How to Buy Bitcoin
(Ready to purchase your first Bitcoin? Check out our list of recommended exchanges HERE)
Like many others, you may have become engrossed in the current furor surrounding Bitcoin. It is likely that you have heard about Bitcoin in the background for many years. This year however, the distant murmurings of tech savvy friends have come directly to the forefront with huge gains in the coins value over the last 12 months. Suddenly, even your local butcher, baker and candlestick maker are talking about how to buy Bitcoin and cash in on the Australian Bitcoin wave.
This may have heightened your own interest in purchasing some Bitcoin, however from the outside it can appear an intimidating prospect. Where do you start when buying Bitcoin in Australia? Then there are questions about storage, security and value of your newly purchased cryptocurrency. In this brief guide, we hope to cover the key points which will help you purchase your Bitcoin and manage it safely and securely in the simplest way possible.
Buying Your First Bitcoin
Buying your first Bitcoin, or most likely, part of a Bitcoin, has never been easier. You now have many options when it comes to purchasing Bitcoin. Those options range from using more traditional bank transfer methods to using your debit or credit cards to make your purchase. You can even use Paypal to buy your first Bitcoin with some exchanges in Australia.
To purchase your first Bitcoin in Australia, generally you will need to use an exchange. There are exceptions if you use sites such as localbitcoins which we will explain later. For now, let’s assume you will purchase your first Bitcoin in the most common way. You should find a safe and trustworthy exchange site which does not charge exorbitant fees. For buying Bitcoin in Australia, the best options for starting out on a new exchange are Coinbase or Coinspot. These sites both provide a very user friendly interface to help with your first purchase and try to make the transaction as simple as possible.
Coinbase is one of the largest cryptocurrency exchanges not only in Australia, but worldwide. They charge a fee of approximately 4% on your purchases. This is a little higher than some other exchanges, but using Coinbase you can purchase instantly using your debit or credit card and given their strong reputation globally, you can be assured of total security.
CoinSpot is one of Australia’s most popular cryptocurrency exchanges. Here you can purchase not only Bitcoin, but a host of other cryptocurrencies, all with Australian dollars and tailored to suit the Australian Bitcoin customer.
The advantage of using CoinSpot is firstly due to its user friendly interface. This makes it an ideal platform for those who are getting started on their first Bitcoin purchases. Secondly, it is an Australian platform, especially tailored to deal with Australian customers. This means that when it comes to verification and deposits, the company is easy to contact and communicate with. Another advantage of purchasing your Bitcoin through CoinSpot is that you can use Australian dollars deposited direct from you Australian bank account.
On the negative side, there is quite a thorough registration and verification process. This includes a 24hr deposit limit of $500AUD during your first week of opening. Generally, some users may find this to be an inconvenience. On the positive side however, this helps to maintain the highest possible safety and security.
CoinSpot fees can be a little high for some transactions. Generally, there is a 2-3% trade commission as well as a variable withdrawal fee averaging around 3%. These fees tend to add up over time and may be disadvantageous to the frequent trader. However, for your initial purchases of Bitcoin, the advantages in terms of security and ease of usage easily outweigh the disadvantages of both Coinbase and CoinSpot.
Alternatively, if you have restricted means to deposit finds on an exchange for any reason, you can use a service such as localbitcoins to make your Bitcoin purchase. Although this is not a recommended way of making your first, or any, Bitcoin purchase, it can serve a worthwhile purpose for those unable to access exchanges. Localbitcoins is a service where you can find a seller of Bitcoin in your area and arrange a purchase on a person to person basis. This is often in-person and using a direct wallet to wallet transfer. Whilst this may seem convenient, the rates offered are quite often very poor and the level of security is inadvisably low. If you decide to use this method, be mindful of these factors.
Storing Your First Bitcoin
Now that you have made your first Bitcoin purchase, there are a few options available to you in terms of storage.
You can of course leave your Bitcoin stored on the exchange where you purchased. This is acceptable if you plan to regularly trade with the full balance in your account, but you should be mindful that it is the most exposed method and very vulnerable to hacking. There are frequent cases of exchange hacking which can result in huge losses to the user, with little or no come back.
There are several online wallets which you can use. One of the most popular is attached to the Coinbase exchange and also offers a more secure offline storage option. These wallets are designed to offer maximum convenience and can usually be accessed quickly with the correct passwords.
The disadvantage of using such a wallet, similar to exchange storage, is that you are trusting the site and wallet provider with your Bitcoins. If they suffer any kind of attack or turn out to be fraudulent, you are vulnerable to big losses.
