Bitcoin has been the talk of the town and there is a lot of doubts and queries everyone has on Bitcoin Investment. Am I too late? Is it just a Gamble? Should I invest in Bitcoin? Or should I invest in Ethereum or LiteCoin? And what about FREE Bitcoins? Is that a scam? Should I try Bitcoin mining? And what are trustworthy platforms for Bitcoin trading in India? Is it a Ponzi Scheme?

Cryptocurrency

Spend some time with this exhaustive Guide on Bitcoin Investment and you will have all your questions answered.

What is Bitcoin? In Simple Words!

Before trying to understand Bitcoin, Lets for 2 minutes understand a little bit more about money. What is Money? It is simply a representation of worth or value that you are holding using an Instrument provided by a central authority like RBI. Government prints that Instruments as “Notes” or “Coins” and the circulation of the same happens in the market. You ask for “Money” based on the Notional value which you have in mind. Let's say you ask someone for Rs. 1000 for a job you do. You know somewhere in your brain that Rs. 1000 can fetch you x,y,z items. You accept that piece of paper money since you trust the government.

Obviously, if you think more about it, Printing Money or circulating coins or currency does not come for FREE. There are a lot of resources or taxpayer money (Paradox - Taxpayer money to generate more money) which goes behind running the entire “Currency of the country”. And then comes the Fees from the banks to do international transfer or to get a cheque book. Nothing is FREE and even if the bank claims its a Zero Fee account, you might be paying fees by getting a lower interest rate or something.

So what are some disadvantages of the Current form of Currency?

  • Centralized (Government has complete control)
  • Not Scarce (Government and countries can decide how much to print which brings down purchasing power of individual)
  • No Global Currency (Even if you have a $5 note in your pocket, some shopkeeper may still not accept it and you need to exchange it to Rupees and pay exchange rate fees)
  • Expensive (Fees you would pay to Government for printing, re-printing, circulation. Fees you pay to banks or Wallets like PayTM to manage your account, transfer from one account to other etc.)

BlockChain Technology

Without using any technical terms, Let's understand Blockchain technology in very simple Words! Let's think about BlockChain as a Shared Record book or a Ledger. Every time you do a transaction with someone else, Let's add a new line to the shared Record book.

Now the big question which may come to your mind is Where is the “Shared Record Book” stored and who maintains it? That’s where the BlockChain technology kicks in.. As you would imagine, Shared Record book is stored on thousands and thousands of computers across the world. Every time a transaction happens, it gets copied to multiple computers and then it gets authorized by the same computers. The beauty here is there is no Bank, No government, no company that you need to trust as there is no middle-men. It’s owned by everyone who has a copy of Shared Record book. The Shared record book is immutable or irreversible. Meaning you cannot go back and change any older entry ever. Every transaction gets written down digitally and there is no way to destroy that.

Is Bitcoin a Bubble? Is it really worth that much?

Bitcoin is obviously based on Blockchain technology. Is it a Bubble or worth that much? To answer this question, you need to ask yourself; Do you see the current form of currency (Notes and coins printed by Government and countries for their own benefits) as future currency? If not 20 years down the line, do you see people using paper currency 50 years down the line? Or do you see a decentralized transparent peer to peer network based technology which can power the future currency? Bitcoin is just one form of currency based on Blockchain. There are hundreds of others which have come up and may have more advantages over bitcoin (like lesser costs, lesser power required etc) but the basic premise of Blockchain Technology still holds true for all of them.

How can it be worth if there is no physical existence?

A common question asked by Many… When your employer says he paid you Rs. 20,000 or Rs. 50,000 in Salary and does some digital transfer… Do you actually see the cash? It still works as you trust the mechanism (Government, Banks, and ATM)

Still not convinced? When Gold or Silver actually got replaced by “Paper Currency”, it was just a piece of paper instead of something physical or real. However, it worked as it was more convenient, more practical form. Similarly, Bitcoin or some other Cryptocurrency / Digital Currency can still replace or will replace current currency as its going to be more and more convenient or practical as it has advantages like Decentralized, Global, Transparent, Convenient and Limited.

Should I Invest in Bitcoin?

My hope is that you are now somewhat convinced behind BlockChain Technology (its merits and power behind it and how it can transform the entire banking/payments industry) and how it can or will power the future Global Currency.

Currently, the speculation is that BitCoin will be that Global “future” currency or at least a Gold-equivalent of “future”, though no one really knows if that will be true or not. Nevertheless, it would be foolhardy to assume that it will take years and years to replace current form of currency as Technology can move very fast and widespread adoption of any crypto-currency can take us all by a surprise.

How do I start Bitcoin Investment?

Even though things may look a bit cryptic as its all digital and surrounded by Jargons. Let’s first start from Major platforms in India which allows one to hold, buy or sell bitcoins securely without much technical understanding.

  • Koinex
  • Zebpay
  • Unocoin

I have given a detailed example below for Zebpay. It's as easy as doing a transaction on an e-commerce website. You can use anyone below as its matter of personal preference. Think about them as equivalent to Banks… Just like banks, these platforms are either funded or backed by Trusted individuals and is the simplest way to buy or sell Bitcoins. Obviously, you need to place some trust that they “may” not run away just as all of us probably trust PayTM, Freecharge, Flipkart’s Phonepe etc or even Private Banks for that matter.

