India’s crypto market is experiencing a rapid boom! With thriving exchanges and innovative blockchain projects, the future of digital assets in India is promising. According to Statista, the cryptocurrency market in India is expected to grow by a CAGR of 7.99% between 2024 and 2028. Yet, the question that often perplexes many is: “How to invest in crypto in India?”
Let’s ditch the confusion and get ready to unlock the potential of cryptocurrencies in India.
Status Of Cryptocurrency In India
Before discussing investing in cryptocurrency, let’s first understand how crypto is witnessed in India.
Cryptocurrency in India is witnessing significant developments as the government takes a cautious yet progressive approach. The Government introduced taxes on cryptocurrencies and other digital assets in the Finance Bill 2022.
However, despite regulatory uncertainties, India boasts a robust crypto investor base, with millions of users engaging in trading and investment. Major crypto exchanges report substantial growth, indicating a strong interest among Indians.
How To Invest In Crypto In India?
Now that you’ve understood the basics of cryptocurrency and its functions, it is time to face the elephant in the room, i.e., “How to invest in cryptocurrency India?” Here’s a step-by-step process to help you embark on your crypto investment journey:
1. Pick a Cryptocurrency to Invest In
The crypto world is brimming with options, from established giants like Bitcoin to innovative new projects. But with so much variety, choosing your first investment can feel overwhelming. Here’s how to select a coin to invest in crypto in India:
Research, Research, Research
Don’t just jump on the bandwagon! Dedicate some time to researching different cryptocurrencies. Popular resources like KoinX provide information on market capitalisation (a coin’s total value), project details, and historical price charts.
Understand the Purpose
Consider Market Capitalization
Generally, established cryptos with high market capitalisation offer lower volatility, meaning their prices fluctuate less. This can be a wise choice for beginners seeking a more stable investment.
Explore New Projects (Cautiously)
The beauty of crypto is in innovation. Promising new projects with exciting ideas can be tempting. However, thoroughly research these ventures before investing. Look for a strong development team, a clear roadmap for the future, and a well-defined purpose. Remember, due to their unproven track record, new projects often come with higher risk.
Here’s a golden rule: Only invest in what you understand and can afford to lose.
2. Find a Secure Crypto Exchange
Once you’ve chosen your cryptocurrency, the second step to the answer to how to invest in crypto in India is to find a good crypto exchange. You must select a reputable platform to buy cryptos. Here’s what to look for in a secure crypto exchange:
FIU-IND Registration
In India, ensure the exchange is registered with the Financial Intelligence Unit of India (FIU-IND). This guarantees a level of regulatory compliance and consumer protection.
Security Features
Two-factor authentication (2FA) is a must. For enhanced protection, consider additional security measures like address whitelisting and cold storage (storing most user funds offline).
Supported Currencies
Verify if the exchange allows trading in Indian Rupees (INR) for your chosen cryptocurrency. This simplifies the buying process.
Trading Fees
Crypto exchanges charge fees for buying and selling. Compare costs across different platforms before finalising your choice. Some exchanges offer lower costs for higher trading volumes.
3. Buy Your Crypto
With complete research and a secure exchange chosen, you’re ready to take the plunge! Here’s a step-by-step guide to buying your first cryptocurrency:
KYC Verification
Most Indian crypto exchanges require KYC (Know Your Customer) verification. This typically involves submitting government-issued IDs like your Aadhaar and PAN cards.
Fund Your Account
Once verified, transfer funds from your bank account to your exchange wallet using the available methods (often bank transfer or UPI).
Place an Order
Navigate to the trading section and select your cryptocurrency. Decide on the order type (market order for immediate purchase or limit order for a specific price) and enter the amount you wish to invest.
Review and Confirm
Double-check your order details (amount, price, fees) before confirming the purchase.
Congratulations! You’ve successfully bought your first cryptocurrency! But remember, the journey doesn’t end here.
Store Your Crypto Securely
Cryptocurrencies aren’t like traditional stocks held in brokerage accounts. Here, you take full responsibility for safe storage. Here are two popular options:
Exchange Wallets
Most exchanges provide built-in wallets for storing your purchased crypto. While convenient, these can be vulnerable to hacking if the exchange is compromised.
