How to invest in cryptocurrency in India?

Crypto investing in India: According to a recent report by Statista, the number of India’s total crypto investors will increase to 156 million by the end of 2023, almost half of the world’s total crypto investor community. The popularity of cryptocurrency in India is continuously increasing despite the ongoing crypto winter and market volatility. 

However, if you are new to the crypto space, knowing where to start your crypto journey can be a daunting task. To solve this, here is a step-by-step guide to start investing in cryptocurrencies while not being overwhelmed by all the industry jargon. 

What is Cryptocurrency?

Cryptocurrencies operate on a technology called blockchain, a decentralised and distributed ledger that records all transactions across a network of computers.  Bitcoin, the most popular cryptocurrency in the world, was launched in 2009 by an anonymous blockchain developer named Satoshi Nakamoto and since then, cryptocurrencies have gained a significant market share. 

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The launch of Bitcoin has set the stage for a plethora of other digital currencies such as Ethereum, Ripple (XRP), and Litecoin, each with its unique features and applications. Many crypto tokens have also emerged from India including Polygon MATIC and Sharedeum.

Legal status of cryptocurrency in India

In India, the regulatory environment surrounding cryptocurrencies has been a subject of debate and evolution. Previously, the Reserve Bank of India (RBI) had placed a banking ban on cryptocurrency transactions, which was later lifted by the Supreme Court in March 2020. 

Currently, there is no specific legislation governing cryptocurrencies, but the government is working on an international scale to bring global consensus on common crypto regulations for the industry. Apart from that, all crypto profits in India are taxable at the rate of 30 per cent along with 1 per cent of TDS on every crypto transaction. 

Steps to Invest in Cryptocurrency

Investing in cryptocurrencies can be highly rewarding if you choose the right projects at the right time but cryptocurrencies are more than just investment tools. Cryptocurrencies are rooted in the idea of shifting the power centres of traditional finance, bringing in a more democratic more of value transfer. 

You should enter the crypto market if you align with the fundamentals of cryptocurrency and here is the way you can proceed with that. 

Research before you invest

Before venturing into the world of cryptocurrencies, it's important to educate oneself about the fundamentals, various types of cryptocurrencies, blockchain technology, and the associated risks. Cryptocurrencies can be a highly risky investment class and thus knowing your risk capacity and diversifying your investments is crucial.

Choose a reputable crypto exchange

Selecting a reliable cryptocurrency exchange can be a critical decision. Look for platforms that offer a user-friendly interface, a wide range of cryptocurrencies, secure storage options, and responsive customer support. 

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Apart from that, prioritise exchanges with better reputations and larger trading volumes to get better credibility 

Complete the verification process

Most exchanges require users to complete a Know Your Customer (KYC) verification process. This involves submitting identification and address proofs to comply with legal requirements. From submitting your documents to video verifications, KYC processes can differ from platform to platform. 

Create a digital wallet

A digital wallet is essential for securely storing your cryptocurrencies. Choose a reputable wallet that supports the cryptocurrencies you intend to invest in. 

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If you are choosing a centralised exchange, you will get a software wallet integrated into your exchange account where you will get your crypto by default. Ideally, you should move your crypto out of your exchange wallet into a cold wallet to upgrade your crypto security. 

Deposit funds

To buy cryptocurrency on a centralised exchange you will need to transfer funds from your bank account to the exchange. Many exchanges offer various payment options, including bank transfers, credit/debit cards, and UPI. You can also deposit other cryptocurrencies to your exchange to swap them with the token of your choice. 

Place your orders

Now once you have added funds to your exchange wallet, navigate the market in the exchange's interface to place buy or sell orders for the cryptocurrencies you wish to invest in. While investing in cryptocurrencies, it is essential to set a budget and strategy based on thorough research to avoid any financial blunder.

Implement security measures

Implement strong security measures to safeguard your investments. This includes enabling two-factor authentication (2FA), using hardware wallets for long-term storage, and being cautious of phishing attempts.

Risk mitigation and responsible investing

Cryptocurrency investments are highly volatile and carry inherent risks. It's crucial to exercise caution, conduct thorough research, and only invest what you can afford to lose. Diversifying your investments and staying updated with market trends and news are prudent strategies to mitigate risks.

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As the regulatory landscape continues to evolve, staying informed, using reputable platforms, and following responsible investing practices will be instrumental in navigating the decentralised financial landscape.