In May 2016, you could buy 1 BTC for around $ 500, but at the beginning of May this year, a single Bitcoin was worth around $ 30,000. This is a growth of almost 6000%.
However, there are two sides to the success story of each cryptocurrency, and Bitcoin is no different. In addition to impressive gains, BTC has also experienced devastating declines, especially recently. Bitcoin fell below $ 20,000 as late as June 2022, up from intoxicating peaks of nearly $ 69,000 at the end of 2021. This represents a 37% drop in June alone.
Bitcoin is therefore still a very volatile asset. If you want to buy the coin, many experts recommend that you do not invest more than a small percentage of your net worth in the cryptocurrency.
How to buy Bitcoin (BTC) in 4 steps
1. Select a crypto exchange
To buy Bitcoin (BTC), or any cryptocurrency, you need a cryptocurrency exchange where buyers and sellers meet to exchange dollars for coins.
There are hundreds of exchanges out there, including several Australian-based exchanges, but as a beginner you will want to choose one that balances ease of use with low fees and high security.
Be sure to check if your exchange has a Bitcoin wallet built into the platform; if not, you need to find one of your own. You can also choose to buy crypto on a platform like Paypal, but buying crypto this way often means that you cannot withdraw your coins and move them to another platform. If you want to keep your cryptocurrencies in another wallet, you have to sell your holdings and then buy them again on another exchange.
2. Decide on a payment method
After choosing a stock exchange, you need to fund your account before you can start investing in Bitcoin. Depending on the exchange, you can fund your account through bank transfers from a checking or savings account, PayPal, bank transfers, a cryptocurrency wallet or even a credit or debit card.
If you use your credit card to buy crypto, be aware of any fees that may be added to the cost of the transaction.
Because fees reduce how much money you can invest (and therefore also how much money you have to grow and put together), it tends to make sense to use electronic transfers from a bank account instead of other methods. In addition, if you use a credit card to buy cryptocurrency, it will usually count as a cash advance and be subject to a higher interest rate than you pay on regular fees. Remember that it is extremely risky to take on debt to buy volatile investments.
3. Place an order
Once your account is funded, you can place your first order to purchase Bitcoin. Depending on the platform you are using, you may be able to purchase it at the touch of a button, or you may need to enter the Bitcoin ticker symbol (BTC). You must then enter the amount you want to invest.
Once the transaction is complete, you will own one share of a Bitcoin. This is because it requires a large upfront investment to buy a single Bitcoin now. If Bitcoin’s current price was $ 30,000, for example, you would have to invest that much to buy a Bitcoin. If you invested less, say $ 1000, you would get a percentage, in this case 3.33%, of a single Bitcoin.
4. Select a secure storage option
Many crypto exchanges have an integrated Bitcoin wallet, or at least a preferred partner where you can safely store your Bitcoin. However, some people do not feel comfortable leaving the crypto connected to the internet, where it can be more easily stolen by hackers.
Most major exchanges have private insurance to reimburse customers if this happens, and they are increasingly also storing the majority of customers’ assets offline in so-called “cold storage”.
For ultimate security, you can store your Bitcoin in an online or offline Bitcoin wallet of your choice. But keep in mind that if you move crypto from an exchange, you may have to pay a small withdrawal fee. In addition, if you use a third-party crypto wallet manager, you may also be permanently unable to access your coins if you lose the private key that serves as your wallet password.
Selling Bitcoin
Once you decide you are ready to sell your Bitcoin, you can place a sales order through your exchange, much like you did when you originally bought it. Most exchanges offer several order types, so you can decide to sell only when Bitcoin reaches a certain price, or you can place an order that goes through immediately.
You can choose to sell the entire holdings of Bitcoin or just a specified amount. Once the sale goes through, you can transfer the money to your bank account. However, your exchange may have a retention period before you can transfer it back to your bank account. This is not a cause for concern; it simply takes some time to make sure the transactions are ready.
When you sell your Bitcoin, you can make money, and you can therefore be on the hook for capital gains tax at the Australian Tax Office (ATO), so be sure to keep track of your profits.
Should You Buy Bitcoin?
When Bitcoin’s price skyrockets, it can be tempting to invest in the popular cryptocurrency. A number of Australian crypto exchanges have insisted that the recent fall in prices is cyclical, and that newer investors had to ride down the downturn to reap gains. But while crypto clearly has the potential to be a lucrative investment, you should be extremely careful.
Even if you decide to move on, volatility has led many experts to recommend that you do not allocate a large percentage of your funds to buy it.
In other words, treat it as a high-risk investment and consider your own financial position, and what is best for you, before you decide to invest or not.
This article is not an endorsement of any particular cryptocurrency, broker or stock exchange, nor does it constitute a recommendation of cryptocurrency as an investment class.
