Bitcoin is still a confusing idea for many people, but its surging value through the last few months has gotten everyone paying attention again. The value of Bitcoin soared as high as $40, (roughly Rs. lakhs). However it still remains volatile, and on January 11, we saw Bitcoin sliding 26 percent in its biggest plunge since March Although Bitcoin can seem like a great investment, it's important to do your research before you take the plunge. Experienced investors who know what they're doing won't need to be told this, but for beginners, it can be quite risky.

It is necessary that you find the right places to make this investment and understand the legal and tax implications regarding investing in Bitcoin, before you start investing. We can't give you legal advice but here's what we've been able to learn, to get you started in Bitcoin.

How Can I Buy Bitcoins in India?

In India, you can buy Bitcoin from several online exchanges like BuyUCoin, Coinshare, Unocoin etc. Unocoin is an Indian-based exchange. Online exchanges like these will allow you to buy, sell, and hold Bitcoins. You can also do person to person Bitcoin trading using LocalBitcoins — it uses escrow protection to keep the transaction secure.

It is generally better to use an exchange that allows its users to also withdraw their Bitcoins to their own personal wallet for safe keeping — there are exchanges that do not allow for this.
And it goes without saying, but let's say it anyway — when creating an account on online exchanges, it is important to use safe Internet practices like using two-factor authentication and unique and strong password.

Most Indian exchanges also have a KYC (Know Your Customer) requirement. This process involves verifying your identity using your government-issued ID cards like an address proof, PAN card, and your bank account details.

Once you place an order, you can purchase Bitcoin using digital payment methods. Money from your bank accounts can be transferred using NEFT, RTGS, debit or credit card. One Bitcoin is valued at $35, (roughly Rs. 26 lakhs) as of today, but you don't need to buy a whole coin to start your Bitcoin investment. You can start your Bitcoin investment by chipping in as low as Rs.

Is it legal to buy Bitcoins in India?

In , the RBI barred regulated entities (such as banks) from dealing with Bitcoin. This threw the market into a tailspin. Later in the year, the Supreme Court also backed this decision. However, last year, the SC overturned the ban. While holding Bitcoin was never made illegal, the SC decision means that companies in this space can do business more easily.

Online tax service Cleartax also noted that there are no rules, regulations, or guideline in places for resolving disputes that could arise while dealing with Bitcoins. This amplifies the risk factor while dealing with the cryptocurrency in India. However, it is legal to buy and sell Bitcoin in India.

How do I ensure that my Bitcoin is stored safely?

After buying Bitcoins, you have to ensure that you store it safely. These are typically stored in Bitcoin wallets — which can be offline storage like a USB drive, called cold wallets, but there are also online wallets you can use including, most recently, PayPal, which are called hot wallets.

Even Bitcoin wallets have faced multiple hacks in the past, which is why many people prefer to keep at least part of their investment in a cold wallet.

What are the taxes I should be concerned about if I own Bitcoins?

There is still a lack of clarity on the tax front on Bitcoin investment in India. According to CoinDesk, a digital currency news site, India-based investors may soon have to pay taxes on returns earned from Bitcoin investments.

With the soaring value of Bitcoins, income for selling Bitcoin is taxed at 30 percent tax on cryptocurrency gains for short term investments around 20 percent for long-term investments. However, as long as you don't sell the Bitcoin, you don't have to pay money simply because its value went up.

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Cryptocurrency Prices across Indian exchanges

1. Open an account with eToro – Head to eToro’s homepage and click ‘Join Now’ to sign up. Your capital is at risk.
2. Deposit – Deposit at least $10 into your trading account using a credit/debit card, bank transfer, or e-wallet.
3. Search for Bitcoin – Type ‘BTC’ or ‘Bitcoin’ into the search bar at the top of your screen and click ‘Trade’.
4. Invest – Enter the amount you’d like to invest in Bitcoin (minimum of $10), double-check everything is correct, and click ‘Open Trade’.

• You invest $ in Bitcoin when the price is at $40,
• After one year, the price of Bitcoin rises to $,
• You decide to close out your position and take your profits
• As the price has increased from $40, to $,, which is a % increase, your investment amount will have also increased by %
• Due to this, your $ will have turned into $!

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Investing in Bitcoin (BTCUSD) can seem complicated, but it is much easier when you break it down into steps. Investing or trading Bitcoin only requires an account at a service or an exchange, although further safe storage practices are recommended.

