As cryptocurrencies go mainstream, bitcoin investing in Australia is attracting increasing attention. Here's what investors should know before jumping in.

Bitcoin is experiencing hype as its price continues to ride high, and Aussie investors are looking closer at ways to invest in cryptocurrencies.

Debuting in 2010 at a cost of just a cent, bitcoin has since taken off, reaching a record-breaking value of more than US$63,000 this past April, equivalent to over AU$81,000.

The market is gaining steam, and research from Finder shows that one in four Australians are currently investing in cryptocurrencies, with 13 percent putting money in bitcoin. Almost half of the cryptocurrency investors surveyed by Finder said they purchased digital coins due to their skyrocketing value.

Should Australians add bitcoin to their portfolios? Read on for a brief look at bitcoin investing in Australia.

What is bitcoin?

Bitcoin was invented by Satoshi Nakamoto, who designed it in the wake of the 2008 financial crisis as a way to get around traditional banking infrastructure.

Nakamoto wrote a paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System," and is believed to own 5 percent of total bitcoin holdings — which today hold a value estimated in the billions. Nakamoto's name is thought to be a pseudonym, and there is debate about the "real" person or persons behind bitcoin.

But what exactly is bitcoin itself? Put simply, bitcoin is a type of cryptocurrency, meaning it is a digital product with balances kept on a public ledger for all to look up.

Although the cost of a single bitcoin can seem very high, it is possible to buy a small part of a bitcoin. In fact, theoretically a person can buy as little as 0.00000001 of a bitcoin (or one bitcoin divided by eight).

Click here to learn more about bitcoin's price history.

How does bitcoin fit into the cryptocurrency landscape?

Bitcoin is undoubtedly the most well-known cryptocurrency, and because only 21 million bitcoins can ever be mined, scarcity is driving demand, particularly in a post-COVID-19 world.

As governments flood the global markets with money to boost spending, many believe the value of that money is eroding, leaving investors to look to bitcoin as protection against looming inflation. Bitcoin enthusiasts consider the cryptocurrency a safe path to portfolio diversification because it is a digital asset whose value cannot be dictated by government decisions.

Click here to learn more about the bitcoin-mining process.

Should Australian investors consider bitcoin?

Bitcoin has historically been one of the most volatile investments, experiencing both extreme highs and lows. As with any risky investment, it's wise for investors to limit exposure to risk by only investing a fraction of their wealth into it — ride the highs without losing it all in the falls.

It's also worth noting that bitcoin exchanges can fail, potentially creating problems for users. For that reason it is advisable for buyers to have their own personal wallet outside of their exchange account.

Click here to learn more about reasons to invest in bitcoin.

How can Australian investors get started with bitcoin?

Investing in bitcoin is relatively straightforward, and is not unlike investing in a company. Bitcoins can be purchased through a broker or by using a cryptocurrency exchange.

There are a number of ways for Aussies to purchase Bitcoins. Some of the bitcoin providers in Australia include: Binance Australia, Bitcoin Australia, BTC Markets, Coin Jar, Cointree, Digital Surge, Easy Crypto, Etoro and Swyftx. All cryptocurrency exchanges in Australia must be registered with the digital regulatory body AUSTRAC, ensuring peace of mind for investors.

Other ways to gain access to bitcoin include receiving them as payment for goods and services, or mining bitcoins. Indeed, there are so many different bitcoin providers that there is a platform to suit almost every investor type — even micro-investing app Raiz Invest is now offering a new portfolio called Sapphire that has a 5 percent target allocation for bitcoin.

Using Coin Map it's possible to track ATMS and merchants accepting cryptocurrency around the globe.

As a final point, potential bitcoin buyers should remember that in Australia cryptocurrencies are considered property, meaning they are subject to a capital gains tax unless used to pay for goods and services for personal use, or if the cost of the bitcoins is less than AU$10,000.

Don't forget to follow @INN_Australia for real-time updates!

Securities Disclosure: I, Ronelle Richards, hold no direct investment interest in any company mentioned in this article.

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