The price of Bitcoin has grown over four times and Ethereum by over ten times in the past year alone. Such returns have attracted many retail investors to dip their toes in this new and intriguing asset class.
More youngsters or first-time investors are looking to invest in cryptocurrencies in India. However, most investors do not understand the crypto markets fully.
Here are five things you should know about cryptocurrency markets in India
- Investing in crypto is not Illegal
There is a common misconception that cryptocurrencies are illegal.
Well, RBI did impose a ban on banks from facilitating cryptocurrency transactions in 2018. This circular made the entire crypto community in India go haywire, and they filed writ petitions to challenge the ban.
Currently, the scenario is very different in the crypto space. Renowned investors are funding many fintech startups to build the space. More retail investors are now interested in dipping their toes in the market. More than 2 million users have registered as investors in crypto start-ups like
within just six months after its launch.
Recently, RBI announced that it is examining the need to create a central digital currency (CBDC) to regulate the market, which could be a positive move for the crypto market.1
- Cryptocurrency transactions are taxed
Cryptocurrencies are indeed decentralised.
They are not controlled and regulated by a central authority or the government. However, this does not mean that you are not required to pay tax if you invest in cryptos.
Any income in India will be brought under the purview of income tax. Like every other investment, profits earned by investing in cryptocurrencies are also subject to capital gains tax under the Income Tax Act.
Depending on your holding duration, it may be classified as short term or long term capital gains. Some others also classify it under income from other sources in their returns.
However, the status of cryptocurrency, whether it is a currency or commodity is still vague. Unless there is a precise regulation governing the market, there is no way to say how these assets can be taxed.
- Cryptocurrencies are not expensive
Generally, when we say cryptocurrency, people tend to associate it to Bitcoin.
You may be aware that one Bitcoin price is now a whopping ~₹30 lakhs2 per coin. Many potential investors assume that they cannot afford to invest in such high valued assets and tend to stay away.
What most people are unaware of is that you can purchase Bitcoins in fractions also. In India, there are crypto exchanges like
, allowing their users to buy Bitcoin with a minimum investment of just ₹100.
Apart from Bitcoins, several other cryptos in the market also have an excellent potential of earning high returns.
- The value of crypto is as real as Rupee
Cryptocurrencies are digital assets and do not hold a physical form like paper money.
The intangible nature of cryptos has led many to believe that cryptos do not have real value and are just a set of codes.
The reality is that no currency possesses real value unless people believe in it.
For instance, Rupee in India holds significance because it is a sovereign currency, and people believe in its sovereignty.
Let us say that the government declares Rupee to be void overnight, and introduces a new currency; then Rupee will no longer hold value.
Similarly, many people have placed their trust in cryptocurrencies as a means of exchange and a store of value.
Although it is a decentralised system, it is being held together by a community.
- Investing in cryptocurrency is simple
Investing in cryptocurrencies often comes across as…