There are several things that aspiring Bitcoin investors need: a cryptocurrency exchange account, personal identification documents if you are using a Know Your Customer (KYC) platform, a secure connection to the Internet, and a method of payment. It is also recommended that you have your own personal wallet outside of the exchange account. Valid methods of payment using this path include bank accounts, debit cards, and credit cards. It is also possible to get bitcoin at specialized ATMs and via P2P exchanges.

Before You Buy Bitcoin

Privacy and security are important issues for Bitcoin investors. Anyone who gains the private key to a public address on the Bitcoin blockchain can authorize transactions. Private keys should be kept secret—criminals may attempt to steal them if they learn of large holdings. Be aware that anyone can see the balance of a public address you use. The flip side to this public information is that an individual can create multiple public addresses for themselves. Thus, they can distribute their stash of Bitcoin over many addresses. A good strategy is to keep significant investments at public addresses that are not directly connected to ones that are used in transactions.

Anyone can view a history of transactions made on the blockchain—even you. Although transactions are publicly recorded on the blockchain, identifying user information is not. On the Bitcoin blockchain, only a user's public key appears next to a transaction—making transactions confidential but not anonymous. In that sense, Bitcoin transactions are more transparent and traceable than cash because all of them are available for public view, unlike private cash transactions. But Bitcoin transactions also have an element of anonymity built into their design. It is very difficult to trace the transacting parties—i.e., the sender and recipient of the bitcoin—on the cryptocurrency's blockchain.

International researchers and the FBI have claimed they can track transactions made on the Bitcoin blockchain to users' other online accounts, including their digital wallets. For example, if someone creates an account on Coinbase, they must provide their identification. Now, when that person purchases bitcoin, it is tied to their name. If they send it to another wallet, it can still be traced back to the Coinbase purchase that is connected to the account holder's identity. This should not concern most investors because Bitcoin is legal in the U.S. and most other developed countries.

Buying Bitcoin 

Source: TradingView

We have broken down the steps to buying bitcoin below. Remember that you still need to do your research and select the best option for yourself based on your circumstances.

Step 1: Choose a crypto trading service or venue

The first step in buying bitcoin consists of choosing a crypto trading service or venue. Popular trading services and venues for purchasing cryptocurrencies include cryptocurrency exchanges, payment services, and brokerages. Out of these, cryptocurrency exchanges are the most convenient option because they offer a breadth of features and more cryptocurrencies for trading.

Signing up for a cryptocurrency exchange will enable you to buy, sell, and hold cryptocurrency. It is generally best practice to use an exchange that allows its users to withdraw crypto to their own personal online wallet for safekeeping. For those looking to trade Bitcoin or other cryptocurrencies, this feature may not matter.

There are many types of cryptocurrency exchanges. Because the Bitcoin ethos is about decentralization and individual sovereignty, some exchanges allow users to remain anonymous and do not require users to enter personal information. Such exchanges operate autonomously and are typically decentralized, which means they do not have a central point of control.

Although such systems can serve nefarious purposes, they can also provide services to the world's unbanked population. For certain categories of people—refugees or those living in countries with little to no infrastructure for government credit or banking—anonymous exchanges can help bring them into the mainstream economy.

Right now, however, most popular exchanges are not decentralized and follow laws that require users to submit identifying documentation. In the United States, these exchanges include Coinbase, Kraken, Gemini, FTX, and www.oldyorkcellars.com, to name a few. These exchanges have grown significantly in the number of features they offer.

The crypto universe has grown rapidly in the last decade, with many new tokens competing for investor dollars. With the exception of Bitcoin and certain prominent coins, such as Ethereum, not all of these tokens are available at all exchanges. Each exchange has its own set of criteria to determine whether to include or exclude the trading of certain tokens. 

Coinbase, Kraken, and Gemini offer Bitcoin and a growing number of altcoins. These three are probably the easiest on-ramps to crypto in the entire industry. Binance caters to a more advanced trader, offering more serious trading functionality and a better variety of altcoin choices. FTX, a fast-growing crypto exchange that has garnered a multibillion-dollar valuation, offers a restricted number of altcoins to U.S. investors. However, traders outside the U.S. have a greater choice of tokens on its platform.  

