A Beginner's Guide To Crypto Investment In Australia

Investing in crypto in Australia can be a daunting task for beginners. Crypto is a digital asset that includes cryptocurrencies, coins, or tokens. It is a high-risk and volatile investment, with extreme price fluctuations influenced by market speculation. Before investing, it is crucial to understand the risks and do thorough research.

When investing in crypto in Australia, the first step is to choose a reputable crypto exchange or broker. Well-known exchanges include Coinbase, Kraken, and Binance, while Caleb & Brown is an example of a popular Australian crypto brokerage. It is important to consider security features, fees, and the range of cryptocurrencies offered.

After selecting an exchange, individuals must create an account and verify their identity to comply with regulations. Most exchanges allow users to create an account, transfer fiat currency, and purchase cryptocurrencies.

Once the account is set up, individuals can deposit funds into their account and place their first cryptocurrency order. It is recommended to start with a small investment and gradually increase holdings as one becomes more comfortable with the market.

Finally, individuals should select a safe storage option for their crypto. While exchanges offer built-in wallets, hardware wallets that are not connected to the internet are considered the most secure option.

Overall, investing in crypto in Australia requires careful research and understanding of the risks involved. By choosing a reputable exchange, diversifying investments, and selecting secure storage options, individuals can navigate the world of crypto investing with caution.

Compare and choose an online exchange or trading platform

When investing in cryptocurrency in Australia, the first step is to compare and choose an online exchange or trading platform. This can be a daunting task, given the variety of options available. Here are some key factors to consider when making your decision:

• Security and Authenticity: The safety of your investments should be a top priority. Look for platforms that employ robust security measures and have a good track record in this regard.
• Fees: Different platforms charge different fees for trading and transactions. These fees can eat into your profits, so it's essential to understand the fee structure before signing up.
• Number of Coins Offered: Depending on your investment goals, you may want to choose a platform that offers a wide range of cryptocurrencies or one that specialises in a few specific coins.
• AUD Support: If you want to avoid unnecessary conversion fees, look for an exchange that allows you to buy crypto directly with AUD.
• Customer Support: As a beginner, you may need assistance at some point. Consider choosing a platform with responsive and knowledgeable customer support.
• User Interface: Some platforms are designed for more advanced traders and can be intimidating for beginners. Look for a user-friendly interface that suits your level of experience.
• Cold Wallet Storage: Cold wallets, or hardware wallets, are considered the most secure way to store your cryptocurrency. Some platforms offer this feature, giving you peace of mind that your investments are safe.
• Regulation: Cryptocurrency exchanges in Australia must be registered with AUSTRAC and comply with anti-money laundering and counter-terrorism financing legislation. However, this does not imply that your coins will be protected, so do your research.
• Reviews and Reputation: Take the time to read customer reviews and check the reputation of the platform. This can give you valuable insights into the quality of their services and how they handle issues.

Remember, investing in cryptocurrency is a risky venture, and you should be prepared to lose what you invest. Always do your due diligence and thoroughly research any platform before signing up and investing your money.

Sign up and verify your email and identity

Once you've selected a crypto exchange that suits your needs, you'll need to create an account and verify your identity. This is a necessary step to prevent fraud and meet regulatory requirements. Each platform will have its own sign-up process, but you'll generally need to choose a username and password, provide personal information, and set up two-factor authentication (2FA) for added security.

As part of the verification process, you'll need to provide proof of your identity and, in some cases, proof of residence. This can usually be done by uploading a copy of your passport or driver's licence, and in some cases, a selfie to confirm your appearance matches the documents submitted. The specific requirements may vary depending on the platform and the amount you plan to invest.

It's important to note that you may not be able to buy or sell cryptocurrency until you complete the verification process. This step helps ensure the security and legitimacy of the exchange and is designed to protect all users involved.

Additionally, identity verification is required by all Australian crypto exchanges to comply with regulations implemented on April 1, 2018, aimed at preventing terrorism financing and money laundering.

Add your bank account and select a payment method

Once you have chosen a cryptocurrency exchange, you will need to fund your account before you can start investing in crypto. The payment method you choose will determine how much money you can invest, so it is important to consider the associated fees. Electronic transfers from your bank account tend to be the most cost-effective option, as they usually attract lower fees than other methods.

Most exchanges operating in Australia offer instant AUD deposits using PayID. You can also fund your account via bank transfer, card, or a debit or credit card. However, it is important to note that if you use a credit card to buy cryptocurrency, it will generally be processed as a cash advance, resulting in higher interest rates than regular purchases. Additionally, you may have to pay a cash advance fee, which can further increase the cost of your purchase.

Some exchanges also allow you to deposit money from a PayPal account, and some may support other payment methods such as Poli and PayID/Osko. It is worth checking the payment options offered by different exchanges before deciding which one to use.

After selecting your preferred payment method, you can make an AUD deposit into your account, which should typically be free of charge.

Choose the cryptocurrency you want to trade

When choosing a cryptocurrency to trade, it is important to remember that the crypto market is extremely volatile and unpredictable. For example, Bitcoin's value increased by over 80% from the start of 2023 but was still down by 50% from its November 2021 peak.

Traders tend to follow crypto news feeds, watch out for forthcoming technological developments, pay attention to regulatory developments, study crypto exchange data and simply watch price trends over time to decide which assets to buy.

• Company authenticity and platform security: Research the company that is issuing the cryptocurrency and assess the security of its platform.
• Fees, spreads and any hidden charges: Compare the fees, spreads and other charges of different cryptocurrencies and platforms. Some exchanges charge substantially more than others, especially for beginner-friendly options.
• Number of coins offered: Consider whether you want to trade a wide range of coins or focus on a smaller selection. Some exchanges offer thousands of coins, while others only offer a few dozen.
• Ability to buy coins directly with AUD: If you are in Australia and want to purchase crypto directly with AUD, make sure you sign up with a local exchange that offers this service.
• Reviews and customer support: Read customer reviews to assess the quality and authenticity of the exchange's customer support. You can also test this by contacting the exchange via live chat or another support channel before signing up.

Select a storage method

Once you have purchased your cryptocurrency, you will need to select a storage method. This is an important step, as it will determine how secure your investment is. There are two main types of storage methods for cryptocurrency: hot wallets and cold wallets.

Hot wallets are online, software-based crypto wallets. They are connected to the internet and can be accessed via a web browser or app. Hot wallets can be custodial, meaning a third party controls the private key and seed phrase, or non-custodial, where you control these yourself. Hot wallets are convenient but are more vulnerable to cybersecurity threats, hacks, scams and fraud. Examples of hot wallets include accounts on crypto exchange platforms.

Cold wallets, on the other hand, are offline wallets. They are not connected to the internet and are therefore less susceptible to hacks. Cold wallets can take the form of hardware devices, such as a USB drive or hard drive, or paper-based documentation. While cold wallets are more secure, they are less convenient for frequent trading and there is a risk of losing your investment if the device is lost, stolen or damaged.

When selecting a storage method, it is important to consider the level of security, fees, ease of use and recovery options offered. Diversifying your storage methods by using a combination of hot and cold wallets can reduce the risk of losing your investment.

Frequently asked questions