If you’re new to cryptocurrencies, figuring out how to buy bitcoin, dogecoin, ethereum, and other cryptocurrencies can be confusing at first. Fortunately, it’s pretty simple to learn the ropes, even if you’re a beginner.
It is important to note that this highly volatile asset class is prone to fluctuations and is not for the faint of heart. As an example, bitcoin, was trading close to $70,000 at the end of 2021, yet in June 2022 it was trading below $18,000 before recovering to hover around $20,000 the following month. As of August 26, bitcoin was trading at $21,551.85. In total, bitcoin has fallen 70% in value since November.
Reading: How to buy bitcoin in australia
However, if you are aware of the risks but still interested in investing in cryptocurrencies, follow these five steps:
1. choose a cryptocurrency broker or exchange
To buy cryptocurrency, you must first choose a reputable cryptocurrency broker or exchange. While both avenues allow you to buy cryptocurrencies, there are key differences between them to keep in mind.
*crypto assets are unregulated & highly speculative. No consumer protection. risk capital. terms and conditions apply.
what is a cryptocurrency exchange?
A cryptocurrency exchange is a platform where buyers and sellers meet to trade cryptocurrencies. exchanges often have relatively low fees, but tend to have more complex interfaces with multiple trade types and advanced performance charts, all of which can make them intimidating for new crypto investors.
Some of the well-known cryptocurrency exchanges include coinbase, gemini, binance, and etoro. While the standard trading interfaces of these companies can overwhelm beginners, especially those with no background in stock trading, they also offer easy-to-use call options.
A large number of Australian-based exchanges such as Coinspot, SwyftX and BTC markets allow users to purchase a variety of cryptocurrencies with AUD, including via bank transfers in some cases or via BPay. Be sure to research trading and transaction fees, and research the Australian-based exchange. Is it safe and includes support? Do you offer a wide variety of currencies to trade? what are the terms and conditions?
Australian cryptocurrency exchanges must be registered with austrac and comply with anti-money laundering and anti-terrorist financing (aml/ctf) legislation.
However, the convenience of exchanges comes at a cost, as beginner options charge substantially more than it would cost to buy the same crypto through each platform’s standard trading interface. To save costs, you can aim to learn enough to use standard trading platforms before you make your first cryptocurrency purchase, or not long after.
what is a cryptocurrency broker?
Cryptocurrency brokers take the complexity out of buying cryptocurrencies and offer easy-to-use interfaces that interact with exchanges on your behalf. some charge higher fees than exchanges. others claim to be “free” while making money by selling information about what you and other traders buy and sell to big brokers or funds or not executing your trade at the best possible market price.
While they are undeniably convenient, you should be careful with brokers because you may face restrictions in moving your cryptocurrency holdings off the platform. with some, for example, you cannot transfer your crypto holdings out of your account.
This may not seem like a big deal, but experienced crypto investors prefer to store their coins in crypto wallets for added security. some even choose hardware crypto wallets that are not connected to the internet for added security.
2. create and verify your account
Once you decide on a cryptocurrency broker or exchange, you can sign up for an account. depending on the platform and the amount you plan to buy, you may need to verify your identity. this is an essential step in preventing fraud and meeting regulatory requirements.
You may not be able to buy or sell cryptocurrency until you complete the verification process. the platform may ask you to submit a copy of your driver’s license or passport, and you may even be asked to upload a selfie to prove that your appearance matches the documents you submit.
3. deposit cash to invest
To buy cryptocurrencies, you will need to ensure that you have funds in your account. you can deposit money into your crypto account by linking your bank account or making a payment with a debit or credit card (beware of high charges from your card provider with the credit card option – see below).
Depending on the exchange or broker and their funding method, you may need to wait a few days before you can use the money you deposit to buy cryptocurrencies.
A big buyer here, beware: While some exchanges or brokers allow you to deposit money from a credit card, doing so is extremely risky and expensive. Credit card companies process cryptocurrency purchases with credit cards as cash advances. this means they are subject to higher interest rates than regular purchases, and you will also have to pay additional cash advance fees.
For example, you may be required to pay 5% of the transaction amount when you make a cash advance. this is in addition to any fees your crypto exchange or brokerage may charge, and these can be up to 5%, meaning you could lose 10% of your crypto purchase due to fees.