An important thing to note when creating a cryptocurrency exchange account is to use safe Internet practices. This includes two-factor authentication and a long, unique password that includes a variety of lowercase letters, capitalized letters, special characters, and numbers.

Step 2: Connect your exchange to a payment option

After you have chosen an exchange, you will need to gather your personal documents. Depending on the exchange, these may include pictures of a driver's license or Social Security card, as well as information about your employer and source of funds. The information you may need can depend on the region you live in and the laws within it. The process is largely the same as setting up a typical brokerage account.

After the exchange has verified your identity, you will be asked to connect a payment option. At most exchanges, you can connect your bank account directly or you can connect a debit or credit card. Although you can use a credit card to purchase cryptocurrency, it is not a good idea because cryptocurrency price volatility could inflate the overall cost of purchasing a coin.

Bitcoin is legal in the United States, but some banks may question or even stop deposits to crypto-related sites or exchanges. It is a good idea to check to make sure that your bank allows deposits at your chosen exchange.

There are varying fees for deposits via a bank account, debit, or credit card. It is important to research the fees associated with each payment option to help choose an exchange or to choose which payment option works best for you.

Exchanges also charge fees per transaction. These fees can either be a flat fee (if the trading amount is low) or a percentage of the trading amount. Credit cards incur a processing fee in addition to the transaction fees.

Step 3: Place an order

You can buy bitcoin (or other cryptocurrencies) after choosing an exchange and connecting a payment option. In recent years, cryptocurrency exchanges have slowly become more mainstream. They have grown significantly in terms of liquidity and their breadth of features. The operational changes at cryptocurrency exchanges parallel the change in the perception of cryptocurrencies. An industry that was once thought of as a scam or one with questionable practices is slowly morphing into a legitimate one that has drawn interest from all the big players in the financial services industry.

Now, cryptocurrency exchanges have gotten to a point where they have nearly the same level of features as their stock brokerage counterparts. Crypto exchanges today offer a number of order types and ways to invest. Almost all crypto exchanges offer both market and limit orders, and some also offer stop-loss orders. Of the exchanges mentioned above, Kraken offers the most order types. Kraken allows for market, limit, stop-loss, stop-limit, take-profit, and take-profit limit orders.

Aside from a variety of order types, exchanges also offer ways to set up recurring investments, allowing clients to dollar-cost average into their investments of choice. Coinbase, for example, lets users set recurring purchases for every day, week, or month.

Step 4: Safe storage

Bitcoin and cryptocurrency wallets are a place to store digital assets more securely. Having your crypto outside of the exchange and in your personal wallet ensures that only you have control over the private key to your funds. It also gives you the ability to store funds away from an exchange and avoid the risk of your exchange getting hacked and losing your funds.

Although most exchanges offer wallets for their users, security is not their primary business. We generally do not recommend using an exchange wallet for large or long-term cryptocurrency holdings.

Some wallets have more features than others. Some are Bitcoin only, and some offer the ability to store numerous types of altcoins. Some wallets also offer the ability to swap one token for another.

When it comes to choosing a Bitcoin wallet, you have a number of options. The first thing you will need to understand about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or hardware wallets).

Hot wallets

Online wallets are also known as hot wallets. Hot wallets are wallets that run on Internet-connected devices such as computers, phones, or tablets. This can create vulnerability because these wallets generate the private keys to your coins on these Internet-connected devices. Though a hot wallet can be very convenient in the way you are able to access and make transactions with your assets quickly, storing your private key on an Internet-connected device makes it more susceptible to a hack.

This may sound farfetched, but hot wallet holders who haven't set up enough security run the risk of losing funds to theft. This is not an infrequent occurrence, and it can happen in a number of ways. For example, boasting on a public forum such as Reddit about how much bitcoin you hold while you are using little to no security and storing it in a hot wallet would not be wise. That said, these wallets can be made secure so long as precautions are taken. Strong passwords, two-factor authentication, and safe Internet browsing should be considered minimum requirements.

These wallets are best for small amounts of cryptocurrency or cryptocurrency that you are actively trading on an exchange. You could liken a hot wallet to a checking account. Conventional financial wisdom would say to hold only spending money in a checking account while the bulk of your money is in savings accounts or other investment accounts. The same could be said for hot wallets. Hot wallets encompass mobile, desktop, web, and exchange account custody wallets. 

