Bitcoin Hits $71,000: A Quick Guide On How To Invest In Cryptocurrency

Bitcoin surpassed $71,000 on Monday, setting a new record. The leading cryptocurrency hit $71,302, according to Coindesk,  and comes after Bitcoin's highest weekly close at $69,062 on Bitstamp. 

This record-breaking achievement for Bitcoin rates comes when the cryptocurrency market is witnessing an upswing. Case in point is Ethereum, the second-largest cryptocurrency, recently surpassing the $4,000 mark.

What is Bitcoin?

Bitcoin is a type of cryptocurrency that operates on a decentralised network called Blockchain –  a distributed ledger that records all transactions across a network of computers. Unlike traditional currencies issued by governments, Bitcoin is not controlled by any central authority, such as governments or banks.  Users can trade – buy, sell, and transfer –  bitcoins directly to one another without any interference from intermediaries like banks. 

As a digital/virtual currency, bitcoin can be used for various purposes, including online purchases, and investments, and as a means of transferring value across borders. The transactions are secure and transparent due to the blockchain technology, which also protects Bitcoin from fraudulent elements. 

The supply of bitcoins is limited to 21 million, which adds a scarcity element, making it comparable to precious metals like gold with limited supply.

 How to invest in Bitcoin?

Before investing in Bitcoin, it is important to understand how Bitcoin works, the technology behind it (blockchain), and the risks involved in its trade. 

Select a reputable cryptocurrency exchange that has proper security measures and a user-friendly interface, to buy and sell Bitcoin. Once you have chosen the exchange carefully, provide the necessary personal information. Complete the verification process required by the platform.

Then, you are required to obtain a cryptocurrency wallet to store your bitcoins securely. Wallets come in various forms - software, hardware, or paper wallets. Hardware wallets, such as Ledger or Trezor, offer added security.

Fund your exchange account and buy Bitcoin based on the amount you wish to invest. You can even buy fractions of a Bitcoin if needed.

Enable two-factor authentication (2FA) on your exchange account and wallet for added security. Always follow the golden rule – use strong, unique passwords. For those opting to hold Bitcoin for the long term, some experts advise transferring it to a secure hardware wallet for cold storage. This reduces the risk of hacking.

Due to its highly volatile nature, users are also advised to familiarise themselves with reputable sources for cryptocurrency news and trends. This will allow users to remain updated on market trends, regulatory changes, and technological advancements.

While Bitcoin is a prominent cryptocurrency, consider diversifying your portfolio by exploring other cryptocurrencies or traditional investments. Diversification is an important tool in managing financial risk. This is particularly important in the context of Bitcoin, whose value can be highly volatile, and market conditions can change rapidly, as we have seen in the last few years.

How to buy Bitcoin in India? 

Select a reliable cryptocurrency exchange that operates in India. Popular options include WazirX, Unocoin, and CoinSwitch.

Sign up for the chosen exchange by providing the necessary details.

Complete the KYC (Know Your Customer) verification process as per the exchange's requirements. This usually involves submitting identity documents such as an Aadhar card, PAN card, and a photo.

Obtain a secure Bitcoin wallet to store your bitcoins. Some exchanges provide built-in wallets. For added security, consider using an external wallet.

Next, you can add Indian Rupees (INR) to your exchange account. This can be achieved through various modes including bank transfers, UPI, or other exchange-specific payment methods. Then, at the trading section of the exchange,  place an order to buy Bitcoin.

You can choose the amount you want to buy or the amount you want to spend in rupees

Once the purchase is complete, transfer your Bitcoin to your secure wallet. This helps improve security. You can also activate 2FA on your exchange account for an extra layer of security. This can be done by linking your account to a mobile app like Google Authenticator.

As per the rules specified by the Indian government, gains from all such crypto transactions are taxable at a flat rate of 30 per cent. These rules were introduced during the 2022 Union Budget.