You need to have an account with the cryptocurrency exchange (like WazirX, Binance, Zebpay) to invest in cryptocurrencies like Bitcoins, Ethereum, Ripple and Doge.
It’s similar to investing in the stock market where you can trade daily or invest for the long term.
The article helps you understand – how cryptocurrency investment works and how you can invest in cryptocurrency in India.
How Cryptocurrency Investment Works
Cryptocurrencies came into existence in 2009 with the creation of the first cryptocurrency – Bitcoin.
Bitcoins do not have a physical presence like the US dollar or Indian Rupee note. You can only see the bitcoin address, like the one shown below.
Bitcoin codes are generated during the bitcoin mining process. Mining process needs large powerful computers and a continuous electricity supply. It’s not profitable to mine bitcoins in India due to the high cost of electricity in India.
Most of the bitcoins are mined in China and countries like Norway where computer infrastructure and electricity are cheap.
People like you and me can buy bitcoins directly from the crypto exchange. I will go through the bitcoin buying process later in the article.
I should also inform you that It’s a good practice to keep the cryptocurrencies safe in a wallet rather than keeping them in the exchange for safety reasons.
How to Invest in Cryptocurrency in India
#1. Choose Your Cryptocurrency
It’s really hard to select the best coin out of more than 5000 available cryptocurrencies. You can’t trust the information blindly that is published on the internet. There are more scammers than real crypto investors.
So it’s better to do your own research than buying crypto based on a random tip from a Facebook group or Redditt group.
I can help you evaluate the cryptocurrencies based on some parameters that represent the strength of a cryptocurrency.
#1. Market Capitalization
The price of the coin is not the right parameter to evaluate a coin. It’s not always true that a coin of 1 Rs. is cheaper than a coin of 10 Rs. You should multiply the total available coins with the price of the coin to find which coin is more valuable.
A high market capitalization indicates that the particular crypto has people’s interest and their willingness to pay for a coin.
Here you can check the market capitalization of different cryptocurrencies.
For example, the market cap for bitcoin will be 18,707,650 BTC (circulating supply) x $57,230.82 (Price) = $1,070,654,149 (market capitalization).
#2. Liquidity or Volume Traded
Liquidity means how many coins have been traded in the past 24 hours. More volume means it is easier to buy and sell the cryptocurrency.
If the cryptocurrency has low trading volume, you would find it difficult to sell the coin when you need the money.
Choose a cryptocurrency that has at least 10,000 USD trading volume to ensure that there are both buyers and sellers and the crypto has a fair amount of liquidity.
#3. Cryptocurrency with a track record and historical data
Invest in a cryptocurrency that has been around for some time and has a proven track record in the cryptocurrency markets.
Stay away from the cryptos which are just launched and created just hype without solid product development.
Dogecoin is one rare case, that does not mean that all meme (joke) coins will give you a 10x return. Doge was successful because of Elon Musk otherwise that’s just a joke coin.
Investing in a cryptocurrency that has been traded for 2 years or more would be a safer investment option than the one which has been around for a few weeks.
Because then you are sure that the cryptocurrency is not a fad that would last for a few weeks or months before disappearing.
#4. Cryptocurrency with a community
The success of bitcoin was its community, a network of people and developers who carried the technology forward.
Likewise, for any cryptocurrency’s success, it needs to have loyal followers and a strong community who have genuine interest and belief in the future of that particular crypto technology.
You need to check blogs and forums like Reddit to find whether the cryptocurrency has a fan following and solid support from the community.
#2. Choosing the Platform to Buy Cryptocurrency
The cryptocurrency platforms are the exchanges or websites that help match cryptocurrency buyers and sellers. The platform helps trade and exchange various cryptocurrencies.
Without a platform, it will be hard to invest in cryptocurrencies unless you know the cryptocurrency seller in person.
Choosing the right platform is equally important, which is secure and supports the trading of your cryptocurrency.
Factors that you need to consider before choosing an exchange platform to buy cryptocurrency are.
#1. Supports your cryptocurrency/ trading pairs
The frontline cryptocurrencies like Bitcoin, Ethereum, Ripple and Litecoin are mostly available for investing in all the exchanges.
Find a crypto exchange that has INR pair so that you can invest directly into the crypto without converting Indian currency into Bitcoins or USDT.
Security of the crypto exchange and cryptocurrency is an important factor because if the exchange is insecure, your cryptos and funds can get stolen.
You need to select a crypto exchange that employs encrypted transactions, stores crypto coins in cold (not connected to the internet) locations and keeps the trading platform secure.
#3. Ease of Use
The exchange should provide a trading platform that is simple, fast and available on the web & smartphones. So that you can trade from anywhere anytime.
The platform should allow the deposit/ withdrawal of your local currency money without any problem.
