because cryptocurrency investments can make you very rich in a short time.
Or, if you’re careless, it can wipe out all your savings and investments in just a few hours. If you’re unaware of what is Bitcoin or cryptocurrencies, I will explain briefly.
Bitcoin is a cryptocurrency. It has a large value in Indian Rupees. Right now, the price of a single Bitcoin is about Rs.17 lakhs.
Bitcoin is not a regular currency like the Indian Rupee. There’s a vast difference. The Indian Rupee or American Dollar, or any other currency in the world is regulated by a government. However, Bitcoin is not regulated by any authority.
All currencies, such as the Rupee, have collateral, such as gold. Bitcoin has no collateral. Also, unlike the Rupee, Dollar, Euro or other currencies, there’re no notes or coins of Bitcoin. This means that Bitcoin has no physical existence. Bitcoin lives online only and is digital.
This means if you want to buy Bitcoin, sell Bitcoin or trade in Bitcoin, it has to be done online only. Though Bitcoin has no physical existence, it is worth a lot of money because of the demand and supply. Unlike common currency, which is printed or minted by a government, Bitcoin generates itself on the system known as Blockchain.
By mid-2022, nearly 19 million Bitcoins were in circulation. This means that only about two million more Bitcoins will be mined and available. It is estimated that it would take close to 120 years for the remaining Bitcoin to be mined and available.
Once all these 21 million Bitcoin are mined, there will be no new Bitcoin. Bitcoin is also famous with Indian investors for a simple reason. You can buy Satoshi, a fraction of a Bitcoin, for as low as Rs.100 only. 100 million Satoshi make one Bitcoin. That means you can continue buying Satoshi every day or every month and own a Bitcoin over a period of years.
If you’re interested in investing in Bitcoin, you can also start a Crypto Investment Plan or CIP, which is available from various apps that offer crypto in India. That way, you could choose to invest small amounts of money regularly and own the single-largest cryptocurrency in the world or its fractions.
A few years ago, investing in Bitcoin was illegal in India. However, the Indian government has since relaxed the rules. You can own Bitcoin in India, provided you undergo the full Know-Your-Customer or KYC process like we do while opening a bank account.
Advantages of Bitcoin Investment
Now, the question arises, why should I invest in Bitcoin and other cryptocurrencies? That’s quite understandable because, in India, we have several regular or conventional investment options such as bank plans, stocks and Mutual Funds, commodities and currencies and other such things.
True. However, investing in Bitcoin and other cryptocurrencies comes with its own set of advantages. Here are some of these advantages:
1. Prices are Always High:
Though Bitcoin prices go up and down, the overall trend over the last 10 years is that Bitcoin prices always surge higher than expected. This means your money grows manifold. Unlike stocks, Bitcoin is not prone to economic or market conditions.
The prices of Bitcoin go up when there’re lots of people that want to buy this cryptocurrency. In fact, the price rises daily. You don’t have to invest in many cryptos, while with stocks, you usually would have to buy many.
2. Bitcoin is Legit:
When you open an account on any platform to buy Bitcoin or any crypto, you have to complete the full KYC formalities. This means you can own Bitcoin or other cryptos legally without having to worry about breaking any rules.
You can also nominate a person to inherit Bitcoin and other cryptos in your accounts, legally, after you pass away. Earlier, owning or buying, selling and trading in Bitcoin was banned, but now it is allowed.
3. Buy or Sold Anywhere in The World:
All you require is an app to buy and sell or trade in cryptos and a cryptocurrency wallet to store them. You don’t need to open a complex Demat and Trading Account to hold cryptos. Furthermore, you can exchange your cryptos in any currency of your choice if you take the option.
For example, if you’ve bought cryptos in India but wish to take them to Dubai or USA, you can easily do that. And you can request the money that comes when you sell or trade them in the local currency of Dubai, which is the UAE Dirham or the USA, which is the US Dollar. Only the buying and selling app should be connected to your bank account in these countries.
However, the greatest benefit of investing in Bitcoin is the huge profits that are possible within the shortest possible time. This happens because Bitcoin and other crypto prices rise a lot every day. You can see some growth in the prices daily.
You can sell a few fractions of the crypto whenever you need money. Usually, crypto is seen as cash. So, when you sell Bitcoin or Satoshi, Ethereum or others, you get the money in Indian Rupees immediately.
Taxation on Bitcoin
Now, this is something you should seriously consider. The Indian government imposes a 30 per cent Property Gains Tax on all profits made with Bitcoin and other cryptos.
Additionally, you have to pay one per cent of the profits as tax when you trade with Bitcoin and other cryptocurrencies. This might sound strange because Bitcoin doesn’t attract taxes in most countries.
The practice of taxing Bitcoin and crypto investments began in 2012. This is because owning a Bitcoin or crypto is considered as property, unlike any other form of investment. This tax can be affordable if you’re making large profits on Bitcoin and other cryptos.