ZebPay - India’s first Bitcoin Exchange Platform

Zebpay has been in Cryptocurrency space since 2011 and has also been backed by a Series-A round of 1mn $ funding. So it can be considered as a Good trusted platform to start with.

They currently provide an Android and iOS App to get started. Once you Download and Install the app, Simply follow the steps below:

  1. Once you install and open, It will explain you more about the app. Click “Got it” once you have understood the basics.
  2. Enter your mobile number. Click Accept and Continue.
  3. Enter the One-time Verification code received on your mobile phone. Click Verify.
  4. Next, it will ask you to Setup a 4-Digit PIN. Make sure this PIN is not shared with anyone including Zebpay. This is more like your password to keep your bitcoins safe.
  5. It may optionally ask you for Fingerprint. It is completely up to you, though I would just prefer the PIN method.
  6. Next, you need to tap on “Verification” to ensure that your account is completely KYC Verified. You need to provide your Email, PAN Card, Bank Account and Aadhar. The steps are extremely simple and once you upload everything, you can sit back and relax. Its best time to look at “Buy” and “Sell” rate to understand how the currency fluctuates etc.
  7. Once the account is verified, One can transfer amount from Bank Account which will be then visible in your Main balance section. Use “Buy” button to do your first transactions and you will see your currency magically converted into Bitcoins. Congratulations! You now hold Bitcoins with you.
  8. I would not go into trading aspects in depth as the whole purpose is to hold a certain amount of BitCoins so that way you are safe and covered if Bitcoin becomes the future currency. However, if you have the risk appetite, you can buy and sell as many times as you want to get gains from the fluctuations.

UnoCoin - India’s Leading Digital Platform

UnoCoin is extremely similar to Zebpay and one advantage it has is that it also allows one to Buy or sell Bitcoins via Website and is not limited to an app.

Koinex - India’s Advanced Digital Assets Exchange Platform

If you are looking at actively trading Bitcoins, Zebpay and Unocoin may not be the best platforms. In such cases, its recommended to use a platform like Koinex as Buy - sell Spread is much less compared to Zebpay.

  1. Koinex by default shows you Ethereum data. Click on Drop down to select “Bitcoin”.
  2. Sign up is simple. Simply enter the details and complete OTP Verification etc.
  3. Once Mobile verified, Submit your KYC Details.

What about BitCoin Cash? Is it better to invest in BCH?

While Zebpay also allows you to convert Bitcoin to Bitcoin Cash (Kindly note Bitcoin Cash is another variant of Cryptocurrency), I would strongly recommend to stay away from the same and also avoid Bitcoin Gold for the moment. There are various Reddit Threads which suggest that BCH fork had many hidden motives of a certain individual behind it and hence am avoiding dealing with BCH currently.

Diversification may not be a Bad Strategy!

Suppose you are planning to invest Rs. 1 Lakh in Crypto-currency. In that particular case, I feel, it might be a good idea to diversify your Holdings into Bitcoin, LiteCoin, Dash, Ethereum, Ripple etc. My personal portfolio split is 70% Bitcoin, 10% Ethereum, 10% LiteCoin, 10% Ripple and 0% Dash. Buying some ICO might also be a good idea.

How much should I invest?

In my opinion, there is a merit in starting small with cryptocurrency and one can start converting at least 2% of their annual Salary into Bitcoin or other forms of Crypto-currency. Atleast that’s the ratio I am following. Do share how much are you investing in Bitcoins in comments below.

What are Tax Implications?

RBI has issued series of warnings against trading in Bitcoins. Hence, there is no clear picture available as RBI currently does not recommend investments in Bitcoins in the first place. However, with more and more people getting into Bitcoins, RBI will have to form regulations around Bitcoin investment to not loose out on tax revenues afterall.

Expect to pay anywhere between 20% to 35% tax on Bitcoin earnings. One can also use bitcoin for online purchase. It won't be surprising to see more and more e-commerce companies accepting Bitcoins.

Should I learn Bitcoin Mining?

In very simple terms, its getting rewards for solving a very difficult computational puzzle. You can view this nice video to understand more:

My personal recommendation is Bitcoin mining will only get more and more expensive and since around 16 million Bitcoins are already available out of 21 million Bitcoin target. Mining is not a lucrative business unless you have the hardware and software power to run Mining.

Get Started! It's never too Late

Even though it may seem that it might be too late. If Bitcoin is actually going to become the “Future” Currency, then it's not late as all and it may continue to rise in 2018. So it's not a bad idea to still invest a small amount of your Wealth in BitCoins or any other form of CryptoCurrency. Just like stock markets, There will be buying opportunities and you have to trust your “gut” or “intuition” and buy during the dips.

Disclaimer: The thoughts expressed in this article is simply my belief/recommendations. I won't be responsible if Bitcoin markets go down completely and/or for any profits or loss incurred. So kindly do your own due diligence. I neither claim myself to be any expert etc. I am just sharing my thoughts. You yourself will be responsible for any loss incurred on your investment in any of the digital cryptocurrency.