#4. Exchange Fees
Charges for trading are generally less than 1% per transaction which may decrease if you trade in large volumes.
Apart from trading fees, you need to pay withdrawal charges too. You should compare all the fees that an exchange is charging for its services.
You need to pick a platform that offers all the facilities at a reasonable cost because the exchange fee accounts for a substantial cost of investment.
I have opened an account with WazirX crypto exchange because WazirX is an easy-to-use exchange with online account opening.
WazirX helps you buy/sell most of the popular cryptos with just 0.2% trading fees. However, there are withdrawal limits on certain cryptos. The platform is safe, fast and available on smartphones, Windows and Mac.
WazirX even has its own token WRX that you can use for paying transaction fees.
#1. Sign Up on WazirX
Click here to start the free account opening process.
#2. Fill Details to Start Creating Account
Start account opening by providing your email address and creating a strong password having alpha-numeric characters.
#3. Email Verification and Account Security Setup
Verify the email address provided by clicking on the verification link received on the email address and proceed ahead with account creation.
You need to set up your account security. WazirX offers two options for your account security.
- Google Authenticator App
- Mobile SMS service
You can choose either of the options. But the authenticator app is safer as compared to mobile SMS which is prone to delayed receipt and possibility of SIM card hacking.
#4. Select Country and Choose Account
Select India (country) and choose either the “skip now” or “complete KYC” option as per your cryptocurrency investing needs.
Without KYC you can only deposit and trade on your WazirX account. To enable withdrawal and trade P2P you need to complete KYC.
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
To complete the process upload the scanned copy of your KYC documents and selfie. The account gets verified within 24 to 48 hours.
#5. Transfer money into WazirX account
WazirX wallet allows INR deposits via IMPS, UPI, RTGS and NEFT. You can deposit a minimum of Rs. 100 in your WazirX account while there is no upper limit to the amount of money that can be deposited.
Login and click “Funds” for depositing INR in your account. Select the option “Rupee INR” and click on deposit. Then you will need to link your bank details with your WazirX account.
Next, you will be prompted for “Instant deposit using IMPS/ NEFT/ RTGS” and get WazirX bank details.
Your money (in INR) will be credited in your WazirX account instantly after you transfer the funds via any of the IMPS/ NEFT or RTGS channels.
#6. How to Buy Cryptocurrency (Bitcoin) on WazirX in India
For buying Bitcoin, login to your account and click on INR under section “Exchange”. This is a spot market for all the cryptocurrencies paired against INR.
On the screen, you will get all BTC/INR price charts, the order book details and the order entry form on the right-hand side as shown below.
To invest in cryptocurrency (like bitcoin) fill in the buy order form and click on “Buy BTC”.
The order will take some time to get executed. You will receive Bitcoins as soon as the order gets traded.
If you want to evaluate any other exchange/ platform then you can do so based on the following factors (as explained above).
- Supports your cryptocurrency/ trading pairs
- Ease of use
- Exchange fees
#3. Storing Cryptocurrency
You should not keep your cryptocurrency in an exchange account because your cryptocurrencies can get stolen or there is a risk of an exchange getting shut down.
You can store cryptocurrencies safely in a crypto wallet. A cryptocurrency wallet helps you store, receive and send bitcoins and other cryptocurrencies in a secured environment that is accessible only to you.
Crypto wallets are available in;
- Mobile app form
- Web/ Exchange wallets
- Desktop wallets
- Hardware wallets
You can download the app from the Google or Apple store as the mobile wallets are available online.
Web wallets are also available online, but you need to download the .exe file to create a desktop wallet on your PC.
Hardware are physical wallets that look like USB sticks or cards that you need to purchase online.
After you have signed in your wallet you need to create an address to receive bitcoin. For receiving any other cryptocurrency, you need to create its specific address.
Note: you cannot receive Bitcoin on the Ethereum address. The address is not universal but specific only to receive a particular cryptocurrency only.
A typical bitcoin address looks like the one shown below –
Sign in to your exchange account and select bitcoin or any cryptocurrency for which you have created the address.
Click on send/withdraw Bitcoin on your exchange account, select the amount of bitcoins you want to send and paste the address generated from your wallet in the recipient place.
You will have to confirm the transaction using the two-factor authentication to receive Bitcoin in your wallet.
You may like to read – WazirX vs Zebpay
Best Cryptocurrency Wallets in India 2020
#1. WazirX Multi-Cryptocurrency Wallet
WazirX is a crypto exchange that also provides a wallet facility. You can store 100+ crypto coins in the WazirX wallet immediately after purchase. The wallet allows you to access cryptocurrency instantly for buying/ selling on the exchange.
For security, WazirX uses a two-factor authentication like Google authenticator or mobile OTP-based authentication.
You have to open a WazirX account to use their wallet.
