A beginner's guide to cryptocurrency for the first time
Bitcoin is back in the headlines, having soared from $AUD13,700 in July 2020 to $AUD26,400 by early December. We've seen cryptocurrencies skyrocket before. But this time around, the technology has matured, society is rapidly shifting to digital payments, and low returns on cash are encouraging investors to explore new options.
As Janine Grainger, founder of cryptocurrency exchange Easy Crypto notes, "Growing numbers of Australians are interested in investing in digital currencies. For many, the biggest hurdle can be how to begin. But when you break the process down, it's really very straightforward."
With this in mind, let's take a step-by-step look at how to start trading crypto.
1. Set up a digital wallet
The first step is to organise a digital wallet. Don't be put off by the name - a digital wallet works in much the same way as an online bank account you'd use to trade shares. However, it goes further, giving you complete control of your digital currency.
By way of background, cryptocurrencies do not have a physical form like coins or notes. All that exists are records of transactions stored on the blockchain.
When you buy cryptocurrency, the seller signs off ownership of their coins to your wallet's address. Even better, the details are kept secure by your wallet's key - or password.
Digital wallets range from small hardware devices to software programs or online platforms. A quick Google search can help you decide which is right for you.
2. Select a cryptocurrency exchange
Next, you'll need to select a crypto exchange. These act as the middleman between fiat currencies - government-issued money like the Aussie dollar, and cryptocurrencies such as Bitcoin, Ethereum or Ripple, which according to Easy Crypto are among the three most traded cryptocurrencies in Australia.
All exchanges charge a trading fee, and this is something to look for. Some also levy additional charges for deposits and withdrawals. The key is to understand when fees apply and how much you'll pay.
It's also worth looking for an exchange with a wide choice of cryptos. As you gain experience, you may want to move beyond Bitcoin. Easy Crypto offers 52 different currencies, and all orders are covered by a 100% Funds Safety Guarantee so you can trade with confidence.
3. Get some personal ID together
Once you've selected a crypto exchange, take a happy snap of personal ID like a drivers licence or passport. As part of the account opening process you'll be asked to upload the image to the exchange to verify you're the account holder. From there, it takes just minutes to have your account up and running.
4. Consider how you'll pay for trades
Paying for trades is simple, and the available options include bank deposits, POLiPay and your debit or credit card. Most traders just use regular bank deposits as no fee is incurred on the trade, maximising returns.
5. Decide how much to invest
As with any investment you're new to, it's a good idea to start small, and this is an area where crypto is handy for beginners. Easy Crypto's Grainger's points out, "Part of the appeal of cryptocurrencies is that it doesn't take a lot to get started. Bitcoins are divisible by up to eight decimal points, so it's possible to buy only a fraction of a Bitcoin."
Once you've logged into your crypto exchange account, select how much you want to spend in Aussie dollars - it can be as little as $100. Then choose the digital currency you want to buy. Within minutes, your order is processed and you're officially a cryptocurrency investor! It really is that easy.
As Grainger says, "Getting started investing in digital currencies is far simpler than trading shares. And the results can be very rewarding."
For the latest news on cryptocurrencies and a wealth of free education resources, head to Easy Crypto.