How to use Bitcoin? Should You Invest?
Although more than 18 million Bitcoin are in circulation — with a maximum total supply of 21 million — Bitcoin today is most commonly considered a store of value. Many view Bitcoin as a form of digital gold rather than money in the traditional sense. Users can also transfer Bitcoin to other people and pay with Bitcoin for purchases from a very limited number of businesses.
Major companies that accept Bitcoin as a payment method include Overstock, Microsoft (NASDAQ: MSFT), and AT&T (NYSE: T). If you buy Bitcoin or another cryptocurrency via PayPal (NASDAQ: PYPL), you can use it to pay for purchases from any retailers that accept PayPal Checkout.
Bitcoin is stored in a crypto wallet. When it’s bought, sold, traded, or used for purchases, it’s transferred from one Bitcoin wallet to another. There are two types of crypto wallets:
- Hot wallets: These wallets are connected to the internet and are generally free to use.
- Cold wallets: For added protection, cold wallets aren’t connected to the internet. The most common types of cold crypto storage are hardware devices.
When you buy Bitcoin, the platform where it’s bought places your Bitcoin in a custodial wallet. Custodial wallets hold Bitcoin for other people but are managed by a third party. Depending on the platform, you may be able to transfer your Bitcoin to your own hot wallet or to a cold wallet. Quite a few buyers do this, and it’s a common recommendation so that you have full control of your crypto.
What is Bitcoin?
The concept of bitcoin can be traced back to a white paper published in 2018 by Satoshi Nakamoto. The currency which surged over $48000 at the time of this article was hovering over $12 in 2013. Bitcoin, to say least, is a virtual currency and is an online cash that changes hands over the internet. As of now, there are a plethora of services one can avail of using these virtual currencies.
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How One Buys It?
People who are keen to buy Bitcoins should go to bitcoin exchanges. There are many platforms in India where one can buy cryptocurrency from exchanges like Coinbase and Coindesk. But in India, one can buy Bitcoins from ZebPay. For buying Bitcoins, one can do a transfer from your bank account into ZebPay. You are required to undergo a basic KYC before you start trading in Bitcoins. You can get your KYC done after submitting an Aadhaar card, Pan Card, or any other document.
After placing an order, you can purchase Bitcoin using digital payment methods. Money from your bank accounts can be transferred using NEFT, RTGS, debit, or credit card. Currently, the Bitcoin is $48000 but this does not mean that you will have to buy a Bitcoin, in fact, you can invest in Bitcoin starting from Rs 500.
Is it legal in India?
The Supreme Court of India came out with a judgment overturning the ban imposed by the Reserve Bank of India in 2017. The Reserve Bank of India barred entities from dealing with Bitcoin. The decision made by the apex court brought the much-required clarity for companies and people that it can buy and sell it easily. But one must note that there are no rules and regulations and guidelines in place for resolving issues pertaining to Bitcoin in India. So risk factors can be a big dampener otherwise it’s legal to buy and sell Bitcoins in India.
How to buy Bitcoin
Here’s how to buy Bitcoin:
- Set up an account on a cryptocurrency platform.
- Complete the platform’s identity verification process.
- Deposit money from your bank account.
- Buy the amount of Bitcoin that you want.
There are several places to buy Bitcoin. It’s sold on cryptocurrency exchanges, as well as by select stock brokers and some payment apps. Cryptocurrency exchanges offer the most features, so they’re well-suited for serious crypto investors.
Since Bitcoin is the most popular cryptocurrency, Bitcoin trading is available on just about any exchange. These are a few of the best-known and highly-rated exchanges:
- Coinbase (NASDAQ: COIN): Launched in 2012 as a way to buy Bitcoin through bank transfers.
- Gemini: Founded by Tyler and Cameron Winklevoss in 2014 and the first to offer Bitcoin futures contracts.
- Binance: A worldwide platform that’s been experiencing regulatory challenges, Binance also has a U.S. platform (Binance.US) and has been listing Bitcoin since its 2017 inception.
After you choose an exchange and create an account, you can verify your identity with a driver’s license, passport, or other valid identification typically issued by a government. This step is required for tax reporting purposes and to prevent criminal activity such as money laundering
Investing in Bitcoin in 2023
There’s no denying that owning Bitcoin has been extremely profitable during its short history. Its value has increased from $1 in 2011 to more than $60,000 at times in 2021. Bitcoin is the most famous cryptocurrency and has been rapidly gaining popularity as a form of digital gold. Just as the supply of the precious metal is finite, the limited supply of 21 million Bitcoin could also significantly boost its value.
Bitcoin is also a volatile, high-risk investment. It’s only existed since 2009, it might never be widely used as actual currency, and newer altcoins have distinct cost and operational advantages. And, Bitcoin mining is clearly at odds with environmentally responsible investing.
Although Bitcoin shouldn’t account for a large portion of the value of your portfolio, a small investment in cryptocurrency is worth considering. The key is to maintain a balanced, diversified portfolio. If you choose to invest in Bitcoin and other cryptocurrencies or cryptocurrency stocks, you will be well positioned to benefit if Bitcoin rises in value, but you won’t be putting all of your eggs in one very volatile basket.
What Happens If I Invest In Bitcoin in India?
While there is a lot of uncertainty and volatility over the prices of Bitcoin and its legality in India, it is certain that blockchain technology promises a whole lot of innovation and ways in which transactions are settled.
If you are looking to invest in Bitcoin, you need to bear in mind that only those investors who have a high-risk appetite should consider a part of the portfolio to be invested in Bitcoins. This is due to downside price risk, high tax on the gains from the sale of Bitcoins in India, possible goods and services (GST) tax exposure, and the uncertainty arising out of the legal status of Bitcoins in India.