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There is a ton of information on the interweb on what Bitcoins are; why they are an attractive option is also widely available. So at this time, when stock markets and mutual funds have seen a downward trend (gold has been volatile too), could this cryptocurrency be a shining asset?

Unlike national currencies of the world, Bitcoin is not regulated by an authority (read: central bank). A network of millions of computers around the world called ‘nodes’ back it up. These nodes store information publicly of transactions and help to verify them. Computers can also mine a Bitcoin.

How Covid affects economy

Without getting into the nitty-gritty of how the coins are mined, you should know that miners earn rewards for verifying transactions and maintaining the block which records purchases. Since May 11, 2020, the reward is 3.125 Bitcoin for each block. This will reduce over the years and end in 2140 when miners will be paid fees for processing transactions. The blocks are limited and the cryptocurrency will reach a supply cap, making the currency more valuable over time.

Should Bitcoins be part of your portfolio?

Although the price of Bitcoin dropped recently, the rebound has been significantly impressive. It appears to be a digital asset that can hedge you against economic crises. Here are three reasons how Bitcoins can save your financial plans post-COVID-19.

  1. The Indian economy is not doing well, and that is reflective of the global trend. The purchasing power of currencies may get impacted, but the cryptocurrency’s ability to take the pressure off of financial markets could increase the interest in Bitcoin.
  2. Stock markets may lose some sheen for investors as corporations post losses. Since demand for products has fallen, this could be the case for some time to come. Cryptocurrencies could help balance out losses if economic turmoil continues.
  3. If you have ever invested in mutual funds, you would know that bonds (via debt funds) act as safety nets for the volatility in stock markets (equities). But bonds could lose the ability to do so. The recent shutting down of Franklin Templeton’s debt funds has highlighted this risk. Analysts have for some time recommended that at least one per cent of your total investment to be put into cryptocurrencies.

Buying Bitcoins

In American digital currency investment firm, Grayscale’s recent report, Grayscale Bitcoin Trust and Grayscale Ethereum Trust (another cryptocurrency) saw inflows of $388.9 million and $110.0 million, respectively. JP Morgan, an American investment bank, in its February 2020 report also mentioned that “the crypto market continues to mature, and cryptocurrency trading participation by institutional investors is now significant.”

How to buy them in India?

There are a few apps that allow the trusted sale of Bitcoin such as Zebpay, UnoCoin, and Binance in India. Although one Bitcoin today costs Rs 12 lakh, you can start investing in Bitcoin with as little as Rs 500. There are nominal charges for buying and selling Bitcoins, varying between 0.1 per cent to 0.7 per cent of the total value. It is advisable to keep an eye on the price trends. 

Like any other investment module, buying cryptocurrency also requires you to complete Know Your Customer (KYC) procedures. This typically means that your PAN card, bank account details, and address proof are verified. You will then be able to set up the Bitcoin wallet letting you trade in swiftly.  

If Bitcoins sound too mainstream, may we suggest these cryptocurrencies: Ripple, Peercoin, Namecoin, Ethereum, Litecoin, Quarkcoin, and Zetacoin. Most of these cryptocurrencies are available on BuyUcoin, Blockonix, and Koinex.

All images: Shutterstock

Anam Naqvi

Anam is an astute writer who aims to demystify personal finance and wealth management for the common man. She has written on geopolitics, economics, and politics as well for the Economist Intelligence Unit before moving to personal finance content strategy. Her penchant for storytelling and conversation has resulted in a podcast about humans called “Sapien Story”.