Hardware Wallets:
For enhanced security, consider a hardware wallet. These physical devices resembling USB drives store your cryptocurrency offline, significantly reducing hacking risks. Popular options include Ledger Nano S and Trezor Model One.
So now you know how to trade in cryptocurrency in India. Remember this mantra: “Never invest more than you can afford to lose.”
Types Of Cryptocurrencies Available
There are various types of cryptocurrencies, and it’s essential to understand the difference between cryptocurrency coins and tokens. Coins and tokens may have different purposes, and these can be broadly categorised as:
Payment Currencies
Payment currencies are designed primarily to facilitate transactions and as digital alternatives to traditional fiat currencies. They are used to buy goods and services, transfer global funds, and invest in assets. Bitcoin (BTC), Litecoin (LTC), and Bitcoin Cash (BCH) are prominent examples of payment currencies.
Stablecoins
Meme Coins
Memecoins are a unique category of cryptocurrencies that gain popularity primarily through internet memes and social media engagements. Inspired by the Shiba Inu dog meme, Dogecoin is one of the most well-known Memecoins.
Utility Tokens
Utility tokens provide access to specific products or services within a blockchain ecosystem or decentralised application (dApp). Examples include Ethereum’s Basic Attention Token (BAT) and Binance Coin (BNB).
Governance Tokens
Governance tokens grant holders the right to participate in the decision-making processes of decentralised autonomous organisations (DAOs) and blockchain protocols. Examples include MakerDAO’s MKR and Compound’s COMP tokens. Holders of governance tokens can vote on protocol upgrades, parameter adjustments, and allocation of community funds, thereby shaping the future development and governance of decentralised platforms.
Privacy Coins
Privacy coins prioritise anonymity and confidentiality in transactions, offering enhanced privacy features compared to traditional cryptocurrencies. They utilise advanced cryptographic techniques, such as zero-knowledge proofs and ring signatures, to obfuscate transaction details, including sender, recipient, and transaction amount. Some prominent examples are Monero, Zcash, and Dash.
Blockchain Economy Coins and Tokens
Blockchain economy coins and tokens represent assets within broader blockchain-based ecosystems comprising various digital assets, services, and economic models. Examples include Ethereum’s Ether (ETH), which fuels transactions and smart contracts on the Ethereum network, and Filecoin (FIL), which powers decentralised file storage and retrieval on the Filecoin network.
Things To Know Before Investing In Cryptocurrency
Before you start to invest in legal cryptocurrency in India, it is essential to note a few things. We have penned down a list of crucial aspects to consider before investing in cryptos:
Embrace Volatility
Cryptocurrencies are renowned for their price volatility, characterised by rapid and unpredictable fluctuations. It’s important to brace yourself for these fluctuations, which can yield substantial gains or losses. Above all, prioritise financial prudence by refraining from investing more than you can afford to lose, ensuring your financial security.
Diversify Your Portfolio
Mitigate risk by diversifying your investment portfolio across multiple cryptocurrencies. Each digital asset boasts unique traits, and diversification enables you to spread risk effectively. By distributing your investments, you can cushion potential losses and optimise your overall investment strategy.
Prioritise Security
Protect your cryptocurrency holdings through robust security measures. Safeguard your accounts with strong passwords and bolster security with two-factor authentication (2FA). Consider utilising hardware wallets to secure your funds’ cold storage and remain vigilant against phishing scams and counterfeit websites.
Beware of Scams
Exercise caution to avoid falling victim to scams and fraudulent schemes in cryptocurrency. Be wary of exaggerated profit guarantees and opaque projects lacking transparency. Conduct thorough due diligence before investing and prioritise projects with a solid track record and transparent operations.
Assess Risk Wisely
Conduct a comprehensive risk assessment to gauge your market fluctuations and uncertainty tolerance. Cryptocurrency investment is inherently speculative, influenced by myriad factors such as market sentiment, technological advancements, and regulatory shifts. Align your investment decisions with your risk appetite to optimise outcomes.