As mentioned previously, exchange wallets are custodial accounts provided by the exchange. The user of this wallet type is not the holder of the private key to the cryptocurrency that is held in this wallet. If an event were to occur wherein the exchange is hacked or your account becomes compromised, you would lose your funds. The phrase "not your key, not your coin" is heavily repeated within cryptocurrency forums and communities.

Cold wallets

The simplest description of a cold wallet is that it is not connected to the Internet and therefore stands at a far lesser risk of being compromised. These wallets can also be referred to as offline wallets or hardware wallets. These wallets store a user's private key on something that is not connected to the internet and can come with software that works in parallel so that the user can view their portfolio without putting their private key at risk. 

Perhaps the most secure way to store cryptocurrency offline is via a paper wallet. A paper wallet is a wallet that you can generate off of certain websites. It then produces both public and private keys that you print out on a piece of paper. The ability to access cryptocurrency in these addresses is only possible if you have that piece of paper with the private key. Many people laminate these paper wallets and store them in safe deposit boxes at their bank or even in a safe in their home. These wallets are meant for high-security and long-term investments because you cannot quickly sell or trade bitcoin stored this way.

A more common type of cold wallet is a hardware wallet. A hardware wallet is typically a USB drive device that stores a user's private keys securely offline. Such wallets have serious advantages over hot wallets because they are unaffected by viruses that could infect one's computer. With hardware wallets, private keys never come into contact with your network-connected computer or potentially vulnerable software. These devices are also typically open source, allowing the community to determine their safety through code audits rather than a company declaring that they are safe to use.

Cold wallets are the most secure way to store your bitcoin or other cryptocurrencies. But they require more technical knowledge to set up.

A good way to set up your wallets is to have three things: an exchange account for buying and selling, a hot wallet to hold small to medium amounts of crypto you wish to trade or sell, and a cold hardware wallet to store larger holdings for long-term durations.

How to Buy Bitcoin With PayPal

You can also buy bitcoin through payment processor PayPal Holdings, Inc. (PYPL). There are two ways to purchase bitcoin using PayPal. The first and most convenient method is to purchase cryptocurrencies using your PayPal account that is connected to a payment mechanism, such as a debit card or bank account. The second option is to use the balance of your PayPal account to purchase cryptocurrencies from a third-party provider. This option is not as convenient as the first because very few third-party sites allow users to purchase bitcoin using the PayPal button.

Four cryptocurrencies—Bitcoin, Ethereum, Litecoin, and Bitcoin Cash—can be purchased directly through PayPal. With the exception of those who live in Hawaii, residents of all states can either use their existing PayPal accounts or set up new ones. You can also use your cryptocurrencies to purchase products and services through the "Checkout With Crypto" feature.

To set up a crypto account with PayPal, the following information is required: name, physical address, date of birth, and tax identification number.

It is not possible to use a credit card to purchase Bitcoin using PayPal. During the buying process, PayPal will display a price for the cryptocurrency. But that price is subject to rapid change due to the volatility of cryptocurrency markets. It is a good idea to make sure you have more than the price you budgeted for the purchase in your bank account. 

When you buy bitcoin directly from PayPal, it makes money off the crypto spread or the difference between Bitcoin's market price and its exchange rate with USD. The company also charges a transaction fee for each purchase. These fees depend on the dollar amount of the purchase. For example, a flat fee of $ is charged for purchases between $ and $ Thereafter, the fee is a percentage of the overall dollar amount. For example, a fee of 2% of the total amount is charged for crypto purchases between $ and $

One disadvantage of purchasing cryptocurrencies through PayPal is that you cannot transfer the crypto outside the payment processor's platform. Therefore, it is not possible for you to transfer your purchased bitcoin from PayPal's wallet to an external crypto wallet or your personal wallet.

The other disadvantage of using PayPal is that very few exchanges and online traders allow the use of the payment processor to purchase payment. eToro is among the few online traders that allow the use of PayPal to purchase bitcoin on its platform.

How to Buy Bitcoin With a Credit Card

The process for purchasing bitcoin with credit cards is similar to the process for buying it with debit cards or through automated clearing house (ACH) transfers. You will need to enter your credit card details with the exchange or online trading firm and authorize the transaction. In general, however, it is not a good idea to purchase bitcoin with credit cards. There are a couple of reasons for this.

First, not all exchanges allow bitcoin purchasing with credit cards due to associated processing fees and the risk of fraud. This decision may work out in the best interests of customers. This is because credit card processing can tack additional charges onto such transactions. Thus, in addition to paying transaction fees, you will end up with processing fees that the exchange may pass onto you.

