The recent Bitcoin rally has brought about a stir in the market. Due to its good returns retail investors are investing in this new asset class now more than ever.
About a couple of years ago, buying/selling Bitcoin may have sounded like a tedious job, fit only for techies. Today the scenario has completely changed. Many emerging startups such as CoinSwitch Kuber in the crypto space and venture capitalists are looking to fund such startups, trying to make Bitcoin investing effortless more than ever.
What is Bitcoin?
Bitcoin is the first and most popular cryptocurrency or digital currency in the world. It can be used as both a mode of exchange (money) and a store of value (investment vehicle). Bitcoin is a decentralised digital currency that cannot be controlled or altered by any individual or organisation because no single entity owns the network.
Why Invest in Bitcoin?
The arrival of Bitcoin, the first fully functional and digitally native cryptocurrency in the world gave birth to a new asset class altogether. Since its inception, just a decade ago, cryptocurrencies like Bitcoin have established themselves as a good asset class.
But what is in it for investors? Why is everyone looking to buy a piece of this scarce digitally coded currency? Here is why:
- High returns & top-performing asset
Cryptocurrencies are one of the fastest-growing asset classes, and Bitcoin holds around 69% of its market share. The price of Bitcoin is highly volatile, i.e., the cost may swing far up and down from the average price of the currency on an hourly basis. But such volatility in the market serves as an advantage to risk-friendly investors and traders looking to make quick and high returns from their investment.
For instance, suppose you take a look at the price data of Bitcoins, you will find that in just a decade, the value of Bitcoin has risen from zero to nearly ₹30 lakhs. It is only logical that more investors want to hold a piece of this asset.
- Alternative hedge to inflation
The economy-wide increase in the prices of goods and services over time is called inflation. It diminishes the purchasing power of money. Bitcoin was initially designed as a deflationary asset. Its limited supply and Bitcoin Halving act as catalysts against inflation.
Earlier people used to invest in gold as an asset to protect them against inflation. Over the past couple of years, more people find Bitcoin to be a better alternative asset. Even institutional investors are converting their cash into Bitcoin to protect their finances against inflation.
How to Invest in Bitcoin?
Suppose you want to buy or sell Bitcoins in India, you can do so in the following ways:
- Through a Crypto Exchange
A Cryptocurrency exchange is a platform which helps you buy and sell digital currencies such as Bitcoins, ethereum, etc. Unlike the stock exchange, crypto exchanges are self-regulated, and they operate 24*7 throughout the year.
You can buy/ sell fractional shares of Bitcoins also via an exchange. In India, most exchanges offer a minimum capital requirement as low as ₹100 - ₹500. These exchanges may charge a small fee for enabling these transactions.
- P2P Transaction
Suppose you are not interested in paying a transaction fee or using a corporate platform to facilitate your transactions. In that case, you can choose the P2P (person to person) mode of purchase.
Here, the crypto exchanges/ platforms merely act as facilitators. They find a seller who is interested in your purchase and help you close the transaction. While this method seems more direct, it is not very often that one finds a seller who matches their deal. Also, P2P transactions may require more time to be completed.
- Bitcoin Mining
Mining is the source of earning Bitcoin. This process requires the miner to successfully add a block of transactions to the blockchain network for which the reward of new bitcoins is paid every 10 minutes. Every ten minutes, one miner succeeds in adding a transaction to the blockchain and hence earns Bitcoin through this process. Mining involves a high degree of complexity and requires you to have special purpose equipment making it an activity which is not everyone’s cup of tea.
The easiest way to Invest in Bitcoins - Crypto Exchange
For any retail investor looking to add a fraction of Bitcoin to their portfolio, buying them through an exchange is the simplest way. Many exchanges in India facilitate Bitcoin transactions for their users.
All you have to do is sign up with an exchange of your choice and complete the KYC process. This process involves verifying your documents such as PAN, Aadhaar, etc. Most exchanges have a strict KYC in place to avoid illicit usage of such currencies.
Once you are a registered user, you can add money in INR to your wallet and use that amount to place an order for Bitcoin. In India, you can buy Bitcoin with a minimum capital of just ₹100.
How to Choose a Good Exchange?
An ideal crypto exchange is one which is simple, flexible and accessible to its users. While many platforms are highly technical, a few platforms such as CoinSwitch Kuber are designed for retail investors which simplify the technical process.
While choosing your platform, make sure it is simple to use. Verify the details of the team behind the platform. And most importantly, try to avoid platforms that do not have a KYC in place as it may not be very secure.
Though choosing a secure and straightforward platform is crucial to your investment’s security, you are also required to do your research before investing in crypto.
Disclaimer: This above is non-editorial content and TIL hereby disclaims any and all warranties, express or implied, relating to the same. TIL does not guarantee, vouch for or necessarily endorse any of the above content nor is responsible for them in any manner whatsoever. The article does not constitute investment advice. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified.
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