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How to buy cryptocurrency – a beginner’s guide

You can make your first crypto purchase in a few easy steps. But you’ll need to consider these 4 things first.

If you're new to cryptocurrency, figuring out which digital currencies to purchase and how to purchase them is the relatively easy part. Doing so is similar to buying traditional assets like stocks on a share trading platform.

However, once you buy digital assets, you have to decide where to store them. You can keep them on the platform you bought them on, or move them to a crypto wallet.

How to buy crypto — 4 things to consider

  1. What broker or exchange to use
  2. The crypto asset to buy
  3. How you want to pay
  4. Where to store the crypto you buy

1. Choose a crypto exchange and sign up

Most beginners use either a centralised crypto exchange or an online share trading platform that supports cryptocurrencies to make their first crypto purchase.

Cryptocurrency exchange. These exchanges are where crypto investors can buy and sell their crypto assets through an interface provided by a third-party broker. Most crypto exchanges offer an easy method for making instant crypto purchases and include educational materials for beginners. Popular centralised crypto exchanges include Coinbase, Kraken and Gemini.

Share trading platform. Some brokerages which sell traditional assets like stocks and exchange-traded funds (ETFs) now support cryptocurrencies. For example, you can buy Bitcoin alongside shares of Apple stock on eToro or Syfe.

Compare the best crypto exchanges, trading platforms and apps in Australia.

Checklist for choosing an exchange

  • Make sure the exchange is registered as a digital currency exchange with the Australian Transaction Reports and Analysis Centre (AUSTRAC) or the Australian Securities and Exchange Commission (ASIC). Our reviews of the best exchanges in Australia mention whether a platform is registered (check the pros and cons tab of each review).
  • Avoid centralised crypto exchanges that are based offshore and don't require a know your customer (KYC) check.
  • See if the exchange supports the coin or token you're looking to purchase.
  • Research whether the exchange publishes a proof of reserves, which is an attestation to the amount of crypto the exchange holds.
  • See if the exchange offers 2-factor authentication (2FA) for your account.

2. Choose a crypto asset to buy

If you're just dipping your toes into the crypto waters, global asset manager, Fidelity, recommends starting with Bitcoin (BTC) before purchasing other crypto assets.(1)

However, you may already know you want to purchase a crypto asset other than BTC. In that case, simply check beforehand to make sure that the exchange you'd like to use supports the asset you want to buy.

The following are some of the most popular types of crypto.

Bitcoin (BTC). The original cryptocurrency, Bitcoin (BTC) is the first digital asset to exist on a blockchain. BTC is often called a store of value because it's perfectly scarce — there will only ever be 21 million Bitcoin. BTC is often referred to as digital gold.

Ethereum (ETH). The second-most popular crypto in terms of market capitalisation, Ether (ETH) is the native asset of the Ethereum blockchain, which serves as a platform for decentralised applications (dapps) built via smart contracts. ETH fuels transactions on Ethereum. The network is best known for its decentralised finance (DeFi) applications and for the non-fungible tokens (NFTs) it supports.

Alternative Layer 1 coins. There are many alternative base layer or "Layer 1" smart contract blockchains like Ethereum. And each of these other Layer 1s has its own cryptocurrency. Alternative Layer 1s and their native coins include Cardano (ADA), Solana (SOL) and Avalanche (AVAX).

Layer 2 coins. Layer 2 blockchain networks are built on top of other blockchain networks to help the base layer blockchain to scale. Layer 2 blockchain networks and their native tokens include Polygon (MATIC) and Arbitrum (ARB).

Meme coins. Meme coins are the gambling chips of the crypto space. Coins and tokens like Dogecoin (DOGE) and Shiba Inu (SHIB) have no intrinsic value and their prices tend to be driven by the memes issued by supporters on social media.

Finder survey: Which cryptocurrencies do Australians own?

Response
Bitcoin64.86%
Ethereum47.83%
Other25%
XRP18.84%
Cardano16.3%
Solana15.94%
Dogecoin15.58%
Shiba Inu11.23%
BNB8.33%
Chainlink5.8%
Source: Finder survey by Pure Profile of 1009 Australians, December 2023

3. Choose a payment method and place your order

Pay with cash. Most platforms let you deposit money from your bank account, including with PayID. You can also buy crypto with a debit or credit card. With most crypto brokerages and exchanges, you can deposit cash instantly, although some may have a waiting period of 1–2 days, depending on your bank. Also, keep in mind that fees for using credit and debit cards tend to be high.