The second reason is that credit card purchases can be expensive. Credit card issuers treat bitcoin purchases as cash advances and charge hefty fees and interest rates on such advances. For example, American Express and Chase both count purchases of cryptocurrencies as cash advance transactions. Thus, if you purchase $ worth of bitcoin using an American Express card, you will pay $10 (current cash advance fee for such transactions) plus an annual percentage fee of 25%. What's more, the credit card company also limits you to $1, worth of bitcoin purchases per month.

An indirect method of purchasing bitcoin using a credit card is to get a Bitcoin rewards credit card. Such cards function like your typical rewards credit card except they offer rewards in the form of bitcoin. So, they invest the cash back earned from purchases into Bitcoin. One example of a Bitcoin rewards card is the BlockFi Bitcoin Rewards Credit Card. Beware, however, that the annual fees for these cards may be steep and there may be additional costs associated with the conversion of fiat currencies into crypto.

Alternative Ways to Buy Bitcoin

Bitcoin ATMs

Bitcoin ATMs act like in-person bitcoin exchanges. Individuals can insert cash into a machine and use it to purchase bitcoin that is then transferred to online wallets for users. Bitcoin ATMs have become increasingly popular in recent years—even retail giant Walmart Inc. (WMT) is testing a pilot program that will offer its customers the option of purchasing bitcoin. Coin ATM Radar can help to track down the closest machines.

However, ATMs are an expensive option. There are two charges associated with ATM bitcoin purchases: a purchase fee and a conversion fee for converting a fiat currency to bitcoin. Both fees are fairly steep compared to those of other options. For example, the worldwide average purchase fee at Bitcoin ATMs is % (of the purchase amount) and % for sales at ATMs.

P2P exchanges

Unlike decentralized exchanges, which match buyers and sellers anonymously and facilitate all aspects of the transaction, there are some peer-to-peer (P2P) exchange services that provide a more direct connection between users. LocalBitcoins is an example of such an exchange. After creating an account, users can post requests to buy or sell bitcoin, including information about payment methods and prices. Users then browse through listings of buy and sell offers, choosing the trading partners with whom they wish to transact.

LocalBitcoins facilitates some aspects of the trade. Although P2P exchanges do not offer the same anonymity as decentralized exchanges, they allow users the opportunity to shop around for the best deal. Many of these exchanges also provide rating systems so users have a way to evaluate potential trade partners before transacting.

Mainstream brokerages  

Very few mainstream brokerages offer bitcoin purchase and trading capabilities due to the uncertainty surrounding the regulatory status of cryptocurrencies. Robinhood Markets, Inc. (HOOD), an app popular with retail investors, is one exchange that offers crypto trading facilities. It charges 0% commission for cryptocurrency trades and purchases and makes money from payment for order flow, passing its trading volume onto other trading platforms or brokerages.

The absence of a commission fee may be an enticing prospect for beginners, but there are a couple of catches to that offer. First, Robinhood does not have the breadth of features and coins offered by prominent crypto exchanges like Coinbase. Robinhood had enabled trading on its platform for seven cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic. In contrast, you can trade more than cryptocurrencies on Coinbase. The exchange also offers various order types to minimize risk and offset losses during trading. 

The Robinhood platform also does not have a hosted wallet. Therefore, if you want to purchase cryptocurrencies through Robinhood, you will have to factor in additional costs for an online wallet provider.

How to Sell Bitcoin

You can sell bitcoin at the same venues where you purchased the cryptocurrency, such as cryptocurrency exchanges and P2P platforms. Typically, the process of selling bitcoin on these platforms is similar to the process for purchasing it.

For example, you may only be required to click a button and specify an order type (i.e., whether the cryptocurrency should be sold instantly at available prices or whether it should be sold to limit losses) to conduct the sale. Depending on the market composition and demand at the venue, the offering price for Bitcoin may vary. For example, exchanges in South Korea traded bitcoin at a so-called kimchi premium during the run-up in its prices back in   

Cryptocurrency exchanges charge a percentage of the crypto sale amount as fees. For example, Coinbase charges % of the overall transaction amount as fees.

Exchanges generally have daily and monthly withdrawal limits. Therefore, cash from a large sale may not be immediately available to the trader. There are no limits on the amount of cryptocurrency you can sell, however.