However, I suggest that you consult a Chartered Accountant about whether you should opt for crypto as an investment. Not paying taxes on Bitcoin is tax evasion and hence, punishable under the Income Tax Act of India.
How to Buy and Sell Bitcoin or Other Cryptos
Buying or selling cryptos in India is very simple. All you have to do is download an app from any of the foreign or Indian crypto exchanges online and open an account.
To open a crypto account, you will have to complete the full KYC formalities, similar to the ones done at banks. Only these KYC formalities are online. You will require your PAN card and Aadhar card to open a crypto account.
The next step is to download an app that can hold your Bitcoin or other cryptos. There’re several options available. Some crypto wallets for mobiles are free, while others that come with premium features require a monthly fee.
You can also opt for a hardware wallet, which looks like a pen drive and can be taken with you easily. Furthermore, you have online wallets that can be accessed only through a computer or mobile.
Nowadays, most crypto exchanges also provide a free wallet. However, most persons choose an independent wallet because if anything happens with the currency exchange, their investment remains safe. You can choose the way you wish to store your cryptos and investments in a way you like.
Buying Bitcoin and Other Cryptos
Buying a Bitcoin or other cryptos such as Monera or Ethereum, Polka Dot, or Litecoin is very simple. All you need is some money.
The first step is to fund your crypto trading account. Nowadays, the minimum amount you need to fund your account is only Rs. 500. And you can buy any crypto or its fractions worth that amount. Usually, a crypto exchange will charge Re.1 or Rs.2 as their service fee, which is fairly affordable.
This fee doesn’t change even if you buy less or more than Rs.500. With certain apps. You can invest as low as Rs.100 only. The entire buying process is very quick and takes less than a minute. You simply have to select the crypto you wish to buy and mention the amount of money in the Indian Rupees that you wish to invest.
The app or website will show you how many fractions of that crypto you could get for the value. If you agree, simply click ‘buy’. Usually, many fractions of the crypto will be added to your wallet within a few seconds only.
Additionally, you can keep track of your investments daily or even hourly. You can also sell your Bitcoin and other cryptos 24 hours a day. Unlike stock markets, there’re no specific timings to buy and sell or trade in cryptos. The entire process is online.
Trading in Cryptos
This will bring us to the question of whether we should trade in Bitcoin and other cryptos. Actually, millions of people trade in cryptos around the world. India has one of the lowest volumes of crypto trade because of the high taxation and overall lack of knowledge of Bitcoin.
Trading in cryptos is very simple. All you have to do is fix the price that you want for your cryptos and place the sell order. Whenever the price of Bitcoin and its fractions or those of other cryptocurrencies reach that level, you will get cash. The money goes directly to your bank account linked with the crypto exchange.
The other option is to sell your cryptos at the prevailing rate. That means you have to accept the market price or sell at a lower price if you’re in a hurry. That way, your cryptos are sold within a few minutes only, and the cash goes to your bank account.
Risks of Investing in Bitcoin and Cryptos
While Bitcoin and other cryptos might appear to be a wonderful way to invest and get some real money by trading, let us not forget it is full of some very high risks. These risks could make you lose all your investments overnight.
The legal status of Bitcoin with the Indian government is still shaky. While the Indian government doesn’t accept Bitcoin as legal money, it doesn’t ban Bitcoin and other cryptos either. Therefore, if the government decides to ban crypto, you could lose all the money.
Some years ago, the government raided crypto traders and closed various bank accounts in the country while ruling that owning cryptos was a punishable crime.
The absence of regulation is something that might concern you. Bitcoin and other cryptos aren’t regulated by anyone. There’re no collaterals. Hence, nobody can predict how long would Bitcoin or other cryptos survive as a financial asset.
Furthermore, most crypto exchanges that offer services in India aren’t regulated tightly. Most of them operate vaguely as financial technology companies. Stocks, on the other hand, and stock markets are governed by SEBI or the Securities and Exchange Board of India.
Loss of Account:
If you lose access to your cryptocurrency account or the app or the hardware where you store Bitcoin and other such investments, the money could be lost forever. All cryptos trade with a certain level of anonymity. Therefore, there’s no way to tell whether or not a cryptocurrency belongs to you.
A very simple thing such as losing your account username and password could also put you at great loss since you would lose access. While a few exchanges do provide the facility of recovering your lost username or password, it might not be possible always and in every situation.
How Much Profits?
Before I end, I will tell you how much profit you could make if you invest in Bitcoin or other cryptos. Over the last year, the price of Bitcoin has more than doubled. The price of Ethereum has gone up by about 400 per cent if various news reports are to be believed. This means your investments can get very rich returns if you invest wisely.
Before concluding, I will say that whether Bitcoin and other cryptos are ideal for you or not depends on the amount of money you decide you invest.