You keep hearing about them, but what exactly are bitcoins and how do you buy them? Read on for finder.com.au’s definitive guide.
Referred to as the currency of the internet, bitcoin was established in 2009 as a peer-to-peer currency network that enables new people to transfer funds in the digital space. Bitcoin has taken the decentralised and user-centric ideas that have long-defined the internet and created a payment system void of central authorities, resulting in savings for those who use it.
Bitcoin is the world’s first start-up currency and is still in the early stages of its development. As a currency, the value of bitcoins depends on the current conditions of the bitcoin network and therefore its value can be volatile.
How does bitcoin work?
For users, bitcoin works just the same as any other currency. Just like when you use your credit card or a transfer for an international transaction, when you use bitcoin you are sending a certain currency digitally to someone else. Bitcoin gives each user a ‘digital wallet’ whereby they can store, send and receive bitcoins.
The bitcoin network works by using a public ledger called the ‘block chain’. This ledger contains all processed transactions which is used to check a transaction’s validity, which can be done using digital signatures.
The value of bitcoins is established much the same as any other currency, with the exact value depending on the number of people using bitcoins and the number of bitcoins in circulation. The value of bitcoins can also be affected by relatively small events, trades or business activities.
Who uses bitcoins?
Although it’s a digital currency, a wide range of businesses who exist both online and offline use and accept bitcoin. Bitcoins can be used to make payments online and in physical stores and any user can make these payments as long as they have the recipient's address. There is also no need for a merchant account to be set up in order to receive payments.
How do I buy bitcoins?
There are four ways to get bitcoins:
Receive bitcoins as payment for goods and services
Any business or individual can accept bitcoins as payment—all they need to have is a bitcoin digital wallet. The advantage for merchants is that bitcoin transactions are secure, irreversible and do not contain a customer’s personal information which protects losses caused by fraud. Using bitcoin for business is becoming popular due to lower fees and fewer admin costs, as well as being able to expand to markets where credit cards are unavailable or there are high rates of fraud.
Purchase bitcoins at a bitcoin exchange
There are several bitcoin exchanges available in countries across the world. In Australia, there are bitcoin traders that allow you to purchase the currency using over the counter transfers, cash deposits or bank transfers. These merchants charge varied percentage amounts for their services, usually between 1-2%.
Exchange bitcoins with someone near you
You also have the option to buy bitcoins locally through LocalBitcoins.com. You can select your city and country and find people selling bitcoins and at what rates. There are a variety of sellers who are linked to different local banks and will sell bitcoins through transfers, cash deposits or other online payments. This site currently trades coins in 215 countries, including Australia.
Earn bitcoins through competitive mining
Mining is the process of generating bitcoins with a computer. In essence you use your computer to help add transactions to the bitcoin public ledger. In return you’re paid transaction fees and a subsidy of new bitcoins. Anyone can process transactions using specialised hardware and software. Mining bitcoins is deliberately difficult to keep the number of coins in circulation at a steady number.
Where can I get bitcoins in Australia?
Bitcoins are readily available in Australia for those who want to purchase them. Bitcoin has various affiliate programs through which users can buy, trade, earn and spend bitcoins. Types of affiliate programs can include:
- Forex.Users can use bitcoins to trade and make investments.
- Bitcoin exchanges. Purchase bitcoins using different currencies, including Australian Dollars.
- Buy bitcoin services. You can buy bitcoins from a physical location or online transaction by referring customers, deposits or betting addresses. This system is commission-based.
- Advertising. You can pay users in bitcoins to visit sites, or you can earn bitcoins by monetising online content.
- Gambling. You can use bitcoins to play in online gambling games, or be paid in bitcoins for your winnings.
- Mining. As explained above, you can earn bitcoins by validating bitcoin transactions online.
- Domain hosting. You can use bitcoins to register a domain name.
The table below outlines some sites and companies which facilitate the purchase, exchange and sale of bitcoins.
| SpendBitcoins.com | BuyBitcoinAustralia | LocalBitcoins.com | BitXjoin |
| Uses over the counter transfers for bitcoin purchases. | An Australian exchange for bitcoins. | An in-person trading service that trades bitcoins for cash. | Uses brokerage platforms to make over the counter cash deposits. |
| Bit Trade Australia | 24change | CoinMama | BtcMarkets.net |
| An Australian exchange for bitcoins. | An automated buy/sell bitcoin service | Buy bitcoins and Litecoins with your credit card, Western Union, Moneygram and more. | A bitcoin exchange that operates in Australia. |
| Bitcoin Australia | QuickBT | Coinloft | XMLGold |
| Provides an exchange service to convert AUD to bitcoins. | Instant bitcoin payment using your bank account. | Purchase bitcoins using Australian dollars via bank deposit. | An exchange service that works with bitcoins and other digital currencies. |
| JustCoin.com | VirwoX | BitQuick | |
| Bitcoin exchange based in Norway that supports euros, Litecoins and Ripple. | Purchase bitcoins with PayPal and credit cards. | Connects bitcoin seller and buyers directly to their own bank accounts. |
I live in Australia should I buy locally or invest offshore?
On average how long should I invest in bitcoin if I was to buy $10.000 bitcoin ?
When could I experience my first return?
Do I look after my investment or will I be appointed a financial advisor that will grow my investment?
Hello Barbara,
Thank you for your inquiry today.
