The global bitcoin rush has rubbed off on the Indian investors too, making India the second-biggest bitcoin nation in Asia after China. While the Supreme Court in March 2020 quashed a Reserve Bank of India (RBI) ban on bitcoin-related payments, investors should still be cautious before making any investments in it.

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Here are a few things to keep in mind before buying bitcoins:

Safety concerns

According to Ashish Singhal, CEO and co-founder, CoinSwitch Kuber, bitcoins are intangible digital assets that must be stored in secure wallets. Plus, since these are digital assets, all the best practices of the online world are to be followed.

"That's why choosing the cryptocurrency trading app is something one needs to give serious thought to, and security along with ease of use should be high priority criteria of selection,” Singhal stresses.

Deciding the entry/exit plan

Many investors who invest in bitcoins have no entry or exit plan, which can be detrimental to their financial planning.

As per Singhal, it is important to decide about the plan first, as to when the investor will enter and exit a particular cryptocurrency? What are his/her expected returns? Is she/her over-committed?

Risks and volatility

Investors should always study the risks and volatility associated with bitcoin investing, opines Sumit Gupta, CEO and co-founder of CoinDCX.

“Avoid getting swayed by hype and invest time in studying risks and volatility associated with bitcoin and other cryptocurrencies. Beginners would be well advised to start with an amount of Rs 10, Rs 50, Rs 100, depending on their risk appetite, disposable income, and such factors,” he suggests.

Who should invest in bitcoins?

According to Singhal, anyone who has the risk appetite of dealing in a volatile new asset class along with a sufficiently long time horizon to meet their financial goals should invest in bitcoins.

“No one rule would fit all investors, but it is wise to diversify some of the investable capital into bitcoins. One can have a little more exposure to bitcoins after investing in other asset classes, at a younger age. Investing in bitcoins makes sense because, with even small allocation, one can increase the performance of their portfolio by several percentages, which would eventually compound to even more depending upon one's allocation time," Singha advises.

(Edited by : Jomy)