Avoid Emotional Investing
Lastly, resist the urge to succumb to FOMO (Fear of Missing Out) and make impulsive investment decisions. Emotions can cloud judgment and lead to detrimental outcomes. Instead, rational decision-making should be prioritised and grounded in thorough research and analysis.
Is It Safe To Invest In Cryptocurrency In India?
Now, let’s answer whether investing in cryptocurrency in India is safe. Given its newness in technology and investment, many newcomers question its security as an asset.
Compared to other financial investments, cryptocurrency can be deemed secure due to its robust security features. The underlying blockchain technology offers a highly safe and transparent method for recording transactions. Additionally, cryptographic keys play a crucial role in safeguarding your assets.
While the cryptocurrency market offers potential, knowing the significant risks is crucial. Volatility is a standard feature, fluctuating prices more than in traditional financial markets. The industry also faces ongoing challenges from hackers and scammers.
By exercising caution, storing your private keys securely, and staying vigilant against fraudulent schemes, you can empower yourself to safeguard your assets.
Why To Invest In Cryptocurrency In India?
Cryptocurrencies can be a lucrative option, as they have shown the potential for significant growth and impressive returns on investment.
As the saying goes, with high risk comes high rewards. Recently, many early adopters of crypto have become Bitcoin billionaires and millionaires.
Furthermore, cryptocurrencies allow traditional investors to diversify their portfolios, spreading risk and increasing overall returns, which gives you all the more reason to invest in cryptocurrency in India.
Also, since cryptocurrencies operate independently of the conventional financial system, their performance might not always correlate with traditional markets, providing a way to hedge against economic uncertainty.
However, you may wonder: Is crypto investing legal in India? Let’s find out!
Is Crypto Legal In India?
Yes, cryptocurrency is currently considered legal in India, and the government has not indicated that it plans to ban it anytime soon.
However, investors are increasingly uneasy due to the government’s strict approach to taxing cryptocurrencies and Virtual Digital Assets (VDAs). This has caused many investors to worry about the future of cryptocurrency in the country and the potential impact on their investments.
Hence, crypto trading is legal in India but has tax implications, which we will discuss in the next heading.
Does Cryptocurrency Attract Taxes in India?
Cryptocurrency is considered a virtual digital asset subject to crypto taxes in India. Any gains you have enjoyed from disposing of (selling, exchanging, or converting) the crypto asset will attract a capital gains tax of a flat 30% plus a 4% health and education cess.
Moreover, if you earn cryptocurrency through mining, staking, farming, or salary, the fair market value on the day the coins are received will be added to your income as either business income or Income from other sources.
FUI-compliant exchanges will deduct a 1% TDS (Tax Deducted at Source) on the selling value of the crypto asset. If you have a tax liability, this can be used as a tax credit or claimed as a refund if your income tax liability is nil.
But how do we note all transactions and calculate each tax individually based on the nature of its occurrence? Fret not! Introducing KoinX, an automated crypto tax calculating platform that generates accurate crypto tax reports for accurate ITR filings.
You must integrate your crypto exchange account with KoinX, which supports 180+ CEX, DEXs, and wallets, and leave the headache of tax calculations on us. Or, if you are still unsure of the security, you can upload a.csv file of your portfolio and leave the heavy lifting to us. KoinX will automatically classify the transactions based on the nature of the occurrence and calculate their respective taxes.
So why wait? Join KoinX today and make your crypto taxation easier than before.
Conclusion
The Indian crypto market is a gateway to a future powered by digital assets. This article has equipped you with the foundational knowledge and answered the question of how to invest in crypto in India.
Remember, the crypto landscape is constantly evolving, so stay curious, keep learning, and adapt your strategies as needed. Most importantly, invest responsibly. Put in only what you can afford to lose, and prioritise security above all else.
Moreover, crypto trading is legal in India but attracts crypto taxes. Though manually calculating such taxes can be bothersome, you can use KoinX to generate accurate crypto tax reports in minutes. The platform automatically categorises every transaction according to the nature of its occurrence, thereby computing accurate crypto taxes. KoinX keeps itself updated with all the latest crypto tax guidelines in the country so that you, its users, don’t have to stay behind. So sign up on KoinX today and make your crypto taxes easier.