The Bottom Line

The process for purchasing bitcoin is slightly more complicated than the process to buy regular equity or stock. This is mainly because the cryptocurrency ecosystem and infrastructure are not as well developed as those of mainstream trading.

A bitcoin purchase process consists of four steps: selecting a service or venue for the purchase, connecting with a payment method, placing an order, and ensuring safe storage for your purchased cryptocurrency. Each of these steps requires research and a careful assessment of the pros and cons of each service. You can also buy bitcoin at Bitcoin ATMs or from payment services like PayPal and mainstream brokerages like Robinhood.

• Bitcoin is a cryptocurrency, a type of digital, private money that operates without the involvement of a bank or government.
• Bitcoin trades on online exchanges, and since its price has mushroomed since its debut, it's increasingly attracting investors' interest.
• As an investment asset, bitcoin offers capital appreciation and an inflation hedge, but its volatile price swings make it a high-risk, long-term investment.
• Visit Business Insider's Investing Reference library for more stories.

Scarcely a news cycle goes by without some mention of Bitcoin. But even by its own standards, the cryptocurrency was having an intense moment in the fall of First, its prices on trading exchanges tumbled around Thanksgiving — only to roar back and set an all-time high of $19, on November a % year-to-date increase that put the S&P 's 14% rise to shame. 

But while it has certainly attracted plenty of attention, not just of late but throughout its year-old life, Bitcoin still remains a mystery to casual and experienced investors alike. This shouldn't really be the case, since the basics of Bitcoin and how it works are relatively easy to understand.  

Here's a brief Bitcoin biography: An overview of its origins, operations — and how to invest in it. 

What is Bitcoin? 

Bitcoin is a cryptocurrency, an electronic version of money that verifies transactions using cryptography (the science of encoding and decoding information). 

As Bitcoin educator, developer, and entrepreneur Jimmy Song explains, Bitcoin is "decentralized, digital, and scarce money": 

• It's digital because it exists as a set of code that determines how it operates
• It's decentralized because this code is run by thousands of computers (AKA 'nodes') spread across the globe
• It's scarce because its code limits its overall number to only 21 million bitcoins

When you use bitcoin to buy something, it records the transaction on a blockchain, which is essentially a ledger or database whose entries can't be modified or erased.

Transactions are validated by Bitcoin through a process known as a proof-of-work, in which "miners" (i.e., people with computing hardware) attempt to calculate the cryptographic key for the next block in Bitcoin's blockchain.

"It's called mining because it's like looking for gold. Anyone with a shovel can dig and look for gold, just as anyone with a computer can look for proof-of-work," says Song.

These technicalities aside, one of the main draws of Bitcoin — and one of the reasons why it has attracted so much hype in recent years — is that it's a form of private money that operates without the involvement of a central bank or government.

"Bitcoin is used to transfer funds from one party to another without requiring a middleman such as a bank. Because the technology is open source and entirely decentralized, it is protected from influence by external sources such as governments, who typically control fiscal policy and fiat currency circulation," says Simon Peters, a market analyst at eToro.

A brief history of Bitcoin

This independence from central authorities is key to understanding the beginnings of Bitcoin, which was first formalized by a person identified only as "Satoshi Nakamoto" in an October whitepaper. Working with various members of a cryptography mailing list, the pseudonymous Nakamoto launched Bitcoin on January 3,

Other individuals had attempted to develop forms of electronic money before (e.g. e-Cash, DigiCash, Hashcash), but most had failed to solve the 'double-spend' problem, in which bad actors can spend the same e-money twice. Nakamoto's main solution to this problem was to introduce a timestamped, permanent transactions ledger: the blockchain.

This effectively makes every bitcoin traceable and unique, insofar as the transaction history of each individual bitcoin is publicly visible on the bitcoin blockchain. "Any attempted alteration of the ledger would be rejected by other participants," says Peters.

The blockchain technology behind the Bitcoin network is what excites most people about the digital currency. Because the record-keeping technology is decentralized — so no single group has control — advocates believe it has the power to transform the world's financial institutions and business dealings for the better, resulting in faster but more secure transactions, along with improved transparency and communications.

Early uses of bitcoins

At the very beginning of its life, Bitcoin was used to make trial purchases and payments, with developer Laszlo Hanyecz famously using 10, bitcoins to buy two pizzas on May 22, It then became more commonly used in online marketplaces and for international contracts and import/export operations. 