As the name suggests, these are wallets which can be downloaded to your desktop, and in some cases smartphone, allowing you a more independent level of storage for your Bitcoin and other cryptocurrency assets.
With these wallets, you have more control over your passwords, private keys and back-up phrases. They are widely thought of as safer than online cloud storage. There are many popular software wallets available. These include Electrum and Jaxx. Electrum offers Bitcoin only storage in a secure and easy to use application, compatible with both Windows and Linux as well as Android. It has very low fees and is renowned as one of the most secure software wallet choices.
Jaxx is similar but more catered towards the mobile device market, it also offers a very wide range of currency storage besides Bitcoin and possesses the innovative Shapeshifter feature. This allows you to instantly transfer your Bitcoin holding to a range of other tokens or currencies at very low fees and without visiting an external exchange.
For an additional level of security, you may want to take your wallet completely offline. You can do this with use of a hardware wallet. This is an external device which stores your holdings and private keys. The most popular hardware wallets available are the Ledger Nano S and Trezor.
The Ledger Nano S is French designed and offers sleek and secure hardware storage for your Bitcoin and 8 other cryptocurrencies. Like the Trezor, it is easy to use with its OLED screen and instant connectivity to your computer. It is available from the company website and priced from $127AUD.
Similarly, the well designed and ultra-safe Trezor was the pioneer of the hardware wallet industry. Now supporting up to 7 additional cryptocurrencies including Bitcoin, it is available starting from $143AUD.
While a hardware wallet may seem a little expensive, it is one of the safest ways to store your Bitcoin offline after purchase. You just have to be sure to remember your pin code and make a copy of your back-up seed when using a hardware wallet. Without these, you will lose your coins. Another point to note is that due to high demand, hardware wallets are often sold out quickly. Despite this, you should always purchase them only from the official supplier. The official Trezor Website can be found here. The official site to purchase the Ledger Nano S here.
For maximum security and total offline protection, you can use a paper wallet. This is exactly as it says, a paper note of your public and private Bitcoin address or QR code. This can be done by taking a simple note or by using a site such as walletgenerator.
A paper wallet is of course un-hackable due to being completely offline. You should still take precautions with storage. Nobody should be able to get hold of your private key and your paper wallet should be stored safely in a dry place. If possible, you should make more than one copy and store them in additional secure locations.
Transferring and Security
Many peoples first concerns about Bitcoin are related to security, they worry about being hacked or just think that Bitcoin in general is some gateway to a murky underworld. This is simply not the case. Every network transaction can be viewed here. So, even though the transactions themselves are anonymous, transparency is still easy to achieve. As long as you store your Bitcoins in a safe place, a hardware wallet is recommended, and you don’t forget your passwords, you should have no issue at all with coin security.
When transferring Bitcoin to another person, you simply need their public wallet address. This is the same situation if you are receiving Bitcoin, provide the sender with your public wallet address (not private!). With the address or QR code input correctly and double-checked, your transaction will easily process. Time will vary depending upon network traffic and the amount you are sending.
Each transfer should be verified by a certain number of miners on the network. This is where any associated transfer fee also goes, as a reward to the miners for verifying your transaction. The transaction time will vary based on a number of factors including how many verifications are required.
Once you have successfully completed these steps of purchase, storage and made your first transfer, you will have been familiarized with the key points involved in the Bitcoin process and realize how easy it can all be done in just a few basic steps.
In summary, buying and investing in Bitcoin in Australia has become a rapidly growing trend in Australia and beyond. This is especially true in recent months as the value has continued to skyrocket. This brings with it much speculation and rumor, a lot of which negatively detracts from the original purpose of Bitcoin and serves to instill a sense of fear among new market entrants.
The recent rise in popularity has however, attracted a huge group of new Bitcoin investors and users in to the Bitcoin market in Australia. With a sense of enduring curiosity and perseverance, they have sought to learn more about Bitcoin and the market in general. This represents a great opportunity to impart new knowledge and dispel the notion that Bitcoin is difficult, complex or dangerous to buy.
Through following the simple steps laid out in this guide, you, as a new Australian Bitcoin user, should be well equipped to have a safe and enjoyable experience when buying, storing or transferring your Bitcoin.
(Ready to purchase your first Bitcoin? Check out our list of recommended exchanges HERE)
- The views expressed in this piece are merely opinions of the author and are not in any way intended as financial advice. Every investment decision you make is at your own risk. Do not invest more than you can afford to lose.