Pay with crypto. You may already own some crypto and want to sell it for some other crypto. In this case, you can transfer it to that broker or exchange on which you want to trade it so long as the platform accepts crypto deposits. Certain platforms like eToro don't accept crypto deposits.

Once you find a platform that accepts deposits, make sure it supports both the crypto you already own and the one you want to buy. On some exchanges, these cryptos may be a trading pair, which means you can directly swap one for the other. On other exchanges, you may need to sell the crypto you already own for cash or another crypto first and then buy the new crypto you want.

4. Select a storage method

Once you've purchased your crypto, you'll then have to decide where to store its private keys.

You can leave your crypto in the custody of a brokerage or exchange, but it's important to know that you don't technically own it when you do this. Instead, you own an IOU for your assets and can't use them in a peer-to-peer transaction or put them to work in Web3.

If you opt to take custody of your crypto, a couple of the most popular options for non-custodial wallets – wallets that enable you to hold the private keys to your crypto – are software and hardware wallets.

Software wallets. These are a type of hot wallet, which is a wallet that's connected to the internet at all times. Software wallets are a good place to store or manage assets that you plan to use or trade in the near future. These wallets include MetaMask, Atomic Wallet and Exodus.

Hardware wallets. These wallets are sometimes referred to as cold storage wallets. They include actual physical devices that either never have to be connected to the internet or only have to be connected when in use. These wallets include the Ledger Nano S Plus and the Trezor Model One.

Learn more about hardware wallets and how to choose one.

Exchange sign-up checklist

  • Identification (passport or driver's licence)
  • Facial recognition scan (in some cases)
  • Include your address, phone number and any other information the platform requests
  • Set up 2-factor authentication (2FA)

Is investing in crypto worth it?

Deciding on whether or not to invest in crypto is a personal decision and is often based on your investment thesis, time preference and risk tolerance.

For example, if you believe that Bitcoin (BTC) is digital gold and you're willing to wait years to make a return on your investment, then you might find crypto worth investing in. Though the price of BTC has been volatile over the past decade and a half, it has still climbed from less than $0.01 to almost $70,000 at its peak.

If you're just in the market to speculate in an attempt to get rich quickly, you may want to think twice about investing in crypto, especially if you have a low risk tolerance. Buying a highly volatile crypto coin or token because you've heard from friends or family that you can make some quick, easy money isn't a solid investment plan, as the drops in the prices of these cryptos can be gut-wrenching.

Historically, if you've held an asset like BTC or ETH for more than 4 years, you've found yourself in profit. Keep in mind, though, that past performance does not indicate future results.

Other ways to invest in crypto

You don't have to invest in digital assets directly to gain exposure to the crypto asset class. You can also invest in either crypto stocks or crypto ETFs to indirectly invest in crypto.

Crypto stocks. You can invest in Bitcoin, crypto and crypto-adjacent companies via crypto stocks like Block Inc (SQ), Coinbase Global (COIN) and Riot Platforms Inc (RIOT). Such stocks are available via traditional brokerages. The price movements of some of these stocks tend to correlate with the price movements of major crypto assets like Bitcoin (BTC) and Ethereum (ETH).

Crypto ETFs. While many are awaiting an institution like Fidelity or BlackRock to bring a spot Bitcoin ETF to market, there are also a number of other crypto ETFs available to invest in. These include the ARK Next Generation Internet ETF (ARKW), the Amplify Transformational Data Sharing ETF (BLOK) and the ProShares Bitcoin Strategy ETF (BITO).

A quick note for you: As of late December 2023, BITQ had leaped by an impressive 245%, surpassing both the price increase of Bitcoin and the gains of futures-based Bitcoin ETFs like the ProShares Bitcoin Strategy ETF (BITO). This trend indicates a growing interest and potential in investing in companies linked to the crypto industry, offering a more diversified way to engage with the crypto market.

FAQs

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