It was also around this time that traders first began speculating with the currency, with the now-defunct www.oldyorkcellars.com launching as the world's first bitcoin exchange in March

Having been worth precisely $0 when it debuted in , bitcoin has experienced more than its fair share of pricing ups and downs, with its worth rising or plummeting by hundreds of dollars in a matter of hours.  Still, the major trend has been that the currency's price has risen over the longer term, with each new peak being higher than the last in most cases.

Concerns over bitcoin's legitimacy 

One reason for the volatility: Considerable suspicion and skepticism that have dogged the cryptocurrency throughout its history. Bitcoin's blockchain may be immune to interference, but bitcoin itself may not be, skeptics have said.  

Research published in concluded that "there was serious market manipulation in Mt. Gox exchange," which was the largest cryptocurrency marketplace until hacking forced its shutdown, incurring the loss of some , bitcoins. 

Similar charges have been made with regards to the cryptocurrency Tether. A so-called "stablecoin," it's widely used to purchase bitcoins in regions (particularly Asia) where using traditional fiat currencies for such a purpose isn't legal. Its operators originally claimed that every Tether token was backed by US dollars held in reserve, yet researchers have suggested that this backing is a myth and that Tether is a tool used just to inflate bitcoin prices.

Then there's Bitcoin's association with criminals and shady operators. Most notoriously, it was the medium of exchange used by Silk Road, a clandestine black market eventually shut down by the FBI in  

This stigma has stuck ever since, and not without cause. While recent research suggests that bitcoin is now mostly used for financial speculation or wealth preservation (much like gold), some $ billion was laundered in using the cryptocurrency.

Why invest in bitcoin?

Bitcoin may be a relatively new asset, but it has provided outsized returns in almost every year of its existence. More broadly, its advocates believe that its fixed supply makes it the perfect way to store wealth and that it should appreciate significantly over the long term as more institutional investors — investment banks, mutual funds, pension plans — pile into it.

"We have already seen increased interest from institutional investors and corporations" in , says Peters. "This is in part to the increasing view that bitcoin can act as a strong hedge against inflation in portfolios, as well as potentially growing in price and in consumer adoption substantially in the future." 

How to invest in bitcoin

There are two main ways to invest in bitcoin. Either you set up an account with one of the many dedicated cryptocurrency exchanges now in existence, or you buy it through an investment platform that includes the option to buy cryptocurrencies.

While cryptocurrency exchanges were once shady, unregulated operations, the major exchanges now operating are all regulated and in compliance with applicable laws. In the United States, some of the most popular are:

• Coinbase
• Kraken
• Gemini
• www.oldyorkcellars.com
• bitFlyer
• Coinmama

Alternatively, you can buy bitcoin through a number of financial apps and platforms, including Robinhood, Cash App, and PayPal. Such apps tend not to offer as wide a selection of cryptocurrencies as the dedicated exchanges, but if you're interested only in bitcoin then it doesn't make a real difference.

If you do decide to invest in bitcoin, here are five pointers worth keeping in mind in order to reduce your exposure to risk:

1. Consider buying a bitcoin wallet

If you're buying bitcoin via an exchange, and if you're planning on holding large sums of the cryptocurrency, it may be a good idea to transfer them to your own hardware wallet. Hardware wallets are basically small, offline computers that store the private keys controlling your bitcoin funds, with good examples being manufactured by the likes of Ledger and Trezor.

2. Invest only what you can afford to lose 

This sage advice applies to any investment, but especially here. Bitcoin has fluctuated quite wildly over its brief existence and continues to do so — like that $3, drop in prices the third week of November The moral is:  Your holdings may decline significantly in the short-term, so don't invest any funds that you might need to call on for an emergency, lest you be forced to sell during one of these downswings.  

3. Think long-term

Given its volatility, it usually pays to have more of a long-term perspective when investing in Bitcoin. Viewed over the past decade, it has performed extremely well, so — unless you want to take up day-trading — buying and holding it may be the best strategy.

4. Watch the stock market

Bitcoin has shown an increasing correlation with the S&P in , particularly as the current economic climate has pushed investors towards more speculative investments. As such, it may be worthwhile watching stocks for telltale signs of an impending movement in the bitcoin market.

