Cryptocurrency and Bitcoin are here to stay.
Well, did anyone have any doubts about that? The proposed cryptocurrency ban only helped to focus more attention on the subject, and raise a stakeholders’ lobby in favour of cryptocurrency.
The dramatic rise in Bitcoin and Dogecoin prices, thanks to one Mr. Elon Musk, helped in drawing millennials to it, who look for quick gains. Cryptocurrency or the popular Bitcoin is seen as a new asset class by financial planners, some of whom may advise allocating a certain percentage of your assets to it.
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Is Cryptocurrency an Asset or Currency?
So, let’s move ahead…
HOW DO I BUY BITCOIN OR ANY OTHER CRYPTOCURRENCY?
We have discussed the launching of cryptocurrency in markets, and Bitcoin Mining here. But you don’t necessarily have to be a bitcoin miner to own the coveted coins.
You need to open an account with a bitcoin exchange.
Popular exchanges in India are CoinDCX, WazirX, ZebPay, CoinSwitch and bitBNS.
Popular platforms in the US are RobinHood, Coinbase and many others.
It needs KYC documents.
You need to connect your account with a payment system.
After this, it is possible to buy bitcoin with Paypal or buy cryptocurrency with a credit card or debit card. It is a matter of choice, and acceptability to the bitcoin exchange.
HOW DO YOU PAY FOR BUYING BITCOIN OR ANY OTHER CRYPTOCURRENCY?
The payment for buying, or receipt of sale proceeds needs to be routed through your bank account in India. You are liable to pay income tax on capital gains, as per the tax slab applicable to you.
CHARGES FOR BUYING CRYPTOCURRENCY
The charges for buying range from 1.49% for payment through a bank account to 3.99% for payment through credit or debit cards.
CAN THE TRANSACTIONS BE TRACKED?
US authorities have claimed that transactions can be traced back to the original buyer on the exchange. Hence, the concept of anonymity in cryptocurrency may be misleading.
ALTERNATIVE METHODS OF BUYING CRYPTOCURRENCY
Bitcoin ATMs
In the past, some Bitcoin ATMs in India were pulled down with a RBI diktat. The decision was later reversed by the Supreme Court, but buyers could be weary about using this method.
P2P (Peer-to-Peer) Exchanges
Popular ones in India are Paxful and LocalBitcoins
WHERE DO YOU KEEP YOUR COINS?
It is a virtual currency, yet, there needs to be a location or site to store it.
The first choice is about keeping it in the exchange, which facilitates quick transactions in future.
However, it may not be the safest option. Hacking cannot be ruled out.
There are two kinds of wallets available.
Hot Wallets
are online wallets, which are controlled by a private key. The key needs to be stored carefully, and a reference to it made in your Will & Last Testament. There are people who have lost their treasure by losing the private key. It will lay unclaimed on the internet.
Cold Wallets
can be a USB device, but it needs some expertise to set it up.
One can choose to keep small to medium amounts in a hot wallet to facilitate quick transactions, and a cold hardware wallet to store larger holdings for longer time periods.
WHAT ARE COMMON FEARS ABOUT BITCOIN OR CRYPTOCURRENCY?
- It is too new a platform
2. Track records available are not very long
3. Lack of transparency
4. It may turn out to be a fad, backed by Elon Musk
5. It is not backed by a sovereign authority
6. Fear of loss due to hacking
7. It is suited to those with a high risk appetite