How to Invest in Cryptocurrency in India: Strategies for Successful Cryptocurrency Investing
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Cryptocurrency is a digital currency that is created through cryptography. It is a decentralized currency that functions without the oversight of any central authority. As the popularity of cryptocurrencies continues to rise, many individuals are keen to understand how to invest in cryptocurrency in India, seeking avenues to participate in this dynamic and evolving financial landscape.
For millions of people, cryptocurrency is the means to diversify their investment portfolios and earn high returns. Interested in investing in cryptocurrency in India? The 2008 financial crisis sent shockwaves around the world. This led to the invention of the first decentralized currency in the world, known as Bitcoin.
Cryptocurrency is now a trillion-dollar investment juggernaut. Cryptocurrencies serve as an alternative to traditional banking. They offer a transparent, stable, and decentralized way of currency exchange.
People across nationalities, classes, and demographics can invest in Crypto. And its unique volatility makes can generate record-breaking profits.
This article will guide you and help you understand how to invest in cryptocurrency in India for beginners.
What is Cryptocurrency?
Cryptocurrencies are independent digital currencies that work on blockchain technology. Unlike government-issued cash, cryptocurrency is a non-physical digital asset. It operates through tokens to preserve its promise of decentralization and transparency.
The world is adapting to cryptocurrency as a form of legal tender. Most leading businesses, including Microsoft, AT&T, Overstock, Subway, and others now accept Bitcoin as payment.
Since 2012, there has been a ripple of cryptocurrencies around the world. These are also known as altcoins. Government-backed currencies experience fluctuation in their value. But cryptocurrencies are immune from such instances. Because a large network of individual computers controls it. Which makes the process of making transactions easier, cheaper, and faster.
How Do Cryptocurrencies Work?
Before you learn how to Invest in Cryptocurrency in India, let’s first see how cryptocurrency actually works.
And to understand how cryptocurrency works, you need to understand mining. Mining is the process of solving complex mathematic problems. These are tough problems that need the use of super-computers. When the math problem is solved, a new block is added to the blockchain, and the miner is rewarded with new cryptocurrency. Which is then added to the existing supply.
The mathematical problems are purposefully tough. This maintains a steady and finite supply of the new cryptocurrency.
All of this happens on the blockchain, which is the fundamental concept of cryptocurrency. In this system, independently verified blocks join together to form a chain. These chains then verify the authenticity of the transaction performed by a cryptocurrency users.
Did you know, as of 2022, the global blockchain market is valued at $10.02 billion?
There are two ways to verify the authenticity of each block:
Proof of Stake (PoS)
Ethereum (ETH) coins operate on a Proof of Stake structure. Here, a person becomes a verifier by pledging some coins. This process of verification requires less computational power and cost.
Proof of Work (PoW)
Bitcoin (BTC) operates on Proof of Work. This mechanism is expensive and requires more computational energy. Miners repeatedly solve puzzles to find the closest hash (hidden) value of a block. When the numbers are found, the black is verified.
What Is Bitcoin?
Bitcoin is a revolutionary digital currency created by an anonymous group known as Satoshi Nakamoto in 2009. Unlike traditional currencies issued by governments, Bitcoin operates independently, without the need for a central authority such as a bank or government. This decentralized nature makes it unique and disruptive to the traditional financial system.
At its core, Bitcoin is built on a technology called blockchain. The blockchain is a transparent and decentralized public ledger that records all Bitcoin transactions. This ensures the integrity, security, and privacy of the cryptocurrency network.
Transactions made with Bitcoin are verified by network participants, known as miners, who use powerful computers to solve complex mathematical problems. This process not only validates transactions but also adds them to the blockchain, making them permanent and tamper-proof.
Bitcoin has gained significant attention and popularity over the years, attracting a large community of users, investors, and merchants. Its limited supply of 21 million coins and the decentralized nature of its network have contributed to its value appreciation over time.
