How to buy bitcoin in Australia

The economic uncertainty prompted by the coronavirus pandemic has seen retail and institutional investors gain new interest in cryptocurrencies. With these new financial assets finally breaking into the mainstream, what is the best way for regular users to buy bitcoin and store the currency securely?

About Bitcoin

Bitcoin is the world’s first form of true digital cash: money that can be transferred from one person to another online. Much like handing over coins and notes in person, this occurs without any banks, payment processors or other middlemen. 

This is possible thanks to blockchain, the shared database that records every transaction between users, and which is maintained by a huge global network of computers. Bitcoin is secure because if one – or even many – of these computers tried to process a fraudulent transaction, the rest would ignore it.

Bitcoin was created by Satoshi Nakamoto, an anonymous developer who launched the project in 2009 before handing it on to other people. It has since grown into a global movement and an attractive new asset class, due to the fact that it is independent of any national economy or government.

The number of wallets that hold one bitcoin (1 BTC) recently hit an all-time high, showing that the number of regular investors buying digital assets is rising steadily. 

How to purchase bitcoin

There are several ways of going about buying bitcoin, but before you get started, it’s important to prepare carefully. Holding bitcoin is not like owning other assets like shares, and while buying bitcoin need not be complicated, taking a little time at the outset could save you a lot of trouble later on.

Steps to buying bitcoin – quick guide

1. Download a popular bitcoin wallet for storing and managing your coins safely
2. Find a regulated bitcoin exchange in your country or jurisdiction and create an account 
3. Complete identity verification
4. Deposit funds using your bank account or a credit/debit card
5. Purchase bitcoins
6. Withdraw bitcoins to your wallet 

 

Bitcoin wallets

The Bitcoin blockchain is a ledger of bitcoin’s owners. It holds a permanent record of every Bitcoin address – long strings of characters that act as registration numbers for owners – and every transaction between addresses. Addresses are controlled by private keys, which are essentially complex passwords. You can create any number of private keys and addresses easily and for free. 

Bitcoin wallets manage your private keys and addresses, enabling you to store and send bitcoins. There are lots of options for wallets, including both mobile apps and versions you can use on a desktop or laptop computer. Many people use exchanges, where you can buy and trade bitcoins, to store their coins, but this is not recommended due to security concerns unless the exchange is specifically designed also to be a secure wallet. Coinbase, a popular US-based cryptocurrency exchange, also provides a user-friendly mobile app that anyone can download.

 

Documentation and identity verification

Any regulated exchange will require that you confirm your identity when you create an account. This is part of their anti-money laundering (AML) responsibilities. The requirements vary, but generally proof of identity and proof of address are necessary. A current driving licence and/or passport are often enough, though other documentation may be accepted. Verification is typically a straightforward process. It can take anything from a few minutes to a few days to be approved, depending on the exchange.

 

How to buy bitcoin: payment methods

A large exchange will typically offer several different ways of funding your account, and withdrawing money when you sell cryptocurrency. While submitting your bank account details is generally the most widely-used way of depositing funds, an increasing number of exchanges allow you to use a credit or debit card. (This may require enhanced verification to avoid the problem of criminals using stolen cards to buy bitcoin and withdrawing them to a wallet, since Bitcoin transactions cannot be reversed.)

Ways of buying bitcoin

There are several different ways of buying bitcoin. Which you use will depend on your needs, how much you want to buy, and how you want to pay. 

When starting out, some users might be happier using peer-to-peer services such as LocalBitcoins, which puts buyers and sellers directly in touch with one another. Meanwhile, larger investors and institutional buyers often organise private ‘Over The Counter’ (OTC) deals with major bitcoin holders. For most regular users, though, the safest way to buy bitcoin is from a regulated exchange. This allows you to deposit funds from your bank account or credit card, buy bitcoins, and then withdraw them to a wallet.

When researching how to purchase bitcoin, one question new users often ask is, ‘How much is one bitcoin?’ (This is one of Google’s top searches for bitcoin.) There is a common misconception that you have to buy a whole bitcoin, but this is not the case. Bitcoins are highly divisible, and can be sent in tiny fractions. The smallest unit of a bitcoin is called a Satoshi, after Bitcoin’s creator. A Satoshi is one hundred millionth of a bitcoin (0.00000001 BTC).

As the price of bitcoin has risen from less than 1$ to over 10,000$ over just a few years, most people only buy part of a bitcoin to start with. Because it is cheap to send bitcoin, and the commission fees that exchanges charge are typically 1% or less, a popular strategy is to ‘dollar cost average’ by buying a small amount of bitcoin every week or month. Many investors consider this a better approach than trying to time the market to buy at the best time – something even professional traders find very difficult.

 

The best places to buy bitcoin

If you’re researching buying bitcoin as a newcomer to digital assets, you will almost certainly want to go for a well-known, reputable and regulated exchange. Regulation is critical, because it ensures that the exchange is operated according to best practice. The first exchanges were unregulated, and customers had no recourse when the funds they deposited were misappropriated, frozen or stolen.

It’s generally best to choose an exchange that supports your own currency, since otherwise you’ll likely incur some fairly high fees when the bank converts your deposit to the receiving currency. Larger, international exchanges typically offer multiple currencies and deposit/withdrawal methods, so this is less of a problem.

Coinbase is a popular option for customers in the US and around the world. The user experience is excellent, and depositing funds and purchasing cryptocurrency is fast and easy. Coinbase operates on a brokerage model, which means they set the price and you buy and sell with the company. Unfortunately, payment methods for Australian customers are limited.

TimeX is an excellent option if you want to make deposits and withdrawals straight from an Australian bank account. (International users are able to use one of the many other funding options available.) The platform offers bitcoin and several other cryptocurrencies, with a user-friendly trading experience.