Part 2/2 - How to Invest in Crypto

Let's start with a few facts about Crypto in India:

1. The supreme court of India has asked RBI to decide on the legality of cryptocurrency in India. The odds seem in favour. 
2. About 100 million Indians currently own cryptocurrencies - making India’s crypto user base bigger than any other country! 
3. The trading volumes of Indian cryptocurrency exchanges have increased from $200 million to $40 billion. 
4. Finance minister Nirmala Sitharaman has pledged that the government would keep an open mind with cryptocurrency. 
5. Crypto may never be considered a legal tender but may become an acceptable taxable asset. 

So let’s dive into the world of Crypto Investing

Most bitcoin mining is in China and Norway (90% hydroelectricity), where electricity and computer infrastructure are significantly cheaper. 

How to get started in Crypto: 

1. Choose your Cryptocurrency 

• Determine the market capitalization (value) of your chosen coin 

A high market capitalization indicates a high demand for the coin. 

A coin’s (Circulating Supply x Price) = its Market Capitalization 

• Determine the trading volume (liquidity) of the coin

The higher the trading volume, the easier it is to sell the coin. 

• Determine the track record of the coin 

The longer the coin has been circulating in the market, the better its track record is. A coin that has been circulating for at least two years is a good coin to invest in. 

• Determine the existence of a community around a coin 

Cryptocurrency has been successful because of its network of people, community, and developers involved in carrying its technology forward. Hence every coin needs a similar community backing for it to be successful. 

2 . Choose a Broker / Crypto Exchange / Platform 

Since cryptocurrency is not available for purchase directly through banks, it is advisable to select a broker or a crypto exchange to guide you through the process. There is nitty-gritty that you may miss out on initially and incur financial losses. 

• Robinhood and SoFi are great brokers internationally. 
• CoinSwitch Kuber, Zebpay, WazirX, CoinDCX, BuyUCoin, Bitbns, and UnoCoin are the leading brokers in India. 

While all brokers charge fees to manage your portfolio, they may also have their limitations and regulations regarding the movement of your funds across different platforms and currencies. 

• Ensure your choice of cryptocurrency is available - Bitcoin, Ethereum, Ripple, etc. 
• Ensure the crypto exchange offers an INR pair - the option to invest in INR without converting it to coins or USD. 
• Ensure that the crypto exchange is secure and utilize encrypted transactions to keep your trading safe. It should also offer the storage of your coins in cold wallets (offline wallets).
• Ensure that the platform is easy to use, fast, and available to use on the web and through smartphone applications - so you can trade on the go. 
• Ensure the exchange fees are lower than 1% because you pay an initial transaction fee, a broker fee, and a withdrawal fee. So be mindful of your total expense and ultimate profit. 

3 . Choose your mode of payment 

With the current freeze on crypto investments in India, most forms of IMPS, NEFT, UPI, and RTGS are disabled. However, Peer to Peer (P2P) crypto trading is still open. Staking is also another option for those looking to invest in cryptocurrency. 

4 . Choose your storage method

It is not advisable to store cryptocurrency in exchange accounts since they are prone to high risks like - hacking or complete shutdown of exchanges. 

There are many forms of storage available: 

a) Cold Wallets

Wallets are entirely offline and hence safest because they do not have an online presence or thus the risk of hacking. 

• Desktop Wallets - .exe files 
• Hardware Wallets - USB Sticks or Cards

b) Hot Wallets 

Wallets that are connected to the internet since they are based online. There are options to store your cryptocurrency here, but they are still high risk. 

• Mobile Applications 
• Web / Exchange Wallets 

c) Staking 

A rewarding form of storage that incentivizes storing of coins. So if you invest in coins that support staking, you may accumulate a better return over time.

5 ) Choose your Withdrawal Period

While it is the latest form of investment, and a generous amount of people have greatly benefited from cryptocurrency investments, it is advisable to invest for a minimum of a few years to make your bucks worth here. 

There are sources like CoinDCX that provide sound advice on crypto investments. 

What is your take on investing in Crypto? 

What is your experience with Crypto? 

We'd like to know!

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References:

https://www.cnbctv18.com/cryptocurrency/is-cryptocurrency-legal-in-india-how-can-you-invest-in-cryptocurrencies-11177532.htm

https://www.cashoverflow.in/how-to-invest-cryptocurrency-india/

https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/

https://www.investopedia.com/tech/china-neo-cryptocurrency/

https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency

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