Cryptocurrency has come leaps and bounds since Bitcoin’s debut 12 years ago.
But to many Australians, cryptocurrency still sounds like something that’s been ripped from the pages of a sci-fi novel.
As digital assets continue to make inroads into mainstream investing, it’s time to demystify the cryptocurrency market.
Want to find out how to buy cryptocurrency in Australia? Here’s a guide if you’re starting out.
What is cryptocurrency?
The term cryptocurrency, or ‘crypto’ for short, refers to virtual currency which is created using code and protected by cryptography.
This digital asset is stored on a large, peer-to-peer network of computers using blockchain technology – a database that stores transaction information in chunks or blocks.
This decentralised structure is designed to keep crypto independent of centralised institutions like banks and act as a deterrent to government manipulation.
Bitcoin is the original and most well-known cryptocurrency, but there are hundreds of others referred to as ‘altcoins’. Ethereum, Litecoin, Tether, Binance Coin, Cardano, Ripple and USD Coin are some of the most common altcoins.
While cryptocurrencies are not recognised as legal tender in most countries, attitudes towards crypto vary considerably depending on where you live.
China has banned all cryptocurrency while El Salvador recently became the first country in the world to adopt Bitcoin as legal tender. In Australia, cryptocurrency is treated as property and investments are subject to tax.
How to get started with buying cryptocurrency in Australia
Firstly, to buy cryptocurrency in Australia, you’ll need to create an account with a trading platform and set up a digital wallet to hold your currency.
There are more than 20 different exchange platforms to choose from. CoinSpot, Swyftx, Binance and CoinJar are among the most popular.
It’s important to weigh up the features of each platform before choosing the one that best suits your needs. Security, authenticity, trading vs investing, brokerage fees, the number of coins offered, customer support and trading features are all things to consider.
CoinSpot offers ease of use for crypto beginners, while the Australian-owned Digital Surge and Swyftx both allow you to buy and sell crypto using AUD – handy for avoiding conversion fees. Swyftx even offers a self-managed cryptocurrency super fund.
CoinJar is one of the longest running crypto exchanges and one of its most popular features is a digital currency debit card.
FTX is an international exchange and suited to traders over investors, with low fees and a large selection of coins on offer.
Once you’ve chosen an exchange (or two), the first step is to create an account. You’ll need to set up two-factor authentication (an essential security measure) and verify your identity before you can add your bank account and make a deposit into your wallet.
It’s important to note there are two major types of wallets: a hot wallet is connected to the internet which offers convenience but also makes it vulnerable to hacking, while a cold wallet is stored on a physical device for maximum security.
Now that your trading account has funds, you can go to the buy/trade section and select a cryptocurrency you want to purchase. Then you simply choose how much AUD you want to invest and confirm your purchase.
It’s important to do your research and start small as cryptocurrencies are highly speculative and more complex than traditional currencies. But many investing basics still apply. You buy and sell crypto like any other currency, and you can also trade on the price movements of cryptocurrencies via a contract for differences (CFD).
Speak to the cryptocurrency experts
Are you interested in adding cryptocurrency to your investment portfolio? LDB Group can offer advice, including guidance on tax for cryptocurrency in Australia, how it is treated for income tax, and how they are taxed in self-managed super funds.
If you’d like to find out more, give us a call on (03) 9875 2900 or send us a message via the contact form below.
Disclaimer: Please note that the above information is general advice only and conditions may vary depending on an individual’s circumstances. This article should not be used as a substitute for competent professional advice from a suitably qualified professional and, as such, we advise you seek professional advice to obtain an accurate assessment. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. You alone are solely responsible for determining whether any investment, asset or strategy or any other product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. You should consult a suitably qualified professional regarding your specific legal, tax, financial or investment situation.