You can use the wallet on the go to trade on the WazirX exchange and do P2P (buy/sell directly) 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
- 100+ crypto coins can be stored
What I Didn’t Like
- Some withdrawals have a high fees
- Limit on the minimum and maximum withdrawal amount
Best For– Professional high volume traders who want access to cryptocurrency on-the-go.
#2. Ledger Nano X Wallet
Ledger Nano X is a hardware wallet compatible with Windows 8+, macOS 10.10+, Linux, iOS 9+ and Android 7+ operating systems. The compatibility helps you to access the cryptocurrency on any of the devices easily.
You can store 27 different crypto coins and 1500+ tokens on the USB with secure chips. Ledger Nano X comes with a certified secure chip and custom OS for maximum security, so that you can store your cryptocurrency safely.
Ledger Nano X wallet is powered by a 100mAh battery and can be bought directly from the Ledger online store. The Ledger Nanao X is easy to carry and lasts long as it weighs 34 grams and is made up of stainless steel and plastic.
You can buy Ledger Nano X is for Rs. 10,600/-
What I Like
- 34 grams of weight
- Secure chip and custom OS
- Manage 27 different crypto coins
What I Didn’t Like
- Takes more than 3 weeks to receive the product in India
Best For – Storing cryptocurrency safely offline
#3. Exodus Bitcoin Wallet
You can use your PC as a crypto wallet by downloading the Exodus .exe wallet application. The desktop-based Exodus bitcoin wallet is compatible with Windows, Mac and Linux PC’s hardware. Exodus lets you store 130+ crypto assets safely on your PC.
For using the wallet you need to download the Exodus application. To send and receive bitcoins or other cryptocurrencies you can easily use the QR code of the bitcoin address.
The Exodus wallet stores your keys on the hard drive and offers encrypted private keys and transaction data for maximum security.
Exodus collects a miners fee for all the crypto payments/ withdrawal that you make from your desktop wallet. The fee amount is not disclosed.
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)
Best For – Small investors holding a lesser amount of cryptocurrency and who use PC for investing in cryptocurrency.
You can check out complete list of Best bitcoin wallets in India
Tips To Invest In Cryptocurrency in India
#1. Have a medium-term view
Cryptocurrency investment is not an overnight get-rich scheme. Yes, many people are becoming rich with crypto investments but the risk of losing money is equally high.
Don’t buy at the high price and sell at the low price. Have some patience and research well before investing.
#2. Keep 10% of the overall portfolio in Cryptos
You should not keep more than 10% of your portfolio investment in cryptos. This will ensure that your portfolio is diversified in Stocks, Mutual Funds, Gold, Fixed Deposits and Real Estate.
In case there are negative returns from cryptocurrency then also you have returns from other investment assets.
#3. Invest as per your risk-taking capacity
Cryptocurrencies are highly volatile, i.e. their price fluctuates heavily as compared to other investments like stocks or mutual funds.
For example, the bitcoin prices were at $1,000 in January 2017 which increased to $19,000 in December 2017 and then sharply fell to $6,500 in February 2018.
By the end of December 2017, it dipped to $3,300 before rising again to $10,000 in July 2020.
The price crossed $50,000 in February 2021 to reach $60,000+ in April 2021 before falling again to $57,119 on 12th May 2021.
You should invest only if you have the capacity to hold on to your crypto investments even in the time of huge price fluctuations.
#4. Keep away from FOMO
Fear of missing out or FOMO can create situations where you get compelled to invest in cryptocurrency without even knowing what it is.
You should not follow the herd but carry out your research before you choose to invest in cryptocurrency.
Q: Is cryptocurrency legal in India
Cryptocurrency is a global digital currency with no central regulatory authority. They are legal across the world.
After the Supreme Court relief, trading and holding cryptocurrency is legally possible in India.
Q: Is cryptocurrency a good investment
There is nothing good or bad with any investment. All investment avenues have their pros and cons.
You should have an open mind and follow a disciplined approach even while investing in cryptocurrency.
Q: How much should you invest in cryptocurrency
You can start with having Rs. 10,000 of investment in cryptocurrency. But remember to have around 10% of your overall portfolio invested in cryptocurrency.
You can keep a higher percentage only if you are an aggressive investor who can take a higher risk.
Q: Can I become a millionaire by investing in cryptocurrency
You should avoid this mindset because only scams promise this kind of return.
You need to do your own research and give sufficient time for your cryptocurrency investment to generate returns.
Q: What are Altcoins
All the other cryptocurrencies other than bitcoin are collectively known as Altcoin.
Like any other investment option, you need to have a disciplined approach while investing in cryptocurrency too. Remember any kind of investment is subject to risk and cryptocurrency is not an exception.
You need to be prudent in your investment and follow a disciplined approach. Let me know, in the comments box, if you want to know anything else regarding cryptocurrency investment.