1. Choose a crypto exchange

To buy Bitcoin (BTC), or any cryptocurrency, you’ll need a crypto exchange where buyers and sellers meet to exchange dollars for coins.

There are hundreds of exchanges out there, including multiple Australian-based exchanges, but as a beginner, you’ll want to opt for one that balances ease of use with low fees and high security.

Make sure to check if your exchange has a Bitcoin wallet built into its platform; if not, you’ll need to find one of your own. If you want to hold your crypto in a different wallet, you’ll need to sell your holdings and then re-buy them on a different exchange.

2. Decide on a Payment Method

After choosing an exchange, you have to fund your account before you can begin investing in Bitcoin. Depending on the exchange, you can fund your account through bank transfers from a current or savings account, PayPal, a cryptocurrency wallet, or even a credit or debit card.

If you are using your credit card to buy crypto, be beware of any fees that might be added to the cost of the transaction.

Because fees reduce how much money you can invest (and therefore also how much money you have to grow and compound), it tends to make sense to use electronic transfers from a bank account rather than other methods. In addition, if you use a credit card to buy cryptocurrency, it generally will count as a cash advance and be subject to a higher interest rate than you pay on regular charges. Remember that taking on debt to buy volatile investments is extremely risky.

You can decide which exchange is right for you by reading our guide to the top exchanges for Australians.

3. Place an Order

Once your account is funded, you can place your first order to buy Bitcoin. Depending on the platform you’re using, you may be able to purchase it by tapping a button, or you may have to enter Bitcoin’s ticker symbol (BTC). You’ll then have to input the amount you want to purchase.When the transaction is complete, you will own a portion of a Bitcoin.

That’s because it requires a large upfront investment to buy a single Bitcoin now. If Bitcoin’s current price was $US30,000, for example, you’d need to invest that much to buy a full Bitcoin. If you invested less, say $US1000, you’d get a percentage, in this case 3.33%, of a single Bitcoin.

4. Select a Safe Storage Option

Many crypto exchanges have an integrated Bitcoin wallet, or at least a preferred partner where you can hold your Bitcoin. Some people, however, do not feel comfortable leaving their crypto connected to the internet, where it may be easily stolen by hackers.

Some major exchanges have private insurance to reimburse clients if this happens, and increasingly, they’re also storing the majority of customer assets offline in so-called ‘cold storage’. Yet, things can and do go wrong. Before it collapsed, FTX was considered one of the leading centralised exchanges in the crypto space. Despite this, millions of FTX users have been left empty-handed after the exchange declared bankruptcy.

Ideally, investors should store their crypto in their own wallet, separate from their exchange account. There are multiple types of wallets, from custodial, software and hardware wallets, some more secure than others. The security of custodial wallets is typically no different to what is provided by a centralised exchange, as there is still a third party holding your assets. Software wallets can be more secure, as there is no trusted third party, however, hackers can potentially exploit the wallet’s code as the private keys are still stored online.

The most secure option for storing Bitcoin is to use a hardware wallet. These wallets are physical devices that keep your private keys offline, ensuring that your digital assets cannot be moved without your physical verification on the device. For investors with a substantial amount invested in Bitcoin, it is highly recommended that a hardware wallet is used. It is important to keep in mind that if you move crypto from an exchange, no matter which wallet type you use, you may have to pay a small withdrawal fee.

When you decide you’re ready to sell your Bitcoin, you can place a sell order through your exchange, much like you did when you originally purchased it. Most exchanges offer multiple order types, so you can decide to sell only when Bitcoin reaches a certain price, or you can place an order that goes through immediately.

You can choose to sell your entire holdings of Bitcoin or only a specified amount. Once the sale goes through, you can transfer the money to your bank account. Your exchange, however, may have a holding period before you can make a transfer back to your bank account.

This isn’t cause for concern; it simply takes some time to make sure the transactions clear. When you sell your Bitcoin, you may make a profit and you may therefore be on the hook for capital gains taxes with the Australian Tax Office (ATO) so make sure to keep track of your profits. There is crypto tax calculation software available to help investors with multiple transactions when it comes to tax time, and you can also read our guide to crypto and tax in Australia.

When Bitcoin’s price is skyrocketing, investing in the popular cryptocurrency can be tempting. A number of Australian crypto exchanges have insisted the recent fall in prices is cyclical, and that newer investors needed to ride out the down-turn in order to reap rewards. But while crypto clearly has the potential to be a lucrative investment long-term, you should be extremely cautious.

Even if you decide to go ahead, its volatility has led to many experts recommending that you do not allocate a large percentage of your funds to buying it.

Treat it, in other words, as a high-risk venture and consider your own financial position, and what is best for you, before deciding whether or not to invest.

This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency as an investment class. 

Related: How to Buy Bitcoin in 5 Minutes