Bitcoin has fluctuated dramatically in recent years, peaking at $68,000 in November 2021 before plunging into a widespread crypto slump to below $20,000 in May.
So if you are thinking about investing in Bitcoin, you should know that there is no guarantee that you will see a return or break even, and that you could potentially lose a lot of money.
Such crypto volatility has prompted Australian consumer group CHOICE to call for better protection for consumers. The federal government, meanwhile, is well aware of the need for regulation and there are plans to legislate a number of proposed reforms.
However, if you’re aware of the risk and still want to buy Bitcoin, see how to do it with a credit card.
To buy Bitcoin, you need to exchange some currency for it.
No matter how you want to pay for Bitcoin, you need to use a crypto exchange. Popular Australian exchanges include the likes of Coinjar, Independent Reserve; BTCMarkets and Swyftx.
Choose an exchange with a Bitcoin wallet built into the platform and you won’t need to register for one anywhere else. If you want to keep your cryptocurrency in a wallet outside of your chosen exchange, make sure it allows withdrawals and check what fees may apply.
If you intend to buy Bitcoin with your credit card, check if the exchange accepts the brand you have (for example, American Express, Visa, Mastercard). It’s also worth researching the maximum amounts you can spend per transaction, as there may be limits.
Once you’ve signed up for an account with an exchange, you’ll need to add funds to it.
Not all providers in Australia allow you to use their credit cards to buy crypto.
Also note that most credit card companies in Australia will treat crypto purchases as a cash advance, which attracts higher interest rates. You may also be charged an additional fee for using your credit card as well as a brokerage fee from the crypto exchange you use.
Taking on debt to buy Bitcoin is not advisable. If you buy Bitcoin with a credit card, you should try to pay off your balance as soon as possible to minimize the fees it will attract.
Within the platform you are using, navigate to Bitcoin and enter the amount you wish to invest. Unless you’re investing north of $30,000, you’ll be buying a share of one Bitcoin. If Bitcoin’s value was $30,000 and you invested $1,000, for example, you would own 3.33% of a Bitcoin. Remember that Bitcoin is divisible up to 100 million units.
You can store your Bitcoin in the exchange’s integrated wallet or, if you prefer and the exchange allows it, a wallet provided by a third party. However, if you feel uncomfortable keeping your Bitcoin in a “hot” wallet, i.e. online, you can instead use a “cold” wallet, which is a storage device that is not connected to the internet.
Remember that there may be fees to pay to withdraw your Bitcoin from the exchange, and if you go with a cold wallet, you must keep your access codes or risk being banned from your own holdings.
You can also sell your Bitcoin via a crypto exchange, either immediately or when it reaches a certain price. Once sold, you can transfer the money back to your bank account – although in some cases you have to wait a few days before you can withdraw it.
If you make money selling Bitcoin, you will be responsible for paying capital gains tax (CGT). However, as the Australian Taxation Office (ATO) points out, you may be able to reduce your capital gains charges using the 50% CGT discount if you have held the crypto asset for more than 12 months.
This article is not an endorsement of any particular cryptocurrency, broker or exchange, nor does it constitute a recommendation of cryptocurrency as an investment class.
