Bitcoin is the most preferred cryptocurrency for investment because of the underlying reliable blockchain technology, security, and accessibility.
The chain of blocks (blockchain technology) is actually a digital ledger. Where past bitcoin transaction information is recorded in such a manner that it is difficult to change, hack, duplicate or fraud the details.
The records on a blockchain are secured through cryptography and you have private keys that are assigned to the transactions making it secure.
The digital ledger of transactions is made accessible by distributing it across the entire network of computer systems on the blockchain.
Bitcoins are available on all the crypto currency exchanges for investment and trading.
Bitcoins are used by various global online merchants for accepting payments. For example, Microsoft allows account top-up through bitcoins. In the coming days, there is a most likely hood that merchants in India start accepting bitcoins.
Different Ways to Invest in Bitcoin in India 2020
There are three ways to buy/sell bitcoins for investment purposes in India.
#1. Invest in Bitcoins Through Cryptocurrency Exchange
Unlike stock exchanges where buying/selling of shares happens, a cryptocurrency exchange is where you can buy/ sell various cryptocurrencies like bitcoins, ethereum, or ripple.
Buying bitcoins from the cryptocurrency exchange is the simplest possible way to invest in bitcoin. You just have to open an account with any of the crypto exchanges, transfer money into the account and use the exchange platform to buy bitcoins.
You need to pay the transaction fees for buying bitcoins from the crypto exchange.
#2. Invest in Bitcoins Through P2P Transaction
If you do not want to pay the transaction fees or use the exchange trading platform then you can use the P2P (Person to Person) mode of buying bitcoins.
In P2P transactions, the exchange/ platform only acts as facilitators. They help you find a bitcoin seller and then you need to close the transaction.
Depending on the platform internal policy they may or may not hold bitcoins in the escrow account till the money transfer completes.
In India, marketplace like Paxful provide P2P transactions at a 0% fee for buyers, whereas sellers need to pay a certain percentage of fee, normally up to 1% of the transaction amount.
But the other platforms or exchanges may collect a small amount of fees for P2P transactions, that you need to check before using the P2P mechanism for buying bitcoins.
#3. Get Bitcoins Through Mining
You can also get bitcoins through mining. Mining is a process where you are rewarded with bitcoins on the successful addition of a block to the blockchain.
Bitcoin mining involves two separate tasks. First, you need to verify the past bitcoin transactions that have already taken place. The file size containing details of bitcoin transactions equal to 1MB needs to be verified.
After that, you need to solve a complex mathematical problem so that the block of verified bitcoin transactions can be added successfully to the existing blockchain.
When you complete both the tasks successfully then you are awarded 1 bitcoin for your efforts.
The degree of complexity involved can be understood from the fact that both the tasks cannot be done on your home PC.
You need ASIC (Application Specific Integrated Circuits) computers dedicated only for bitcoin mining and lots of electricity to mine bitcoins.
Best Way to Invest in Bitcoin in India
The easiest way to invest in bitcoin in India for a beginner is to buy bitcoins on the exchange platform.
#1. Bitcoin Exchange Vs P2P Transaction
In P2P transactions you need to place your bitcoin buying requirements or look for the available bitcoin selling offers. Once you have a match then you need to get in touch with the seller and transfer the money.
The P2P process may take some time and the platform may or may not assist you in the transaction, except for finding the sellers.
In comparison to P2P mode, the account opening and buying process completely happens on the exchange platform.
You have access to buy/sell quotes and the trade happens immediately. You need not wait for a seller with the exact quantity and terms like in the P2P trade.
#2. Bitcoin Exchange Vs Mining Bitcoins
In mining bitcoin, you need to invest money to buy bitcoin mining computers. You also need to invest money for electricity and maintenance.
The mining process will require you to verify transactions and solve complex mathematical problems before you are rewarded with bitcoins. This may take a lot of time and does not assure that you will be successful at mining bitcoins.
Using the exchange method, you do not have to spend money to buy ASIC computers or on electricity to mine bitcoins.
Selecting Bitcoin Exchange/Website to Invest in Bitcoin
Below are the factors that you need to consider before choosing an exchange/website to invest in bitcoin.
#1. Ease of Use
You should look for an exchange that provides a trading platform that is simple, fast and available on all devices through the internet like smartphones, tablets and desktops to ensure trade from anywhere anytime.
The platform should allow online deposit/ withdrawal of money through UPI, net banking and other methods without any problem.
#2. Supports Bitcoin Trading Pairs
Bitcoins (BTC) are listed on most of the exchanges. But, the exchange should also have bitcoin trading pairs like bitcoin – INR pair, bitcoin – ethereum, bitcoin – ripple so that you can invest in other cryptocurrencies also.
If you are looking to trade in other cryptocurrencies or trading pairs then you need to check whether your exchange offers those cryptocurrency pairs.
Your exchange must have the highest security protocol in place to prevent hacking, virus attacks and theft.
Security is the most important factor because if an exchange is insecure, your cryptos and funds are at risk of theft.