Beyond its use as a digital currency, Bitcoin has also opened doors to various other applications. It has paved the way for the development of thousands of other cryptocurrencies, collectively known as altcoins. Additionally, the underlying blockchain technology has found applications in sectors such as supply chain management, voting systems, and decentralized finance (DeFi).
Types of Cryptocurrency Wallets
A cryptocurrency wallet is an online holder of your currency. It stores the passkey that helps you in performing digital transactions with cryptocurrencies. Through your wallet, you get an interface for accessing your cryptocurrency.
There are three major types of cryptocurrency wallets:
Paper
A paper wallet is a printed piece of paper with your private key. It is accessible through QR codes. It is best for users with long-term investments who do not plan to interact with their holdings.
Software
These wallets are stored in your phone in the form of applications. You can perform transactions through QR codes, view your balance, and do so much more with them.
Hardware
Hardware wallets come in the form of devices that look like USBs. They can be connected to any computer. Most hardware wallets automatically sign your transactions.
How to Invest in Cryptocurrency in India
In this section, you will learn how to invest in bitcoin. Investing in any platform without the right knowledge can lead you to a world of losses and scams. For those looking to explore opportunities in the digital financial realm, understanding how to invest in cryptocurrency in India is crucial to make informed decisions and mitigate potential risks.
Follow these steps to safely invest in crypto from India.
Step 1: Decide a Crypto Coin to Invest in
Although Bitcoin dominates the news cycle and the portfolios of leading crypto evangelists, there are thousands of cryptocurrencies in the world.
Here are some of the trending cryptos right now:
- Ethereum (ETH)
- Binance Coin (BNB)
- Tether (USDT)
- Cardano (ADA)
- Solana (SOL)
- Polkadot (DOT)
- Litecoin (LTC)
- Dai (DAI)
- The Sandbox (SAND)
- Tron (TRX)
- Avalanche (AVX)
Choosing crypto can come down to several factors. Leading among which are technology, market capitalization, trading volume, etc. Once you have found a suitable cryptocurrency and completed the background check, you can move to the next step.
Step 2: Choose a Crypto Exchange
Cryptocurrency is bought and sold in the open market through sophisticated crypto exchange protocols.
There are several popular ways to conduct a crypto exchange. All of them have varying fees, security, privacy, and other important features.
Platforms such as Binance, Coinbase, Kraken, KuCoin, Gemini, and Coincheck offer a safe way to transact for millions of investors. These platforms are regulated, providing assurance for investors.
Step 3: Choose a Payment Option
Once you have settled on a cryptocurrency and an exchange platform, the next step is to choose a payment option.
Most cryptocurrency exchanges are done online. You can use your credit/debit cards or direct bank transfers to complete the transaction.
Step 4: Buy Cryptocurrency
Finalize the payment and claim ownership of your crypto. Different cryptocurrency transactions occur at varying speeds. This mostly depends on your choice of crypto, exchange platform, and route of payment.
Step 5: Store Securely
The final step is the storage of your newly bought cryptocurrency. All cryptocurrencies are stored in your crypto wallet. Because it is a digital currency, there is a considerable risk of hacking.
Hence, it is recommended that you choose a wallet with strong security measures. Features such as encryption and two-factor authentication help in protecting your investment and reduces the chances of hacking.
10 Best Crypto Investment Strategies
When it comes to investing in cryptocurrency as a beginner, there are many useful strategies that can help you in building a formidable and high-yielding investment portfolio. Here are 10 such strategies:
Going All in on One Coin
Instead of diversifying your portfolio, you have the option of going all in on one coin. This is a smart strategy that is centred on investing all of your funds into one cryptocurrency with maximum potential for growth.
But, this is also a high-risk high-reward strategy that requires extensive research and due diligence.
Investing in ICOs
Initial Coin Offerings (ICOs) are a collaborative initiative to invest in a cryptocurrency before it’s launched. ICOs appeal to the public due to their early-bird advantage. However, this strategy requires thorough research and identification.
