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Are you interested in investing in cryptos but have little information about what they are or how exactly they work? Stop, take a pause! Cryptos are definitely an exciting investment opportunity and can give you good gains if you DYOR properly. However, if you’re a beginner or a new investor, the risk of losing your capital increases. You will also be prone to being lured by scammers, who can dupe you into giving away your money just like that.
In 2020 and 2021, crypto investments saw a dramatic increase in popularity, which enabled many of the top cryptos to reach all-time highs. Bitcoin (BTC), the most significant of them all, increased from roughly $7,000 in January 2020 to over $69,000 in November 2021. But in 2022 and 2023, things changed abruptly; the crypto space went through a rough “crypto winter.”
Prices began to fall when the Federal Reserve implemented economic tightening measures, and investors turned away from riskier assets. The market then had a string of setbacks, and the prices fell even further after each. The collapse of the Terra (LUNA) network was one such incident that had repercussions on the market for several months afterward.
However, as 2024 began on a good note, the most anticipated Bitcoin halving event took place, shooting Bitcoin to its all-time high of $73,000 in March 2024. Various new projects were launched, and institutional adoption grew; investors and traders were full of excitement and hopeful that the worst was over and crypto investment would be profitable again.
But, for new investors and beginners, we did some digging and prepared a list of critical questions for you to consider before buying crypto in India in May 2024. Let’s quickly have a look at them.
Q 1. What is your ultimate investment goal?
Your investment goal matters the most, so you should consider your investment goal before buying any crypto. Do you want to make an instant profit, or do you want to hold them for the long term? If your goal is to make a quick profit, then you may want to consider day trading or investing in high-risk, high-reward cryptos. On the other hand, if you are interested in holding for the long term, then you may want to consider investing in established cryptos such as Bitcoin or Ethereum.
Related read: Understanding Cryptocurrency Trading Strategies: Scalping, Swing Trading, and HODLing
Q 2. How much are you aware of the current market scenario?
The crypto market is famous for its high risk and volatility, so it is crucial to study the current market conditions before investing carefully. Is the market bullish or bearish? Is there a lot of volatility, or is the market relatively stable? Understanding the current market condition can help you make better investment decisions.
Related read: Understanding the Differences Between a Bull and Bear Market
Q 3. How much are you willing to take investment risks?
Crypto investments are considered risky, but it’s important to consider your risk tolerance before you make any crypto investment decisions. How much are you willing to take on the high-risk investments, or how comfortable are you with low-risk, low-reward investments? This way, you can easily come to a conclusion about the type of crypto you should consider investing in.
Related read: 6 Ways to Minimize Risks When Investing in Crypto
Q 4. How strong is the technology behind the crypto?
Before you choose a crypto for investment, you should definitely consider the technology behind it. What is the underlying technology of Crypto? Is it based on blockchain technology or some other type of technology? Answers to these questions will help you make a better investment decision for the crypto you want to buy.
Related read: Unlocking the Synergy: Exploring the Intersection of Blockchain Technology and Web3
Q 5. What is the regulatory environment surrounding the crypto you want to buy?
The regulatory environment surrounding crypto is also an important factor to consider before investing. Are there any regulatory hurdles that crypto may face in the future? Understanding the regulatory environment can help you make better investment decisions.
Related read: The Crypto-Regulatory Landscape: A 2023 Overview
Bottomline
Nobody can exactly predict crypto prices. However, with the upcoming regulations, there may be short-term volatility, even if it helps to strengthen the crypto market in the long run. The crypto winter is over, and the current market has recovered.
If you plan to invest in crypto, do not make the decision based on expectations of a similar surge like that of 2021. Instead, make crypto investment decisions after having a thorough understanding of blockchain and its potential applications in the future. However, even then, it is crucial to follow the golden rule of crypto investing and invest only the money you can afford to lose.
Happy Trading!
Frequently Asked Questions
Is Bitcoin And Cryptocurrency The Same Thing?
Bitcoin is a cryptocurrency that was designed to facilitate cross-border transactions, eliminate government control over transactions, and streamline the entire process without third-party intermediaries. The absence of intermediaries has resulted in a significant reduction in transaction costs. Satoshi Nakamoto, the creator of Bitcoin, created the first cryptocurrency in 2008. It began as open-source software for money transfers. Since then, plenty of cryptocurrencies have emerged, with some focusing on specific fields.
How Cryptocurrency Works?
Cryptocurrencies use cryptography technology to keep transactions and their units (tokens) secure. Cryptocurrency works via a technology called the blockchain. A blockchain is a decentralized technology that handles and records transactions across numerous computers. The security of this technology is part of its value.
Is Cryptocurrency Banned In India?
No, cryptocurrency is not banned in India. India has seen its ups and downs in the crypto sector concerning its legal status. The Reserve Bank of India (RBI) issued a circular in April 2018 advising all organizations under its jurisdiction not to trade in virtual currencies or provide services to assist anyone in dealing with or settling them. A government committee proposed outlawing all private cryptocurrencies in mid-2019, with up to ten years in prison and severe penalties for anyone dealing in digital currency. The Supreme Court overruled the RBI's circular in March 2020, allowing banks to undertake cryptocurrency transactions from dealers and exchanges.
Is Cryptocurrency Safe To Invest In?
Cryptocurrency investments are subject to market risks, but if sufficient security measures are not taken, trading accounts can be maliciously accessed. Investments come with risks and uncertainties, and we cannot claim that any digital currency investment is risk-free. Buying and selling cryptocurrencies can be risky even if the trader is knowledgeable about the market and treats their coins carefully.
Is Crypto Legal In India?
Cryptocurrencies are legal in India, and anyone can purchase, sell, and exchange them. It is currently uncontrolled, as India lacks a regulatory structure to oversee its operations. Per the Ministry of Corporate Affairs, companies must now record their crypto trading/investments within the financial year. In cases where a person receiving the gains is an Indian tax resident, or the cryptocurrency is regarded as domiciled in India, cryptocurrency transactions have been taxable in India
How To Invest In Cryptocurrency?
There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is considered the procedure of verifying and adding transactions to the blockchain public ledger. Another option is via cryptocurrency exchanges. Exchanges generate money by collecting transaction fees, but there are alternative websites where you can interact directly with other users who want to trade cryptocurrencies.
Is Mining Cryptocurrency Legal?
Cryptocurrency mining can be time-consuming, expensive, and sporadically profitable. Mining has an appeal for many cryptocurrency enthusiasts as miners are paid directly with crypto tokens for their efforts. The legality of cryptocurrency mining is dependent on where you live. In India, there is no restriction on crypto mining.
What Is The Meaning Of Crypto?
A cryptocurrency is a digital currency that is secured by the process of cryptography, making counterfeiting and double-spending almost impossible to happen. Blockchain technology is used to produce cryptocurrencies ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a centralized authority does not issue them.
Who Invented Cryptocurrency?
Satoshi Nakamoto invented cryptocurrencies and the technology that makes them function in 2009. The presumed pseudonymous individual or persons who invented Bitcoin used this identity. In addition, Nakamoto created the first blockchain database. Even though many people have claimed to be Satoshi Nakamoto, the person's identity remains unknown.
Is Bitcoin A Good Investment For The Future?
Some investors are afraid of the risks or devastation, but others are very eager to pursue the possibility of profit from a Bitcoin investment. A Bitcoin investment is similar to stock investing, except it can be more volatile.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