Investing locally or offshore is a decision depending on your risk tolerance. Generally, if you are a starting investor, it may better for you to start locally as offshore trading can be exposed to a lot of global mishaps. Once you got a clearer feel of how the trading would work, that’s the time you may want to expand outside.
As for the term of investing and returns, bitcoin is one of the most volatile type of investments and can work in a binary set-up with other currencies. It fluctuates almost every few minutes and can be very drastic. If you wish to have more stability in your returns, you may consider staying few weeks to months, even years, but then again there is no guarantee if you take a gain or more losses.
If you have some investment and trading background, a bit of research and self-taught resources online can somehow help you straighten out. You may start on a smaller amount and then gradually increase it once you feel more comfortable. Hiring a financial advisor is fine as long as you hire a good one, but then again no one knows how the market behaves and it boils down to how much money you’re willing to lose or pay for someone else.
Hope this helps.
Cheers,
Jonathan
Hi.. I have invested in Bitcoin and Litecoin with Coinbase. But due to high transaction fees and a weekly limit of only $300, I feel its time to use another service provider that better meets my needs. Which provider would you suggest for an Australian? One who would like to invest about $1000 per fortnight, and who is in it for the long term. And how do I get my keys and move them to a new provider? I would like to keep investing in both Bitcoin and Litecoin, as well as Ethereum. Thanks
Hi Noober,
Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.
You may refer to the table under “Where can I get bitcoins in Australia?” for sites and companies which facilitate the purchase, exchange and sale of bitcoins, litecoins, etc.
I hope this helps.
Cheers,
Danielle
Hi where can I sell my BTC and get money transferred to paypal ?
Hi Reza,
Thanks for your question.
You can check the table above listing some sites and companies which facilitate the purchase, exchange and sale of bitcoins. You can also opt to sell bitcoins locally through LocalBitcoins.com. Upon registering with an exchange, you can select the payment method you want among their list of supported payment methods. Kindly note that it’s important to research a payment method and check its risk level before you start trading with it.
I hope this has helped.
Cheers,
Liezl
Hi,
which platforms in Australia will accept bank transfers AND you can use your Self Managed Super Fund to trade.
Hi Chris,
Thanks for your inquiry.
Unfortunately, we are not allowed to suggest specific products rather we are here to give you options and help you find the best option that suits your needs.
You can visit this page – https://www.finder.com.au/super-funds – to help you find the right SuperFund for you.
Hope this information helped.
Cheers,
Arnold
does coinbase provide service to australia
Hi Juby,
Coinbase just expanded its services to Australia yesterday. You’re able to buy bitcoins with a credit or debit card.
Hope this helps,
Elizabeth
Bitcoin is legal in au? Do we need to declare it during the time of tax return.thank you
Hi Juby,
Bitcoin is legal in Australia. There are no tax implications if you’re simply paying for goods or services (for your personal consumption) in bitcoin. According to the ATO, any capital gains or loss from bitcoin will be disregarded if it is $10,000 or less. If you receive bitcoin as payment as goods for services you will need to record it in Australian dollars as part of your regular income.
According to the ATO:
“Transacting with bitcoins is akin to a barter arrangement, with similar tax consequences.
The ATO’s view is that Bitcoin is neither money nor a foreign currency, and the supply of bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is, however, an asset for capital gains tax (CGT) purposes.
The records you require in relation to bitcoin transactions are:
- the date of the transactions
- the amount in Australian dollars (which can be taken from a reputable online exchange)
- what the transaction was for, and
- who the other party was (even if it’s just their Bitcoin address).”
I hope this helps,
Elizabeth
Hi,
So basically it’s impossible to buy bitcoin in Australia anonymously? Because you either have to leave a trail online via BPAY or online banking(comes back to you if anyone looks), or walk in to a bank branch(under CCTV surveillance so just a matter of looking up time and date to find out who it is etc.)? Therefore defeating the entire purpose of paying for things anonymously. They really don’t like us being anonymous do they. Hence why cash is so rare these days I guess. Thanks anyway!
Hi if one was trying to set up a wallet and purchase bitcoins using a debit card for the past few months and found it virtually impossible to do. Is there anything you would suggest to have the ability to make this happen with a debit card that is Visa? In other words how the hek can you actually purchase these things
/
Hi Brendan,
Bitcoin transactions are irreversible, Visa/Mastercard transactions are reversible. Only a few exchanges overseas accept Visa/Mastercard, because of the risk of somebody buying Bitcoins and then reversing the card transaction.
The few exchanges that take the risk must increase their prices significantly to counter the risk, which then makes them uncompetitive. Darn.
Most exchanges in Australia use bank deposits, except for Coinjar which uses Bpay (IMHO a very good way to do it, which is probably why it’s such a popular exchange in Australia).
If you wanted to use your Visa card because you’re not sure if you can trust a Bitcoin exchange, then maybe you should try only sending small amounts of money to start off with. Although 1 BTC is worth $450, you can buy as little as $20 worth of Bitcoin. That’s how I started off, and if you’re unsure you can start by buying just that amount.
Hi Brendan,
Thanks for your question.
To our knowledge there are no bitcoin exchanges based in Australia that accept debit cards as a form of payment for bitcoins, this method is available overseas. If you’re insistent on using your debit card, you may want to conduct some more research regarding international bitcoin exchanges.
An option you may want to consider is using a bank transfer from your transaction account instead, this method is a lot more common for Australian bitcoin exchanges.
I hope this helps,
Shirley