Select an exchange that employs encrypted transactions, crypto coin storage in cold (not connected to the internet) locations and safe trading.
#4. Exchange Fees
The trading/ transaction fee is the cost of investing in bitcoin, so you need to pick a platform that offers all the facilities at a reasonable cost.
Charges for trading in bitcoin is less than 1% per transaction. But, if you trade large volumes then the fees may decrease depending on how the exchange charges your buy/sell transaction.
Before you open an account you need to compare all the fees that an exchange is charging from you. For example, exchanges also collect withdrawal charges when you transfer your money back into your bank account.
Getting a Bitcoin Wallet to Store Coins
After you have invested in bitcoin, you need a bitcoin wallet to store your bitcoins safely at a secured location where you have complete ownership.
Different type of bitcoin wallets that you can use are under
- Mobile or App-based wallets
- Web wallets (an exchange wallet is a form of web wallet)
- Hardware wallets
- Desktop wallets
How to Get a Bitcoin Wallet
You can download the mobile app wallet from Google Play or an Apple Store and get yourself registered to start using your bitcoin wallet. The app wallets are free of cost, you do not have to pay for downloading or using the app.
You need to open an account for using a web wallet with the respective website/ platform or crypto exchange like WazirX and Zebpay.
Hardware wallets come in the form of physical plug-in devices that look similar to USB. They are portable and can be purchased online from Amazon or directly from the company.
Desktop wallets can be set up by downloading the .exe application and storing it on your local PC hard disk.
How to Invest in Bitcoin in India 2020
You can start a bitcoin investment by selecting an exchange to open an account, transfer money and use your money to buy bitcoins.
You can follow step-by-step procedures to invest in bitcoins in India.
I have used the WazirX exchange to open an account and buy bitcoins because of the simple & easy account opening process, lightning-fast transaction and easy to use platform.
WazirX also has tie-up with the world’s largest crypto exchange – Binance. But you can use any other exchange, the process will be more or less the same as shown below.
#1. Open Crypto Trading Account
Open an account on WazirX by following steps mentioned here
#1. Sign Up on WazirX
Click here to visit the WazirX website and sign up to start the account opening process.
#2. Fill Details to Start Creating Account
In the first step, you need to fill your email address and create a strong password to open an account.
#3. Email Verification and Account Security Setup
WazirX sends you an email for account verification. Verify your email and set up your account security.
You can use any of the two ways to set your account security.
- Google Authenticator App
- Mobile SMS service
However, the Google Authenticator app is safer as compared to mobile SMS because the SMS is prone to the delayed receipt and there are chances of SIM card hacking.
#4. Select Country and Choose Account
WazirX allows you to open an account with or without KYC. Without KYC you can only deposit and trade on your WazirX account.
The KYC compliant account has the facility perform all the transactions including withdrawals and can trade in P2P.
For completing KYC you need to enter a few details like
- Full name as appearing on KYC document
- Date of birth
- Address as per the KYC document
Upload the scanned copy of your KYC documents and selfie to complete the account opening process.
#2. Transfer Money (INR) to Your Trading Account
Before you trade, you need to deposit Rupee (INR) into your account. The money can then be used to directly buy bitcoins, USDT or other cryptocurrencies listed on the exchange.
On WazirX the minimum deposit amount is Rs. 100 whereas, there is no upper cap on deposit.
You can deposit using IMPS, UPI, RTGS and NEFT methods.
Click “Funds” for depositing INR after you have logged into your account. Select the option “Rupee INR” and click on deposit. Then you will need to link your bank details with your WazirX account.
Further, you will be prompted for “Instant deposit using IMPS/ NEFT/ RTGS” and get WazirX bank details.
Transfer the funds via any of the IMPS/ NEFT or RTGS channels. Your money (in INR) will be credited in your WazirX account instantly which you can use to buy bitcoins on the exchange platform.
#3. Buy Bitcoins on the Exchange
To invest in bitcoins login to your account and click on INR under the section “Exchange”. This is a spot market place for all the cryptocurrencies that are paired against INR.
On the screen, you will be able to see various cryptocurrency pairs against INR. Select the bitcoin (BTC) – INR pair.
When you select the BTC/INR pair you will get the price chart, the order book details and the order entry form on the right-hand side as shown.
On the right-hand side bottom, you will also find an order (buy/sell) entry form like the one shown below.
Fill in the buy order form for buying bitcoins and click on “Place buy order”. The order gets placed instantly and you will receive bitcoins as soon as the order gets traded.
#4. Store Bitcoins in Your Wallet
After you have bought bitcoins you need to store them in your wallet because leaving them in the exchange account is not safe. The bitcoins can get stolen from the exchange account or there are possibilities that the exchange may close operations in the future.
To prevent such scenarios you need to transfer your bitcoins from the exchange account to your personal wallet.
For transferring bitcoin you need to create an address to receive bitcoin.
Note: You cannot receive bitcoin on ethereum address. Every cryptocurrency has its own specific address to receive that particular cryptocurrency only.