5. Remember tax liabilities

In the United States, bitcoin is taxable. You are liable for capital gains tax when selling the currency at a profit, or even just spending it (if the price has appreciated since you bought it). So be sure to keep records of all your transactions. 

The financial takeaway

It's hard to say where Bitcoin will be in the next five or 10 years. 

Its ability to operate at scale has been seriously questioned, so it's unlikely that bitcoin will become a fully fledged currency, replacing traditional dollars or euros,  anytime soon.

Still, saw the business intelligence company MicroStrategy adopt bitcoin as its primary reserve asset, with the likes of Square and UK-based fintech Mode soon following suit. It also saw PayPal launch its own cryptocurrency trading service, adding to the conviction that the momentum behind Bitcoin and crypto in general is only building.

"In my view, whilst adoption will continue to increase at a steady rate, the largest role I see bitcoin having is its increased use as an asset in investment portfolios," says Simon Peters. Some bullish analysts have set fairly astronomical target for price increases, with former Goldman Sachs hedge-fund chief Raoul Paul going as high as $1 million by  

Given that bitcoin has no real fundamentals besides a limited supply and a growing network of developers, users and holders, it's hard to fully subscribe to such optimistic forecasts. Nonetheless, past years have been very kind to the cryptocurrency, and there are no real signs that its bubble (if it is a bubble) is going to burst just yet.

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One of the many greatest technological breakthroughs that have happened since the advent of the internet is the blockchain-backed cryptocurrency. Cryptocurrency has changed the game for investors and businesses around the world. Here are the basics of crypto and why you should invest in one.

What Is Cryptocurrency?

In simple words, cryptocurrency is a digital asset. The name originates from the fact that all of its transactions are highly encrypted, making the exchanges highly secure. It is decentralised in nature, unlike traditional currencies, which are managed and controlled by a central authority. A cryptocurrency is finite in number and at times equated to precious metals like gold and silver.

Cryptocurrency is created through mining, which is a process of very complex problems being solved by powerful computers, usually as a reward for making successful cryptocurrency transactions. In other words, the exchange of cryptocurrency often results in more cryptocurrency being introduced in the world.

Many cryptocurrencies use blockchain for managing and recording transactions, wherein multiple entities maintain identical transaction records, making it an extremely secure technology for your investments.

“The investors who do appreciate the blockchain technology and have specific views about which aspects of it are going to become major in the years to come can invest in specific cryptocurrencies that are the basis of those aspects,” said Swapnil Pawar, Founder, ASQI Advisors.

The Crypto Market

The total worth of the cryptocurrency market as of May is a whopping $ trillion. There are over 10, listed cryptocurrencies at the time of writing, and this number is only bound to increase. Out of this, Bitcoin has the largest share in terms of market capitalisation, amounting to about $ billion, followed by Ethereum and Tether.

Acceptance of cryptocurrency around the world has been on the increase for many years now.  For example, when a major US online retailer – www.oldyorkcellars.com – started accepting Bitcoins in , it made $, in Bitcoin sales on the first day itself. More interestingly, corporations are also recognising the investment value of this digital asset – US-based MicroStrategy Inc. purchased more than $1 billion of Bitcoin in !

Bitcoin – The Gamechanger

Bitcoin emerged as a gold rush of opportunity when the world realised problems with the existing financial systems after the crisis. It was the very first crypto developed through blockchain and perhaps changed the way people thought about money. In , Bitcoin was recommended as the best investment by Forbes. Today, it has become a household name.

As quoted by Deloitte, over US businesses accepted Bitcoin as a mode of payment in late , making it an attractive asset to hold for a common man. 

Why Invest in Bitcoin?

In addition to being highly secure in nature, Bitcoin is also peer-to-peer (P2P), which means it involves no intermediary (such as a bank or credit card agency) and offers a minimal transaction cost.

It is fast and fully transparent – for instance, every Bitcoin transaction you make is recorded in a public ledger that is visible to all. It cannot be forged or counterfeited. Blockchain transactions are also irreversible, making the chances of fraudulent activities even smaller and your investments much more secure. You can trade Bitcoin through exchanges such as WazirX, which are a safe and secure platform for investors.

The Bottom Line

With cryptocurrency, the future is here. To start investing, you need a trusted cryptocurrency exchange such as WazirX where you can buy, sell and trade cryptocurrencies like Bitcoin, Ethereum, Tron, and more.