In May 2016, you could buy 1 BTC for around 500 USD, but at the beginning of May this year, a single Bitcoin was worth around 30,000 USD. That’s almost 6,000% growth.
However, there are two sides to the success story of every crypto currency, and Bitcoin is no different. Along with impressive gains, BTC has also seen devastating declines, especially of late. Bitcoin I fell below $20,000 in June 2022, up from dizzying highs of nearly $69,000 at the end of 2021. That’s a 37% drop in the month of June alone.
Bitcoin therefore remains a highly volatile asset. If you want to buy the currency, many experts recommend that you invest no more than a small percentage of your net worth in the currency. cryptocurrency.
How to buy Bitcoin (BTC) in 4 steps
1. Choose a cryptocurrency exchange
To buy Bitcoin (BTC) or any cryptocurrency, you will need a cryptocurrency exchange where buyers and sellers meet to exchange dollars for coins.
There are hundreds of exchanges, including several Australian-based exchanges, but as a beginner, you’ll want to go for one that balances ease of use with low fees and high security.
Be sure to check if your exchange has a bitcoin wallet integrated into your platform; if not, you’ll have to find your own. You can also choose to buy your crypto on a platform like Paypal, although buying crypto this way often means you can’t withdraw your coins and move them to another platform. If you want to keep your crypto in a different wallet, you will need to sell your holdings and then buy them back on a different exchange.
2. Decide on a payment option
After choosing an exchange, you need to fund your account before you can start investing in Bitcoin. Depending on the exchange, you can fund your account through wire transfers from a checking or savings account, PayPal, wire transfers, a cryptocurrency wallet, or even a credit or debit card.
If you are using your credit card to purchase cryptocurrencies, beware of fees that could be added to the cost of the transaction.
Because fees reduce the amount of money you can invest (and therefore also the amount of money you have to grow and capitalize on), it often makes sense to use wire transfers from a bank account over other methods. Also, if you use a credit card to purchase cryptocurrency, it will generally count as a cash advance and will be subject to a higher interest rate than you pay on regular charges. Remember that borrowing to buy volatile investments is extremely risky.
3. Place an order
Once your account is funded, you can place your first order to buy Bitcoin. Depending on the platform you are using, you can buy it at the touch of a button, or you may have to enter the Bitcoin (BTC) ticker symbol. Next, you will need to enter the amount you wish to invest.
When the transaction is complete, you will own a part of a Bitcoin. That’s because it requires a large initial investment to buy a single Bitcoin now. If the current price of Bitcoin was $30,000 USD, for example, you would need to invest that amount to buy one Bitcoin. If you were to invest 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 a built-in Bitcoin wallet, or at least a preferred partner where you can safely store your Bitcoin. However, some people do not feel comfortable leaving their cryptocurrencies connected to the Internet, where hackers can more easily steal them.
Most major exchanges have private insurance to reimburse clients if this happens, and increasingly also store most client assets offline in so-called “cold storage.”
If you want maximum 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. Also, if you use a third-party crypto wallet custodian, you may also not be able to permanently access your coins if you lose the private key that serves as your wallet password.
When you decide you’re ready to sell your Bitcoin, you can place a sell order through your exchange, just like you did when you originally bought it. Most exchanges offer multiple order types, so you can decide to sell only when Bitcoin hits a certain price, or you can place an order that is filled immediately.
You can choose to sell all of your Bitcoin holdings or just a specific amount. Once the sale is made, you can transfer the money to your bank account. However, your exchange may have a holding period before you can make a transfer to your bank account. This is not a cause for concern; it just takes some time to make sure the transactions are clear.
When you sell your Bitcoin, you can make a profit and therefore you can be on the hook for capital gains taxes with the Australian Taxation Office (ATO), so make sure you keep track of your earnings.
Should you buy Bitcoin?
When the price of Bitcoin skyrockets, investing in the popular cryptocurrency can be tempting. Several Australian cryptocurrency exchanges have insisted that the recent price decline is cyclical and that newer investors needed to ride out the recession to reap rewards. But while cryptocurrencies clearly have the potential to be a lucrative investment, you need to be extremely cautious.
Even if you decide to go ahead, its volatility has led many experts to recommend that you don’t spend a large percentage of your funds buying it.
Treat it, in other words, like a high-risk venture and consider your own financial position and what’s best for you before deciding whether or not to invest.
This article does not endorse any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency as an investment class.