Factors You Should Consider Before Investing In Cryptocurrencies
Business Today|December 12, 2021
Cryptocurrencies may be the rage now, but here are some Important Factors You Should Consider Before Trading
Teena Jain Kaushal

MORE THAN 100 million! That’s how many Indians trade in cryptocurrencies, the highest in the world, according to BrokerChooser, a broker discovery and comparison platform. While the central bank and some industry experts say that number is on the higher side, it’s an accurate enough estimate of the interest in crypto trading in India. Crypto has gone from being just talked about as an asset class to actually becoming an increasingly popular investment.

And it’s not just seasoned investors, but also youngsters from Tier II and Tier III cities who are ploughing money into virtual coins—as much as ₹6 lakh crore, according to the Blockchain and Crypto Assets Council (BACC), part of IAMAI (Internet and Mobile Association of India). That is an eye-watering amount considering cryptocurrencies are still unregulated and not legal tender in India. The central bank banned crypto in 2018 but the Supreme Court overturned the order in 2020. Since then, crypto trading has grown at a furious rate. And so have crypto exchanges.

And, obviously, crypto prices. For example, the price of one Bitcoin is north of $65,000 (₹50 lakh). But it’s not merely the price of cryptos— which can be bought in fractions— but the cost of trading as well that can impact an investor’s wallet.

So, what are these costs? For starters, exchanges charge a trading fee. A daily trader, for example, would want low fees or no fees, as some exchanges offer. But is there any such thing as a free lunch? Then there are maker-taker fees and the cost of withdrawing or transferring one’s tokens. All such costs tend to be in the tens of rupees generally, but can add up to a significant amount to the trading price in the long run. Some of these costs are baked into the trading price and can be considered “hidden”, while some are more transparent.

But let’s start with why crypto prices differ wherever you look—India vs abroad or even on the various domestic trading platforms. What do these prices include? And more importantly, how does it affect one’s trading cost?

THE COST BEHIND THE PREMIUM

Let’s start with why crypto prices are higher in India. While trading in India has soared, the actual circulation of these digital coins is limited. Moreover, most of the crypto mining happens overseas. This makes the cost of crypto trading relatively higher in India.

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