A typical bitcoin address looks like the one shown below
Next, you need to sign in to your exchange account and select bitcoin to send it into your wallet. Click on send/ withdraw bitcoin, then select the amount of bitcoin that you want to send and paste the address generated from your wallet in the recipient place.
Confirm the transaction using the two-factor authentication and you will receive bitcoin in your own wallet.
Best Bitcoin Wallet in India 2020
#1. WazirX Multi-Cryptocurrency Wallet
You need to open a WazirX account to use the wallet facility. WazirX exchange provides a web/ app based wallet facility.
You can use the wallet to trade 70+ cryptocurrency on the WazirX exchange and do P2P transactions.
WazirX does not charge any deposit fee but withdrawals are subject to fees (depending on the cryptocurrency) and minimum withdrawal amounts.
What I Like
- Option to have both web and mobile wallets
- Directly trade on the WazirX exchange
- 70+ crypto coins can be stored
What I Didn’t Like
- Withdrawals are subject to fees
- Limit on the minimum and maximum withdrawal amount
#1. Ledger Nano X Bitcoin Wallet
Ledger Nano X is a hardware wallet that you need to purchase online. The Ledger Nano X is costly but the safest way to store bitcoin.
Ledger Nano X is in the form of a USB that contains secure chips to store your bitcoins and is a cold (not connected to the internet) hardware wallet.
The wallet is powered by a 100mAh battery and is compatible with iOS (9+) and Android (7+) smartphones that help you manage 24 coins and 1250+ ERC-20 tokens.
Priced in the range of Rs. 10,000 to Rs. 12,500
What I Like
- 34 grams of weight
- Secure chip and custom OS
- Manage 24 coins and 1250+ ERC-20 tokens
What I Didn’t Like
- You need to keep track of the USB
- Needs to be powered
- High price upwards of Rs. 10,000
#2. Exodus Bitcoin Wallet
Exodus uses encrypted private keys and lets you store 110+ cryptocurrencies including bitcoin.
Exodus is a desktop-based bitcoin wallet. You need to download a .exe software on your desktop in order to set up and use the wallet.
The .exe Exodus application is free to download. For a transaction, you need to pay the miners fee.
What I Like
- Wallet downloadable on Windows, Mac and Linux PC
- QR codes for address verification
- Encryption of private keys for security
What I Didn’t Like
- Need Mac 10.12, Windows 10 and 64-bit Linux (kernel version 4.10 and higher)
How to Invest in Bitcoin Mining in India
Bitcoin mining is a process where a new bitcoin is created and rewarded to the successful miner. The miners secure every bitcoin transaction. The successful miner has to complete two separate tasks before other miners.
If you are looking to mine bitcoin then – First, you need to verify 1MB file size of past bitcoin transactions, i.e. all transactions that can be stored in 1MB space. This can be a few transactions to several hundreds of transactions.
After that you need to solve a complex mathematical problem so that you can add the verified block of the transaction to the existing blockchain. When you complete both the activities then you get the newly created bitcoin in the form of reward.
Both the processes are complex and cannot be solved using your day to day computers. You need ASIC (Application Specific Integrated Circuits) computers dedicated only for bitcoin mining and lots of electricity to mine bitcoins.
The starting price of an ASIC in India is around Rs. 50,000. Then you would need a continuous supply of electricity for systems and cooling.
With each block, the difficulty level gets adjusted higher. That means, it will be going to be very hard to get a positive ROI if you are investing in bitcoin mining in India.
Important Things You Should Know Before You Start Investing in Bitcoins
#1. Requires Patience and Understanding
Investing in bitcoin is risky because of the heavy price fluctuations. You need to have patience and understanding of the price movements. You need to have a medium to the long term holding period.
Bitcoin prices change every moment and without the understanding of the market you can end up losing a substantial amount of money.
#2. Invest in Smaller Amounts
Bitcoin is a high priced cryptocurrency and the best thing is that you can invest in bitcoins in small fractions. You can invest in 0.001 bitcoins.
One bitcoin costs you around Rs. 9,00,000. For beginners, this can be a large sum of money. But you can definitely buy 0.01 bitcoins for Rs. 9,000.
#3. Have a Wallet to Store Bitcoin
Never make a mistake of leaving your bitcoin in the exchange account. Bitcoins can get stolen or are vulnerable to hacking and virus attacks. In such a scenario you can lose your bitcoin.
Transfer them to your very own bitcoin wallet and store them in a secured place where only you have access.
#4. Know Your Risk-Taking Abilities
Bitcoin is a high-risk investment because of the high price volatility. If you do not have the capacity to bear risk then you can invest only such an amount that you do not mind losing it.
Aggressive investors with large risk-taking capacity do not mind even if their capital is eroded by 50%. Whereas, conservative investors protect their base capital. For them, a loss of 20% is the limit.
Investing in bitcoin in India is totally legal (after the Supreme Court relaxation) and not that difficult. You can start bitcoin investment by opening an account online with WazirX
Initially, you can allocate Rs. 10,000 to buy bitcoin and understand the cryptocurrency market place. Once you are comfortable then you should increase your bitcoin investment amount.