4. place your cryptocurrency order
Once there is money in your account, you are ready to place your first cryptocurrency order. There are hundreds of cryptocurrencies to choose from, from familiar names like bitcoin and ethereum to more obscure cryptos like theta fuel or holo.
when deciding which cryptocurrency to buy, you can enter its ticker symbol (bitcoin, for example, is btc) and how many coins you want to buy. With most exchanges and brokers, you can buy cryptocurrency fractional shares, allowing you to buy a portion of high-priced tokens like bitcoin or ethereum that would otherwise cost thousands of Australian dollars.
5. select a storage method
Cryptocurrency exchanges are not regulated in Australia, and some potential investors have even been victims of theft or hacking. You could even lose your investment if you forget or lose the codes to access your account. That’s why it’s so important to have a safe storage place for your cryptocurrencies.
As stated above, if you are buying crypto through a broker, you may have little to no choice in how your crypto is stored. if you buy crypto through an exchange, you have more options that may or may not be right for you:
- leave the crypto on the exchange. When you buy cryptocurrency, it is usually stored in a so-called crypto wallet attached to the exchange. If you don’t like the provider your exchange is associated with or want to move it to a more secure location, you can transfer it off the exchange to a separate hot or cold wallet. Depending on the exchange and the size of your transfer, you may need to pay a small fee to do this.
- hot wallets. These are crypto wallets that are stored online and run on internet-connected devices such as tablets, computers, or phones. hot wallets are convenient, but there is a higher risk of theft since they are still connected to the internet.
- cold wallets. Cold crypto wallets are not connected to the internet, making them your safest option for holding cryptocurrencies. They take the form of external devices, such as a USB drive or hard drive. however, you should be careful with cold wallets: if you lose the key code associated with them or if the device breaks or crashes, you may never be able to get your crypto back. while the same could happen with certain active wallets, some are run by custodians who can help you get back into your account if you get locked out.
alternative ways to buy cryptocurrencies
While buying cryptocurrencies is a major trend right now, it is a volatile and risky investment option. If investing in cryptocurrencies on an exchange or through a broker doesn’t sound like the best option for you, here are some options to invest indirectly in bitcoin and other cryptocurrencies:
*crypto assets are unregulated & highly speculative. No consumer protection. capital at risk.
1. wait for crypto traded funds (ETFs)
Exchange-traded funds are popular investments that allow you to buy exposure to hundreds of individual holdings at one time. this means they provide immediate diversification and can be less risky than selecting individual investments.
There has long been an appetite for cryptocurrency ETFs, which allow you to invest in many cryptocurrencies at once. The first cryptocurrency ETFs for private investors are rolling out in the Asia-Pacific region: Sydney-based ETF Securities and Switzerland’s 21Shares recently joined forces to trade bitcoin on the CBOE Australia exchange. Cosmos Asset Management’s Bitcoin ETF feeder also launched in Sydney.
2. invest in companies connected to cryptocurrencies
If you prefer to invest in companies with tangible products or services and that are subject to regulatory oversight, but still want exposure to the cryptocurrency market, you can buy shares in companies that use or own cryptocurrencies and the blockchain that powers them. . You will need an online brokerage account to buy shares in publicly traded companies, such as:
- nvidia (nvda) this technology company designs and sells graphics processing units, which are at the heart of the systems used to mine cryptocurrencies.
- paypal (pypl) is already a A popular choice for people buying items online or transferring money to family and friends, this payment platform recently expanded to allow customers to buy and sell select cryptocurrencies with their PayPal and Venmo accounts.
- square (sq) This small business payment service provider has purchased millions of dollars worth of bitcoin since October 2020. In February 2021, the company revealed that bitcoin represented around 5% of the cash on its balance sheet. Additionally, the Square Cash app allows people to buy, sell, and store cryptocurrencies.
As with any investment, be sure to consider your investment objectives and current financial situation before investing in cryptocurrencies or individual companies that have a large holding in them. cryptocurrency can be extremely volatile (a single tweet can send its price plummeting) and remains a highly speculative investment. this means you should invest with caution.
Watch out, too, for bad actors infiltrating the crypto space. As the Australian government’s Australian Competition and Consumer Commission (ACCC) notes, Australians lost more than $205 million to scams between January 1 and May 1, 2022, with $113 million of those losses related to cryptocurrencies. /p>
This article does not endorse any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency as an investment class.
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