Hunting for Microcap Altcoins
Microcap altcoins are cryptocurrencies with a market capitalization of less than $300 million.
Investment in smaller and lesser-known cryptocurrencies with a low market cap can lead to significant gains, as they have the potential to be successful.
Trading Popular Narratives
Picking the popular narrative is all about investing in cryptocurrencies that are gaining international acclaim and relevance at the moment.
Opting for this strategy saves you the time and energy that is required to review each investment.
Copy-Trade Whales
“Crypto whales” is a popular term used to address successful investors and cryptocurrency evangelists.
In this strategy, you just have to follow the lead of the “whales” and invest your money in places wherever they have their holdings.
Finding Airdrops
Airdrops are newly minted cryptocurrency that is offered for free to existing holders of a related cryptocurrency.
These coins are claimed in the expectation that they may turn out to be worthy in due time.
Yield Farming Coins
Yield farming is the practice of lending your cryptocurrency holdings to earn interest.
This process is similar to earning interest through bank deposits.
Minting or Trading NFTs
Non-fungible tokens (NFTs) are unique cryptographic assets that cannot be duplicated.
They are valued at a price set by the seller/buyer, which makes them a handsome avenue for investment.
Value Investing
Value investing is the practice of investing in undervalued coins that are expected to prosper in the coming years.
This includes investing in early-stage coins, new cryptocurrencies, and downtrodden coins backed by ambitious technology.
Technical Analysis
Technical analysis is an old-school and proven method of investing. All you have to do is to put each cryptocurrency to the test and research its past performance.
This is an elaborate strategy that involves the usage of tools, public records, and expert analysis.
The Best Way to Invest in Cryptocurrency
Investing in cryptocurrency as a beginner can be scary. This is why this guide have been created to help you. Hope you have the answers to all of your questions on how to invest in cryptocurrency for beginners.
There are many types of cryptocurrencies to choose from. Each comes with its own risks and rewards. Once you have settled on one, it’s time to take the plunge!
Remember, as a beginner, it is important to start small. Have a diversified portfolio and do your own research before taking any investment decision.
Want to explore helpful techniques to save and grow your hard earned money? Dive in to our guide on Save Money.
Frequently Asked Questions (FAQs)
Yes, cryptocurrency is legal in India. The Supreme Court of India lifted the ban on cryptocurrency trading imposed by the Reserve Bank of India in 2018. However, the RBI still does not consider it as legal tender.
There is no clear answer to which Indian cryptocurrency is the best for investment as it depends on various factors such as market conditions, individual risk appetite, and investment goals. However, popular cryptocurrencies for investment in India include Bitcoin, Ethereum, Tether, Binance Coin, Cardano, Solana, and Polkadot.
Beginners can make their first cryptocurrency investment through cryptocurrency exchange platforms like Coinbase or WazirX.
To start investing in cryptocurrency in India, you need to follow a few steps. Firstly, you need to choose a reliable cryptocurrency exchange that operates in India, such as WazirX, CoinDCX, or Zebpay. Next, you need to sign up and complete the necessary KYC verification process. After that, you can link your bank account to the exchange and transfer funds to start investing in cryptocurrencies like Bitcoin, Ethereum, and others.
Yes, you can convert your cryptocurrency holdings to cash in India by selling them on a cryptocurrency exchange platform that allows you to sell your digital assets for Indian Rupees (INR).
Yes, cryptocurrency is taxable in India. The profits made from trading or investing in cryptocurrency are considered as capital gains and are subject to taxation under the Income Tax Act, 1961.
Bitcoin remains the most popular and widely recognized cryptocurrency in India. It has the highest market capitalization and trading volume among all cryptocurrencies. Bitcoin is also accepted as a form of payment by many merchants and businesses in India, including Microsoft, KFC, and Subway. While there are other popular cryptocurrencies such as Ethereum, Binance Coin, and Cardano, Bitcoin remains the most widely used and recognized cryptocurrency in India.
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