The cryptocurrency market in Australia is a booming investment industry, with more people embracing and putting their money into it. With more information about cryptocurrencies available, people are learning how to invest and trade. There are also tools readily available to help traders make informed trading decisions.
While the available trading resources have made investing in cryptocurrencies more manageable, there are some basics that every trader should still know about. For example, taxation laws, exchange platforms, and deposit methods can vary from place to place. So, if you’re in Australia, you need to familiarize yourself with how to invest in crypto there.
Here are the different ways and steps you need to know so you can invest cryptocurrencies in Australia:
- Choose a reliable exchange platform
Usually, when you want to purchase a cryptocurrency, you’ll need to create an account with an exchange or trading platform. The exchange will allow you to buy, sell, or hold your currencies. There are several different exchanges available In Australia. You need to choose the one that suits you the most. An excellent way to find a good crypto exchange is by reading blogs on how to find crypto exchanges in Australia. (1)
As an investor, you must research any platform before transferring any money to ensure that it’s reputable and trustworthy. You should also check the fees or commission they charge to trade in the platform, as minimal fees mean you keep more money. Lastly, you should check on the liquidity of the exchange. Liquidity means how easy it is to buy or sell cryptocurrencies on the platform. High liquidity is good because it allows you to trade more frequently. (1)
- Understand your tax obligation
Cryptocurrencies aren’t regarded as currencies by the Australian Tax Office (ATO). Instead, they’re classified as assets. So, any profit or gain from buying and selling cryptocurrencies is subject to capital gains tax (CGT) rules.
When investing in cryptocurrencies, you need to determine if you’re an investor or a trader. An investor is a person who holds crypto for personal reasons, and the majority of your profits will be as a result of long-term gains. However, a trader holds crypto for commercial reasons, and the profits come from short-term gains. (2)
The ATO has clearly defined the tax treatment of cryptocurrencies, which means it’s not so different from other investments. You pay capital gains tax on any profits (50% discount if you hold an investment for longer than 12 months), and you pay income tax on any dividends or interest earned from short gains in crypto. (2)
Therefore, when you invest in cryptocurrency, you’re required to keep the following records:
- The date of the transaction.
- What type of cryptocurrency was bought?
- How many units were bought?
- The total amount paid (including any fees).
These records will help you file for capital gains or losses after you’ve sold your cryptos and use them for your tax obligations.
- Choose the right cryptocurrency
When you’re new to cryptocurrency, it can be easy to get caught up in the excitement of buying and selling, but not all coins will be worth your time and money. You’ll need to have a good idea of what you’re looking for from your investment. Are you hoping to make quick profits, or do you want to build up your portfolio over time? Will you be trading frequently, or would you prefer to leave your coins alone for the long term? (4)
Your situation and goals will determine your approach. For example, if you’re looking for a quick profit, it might be worth investing in coins that are currently experiencing rapid growth. However, if you’re more focused on long-term gains, it could be better to focus on more established currencies with a proven track record. (4)
The best way to get started is by doing plenty of research. You’ll want to look into the performance of coins over the past year and check out their market trends. If you aren’t sure about what coin to invest in, you can diversify your portfolio by investing in both established and new coins. This strategy will protect your portfolio while still making quick profits. (4)
- Get tools to help you succeed
One of the best ways to succeed as a crypto investor in Australia is by having the right tools. There are so many coins available, and each has different price movements, which makes it difficult for investors to understand. Thus, you should ensure that you have all the necessary tools that could help you buy coins, spot trends, and learn more about crypto investment. (5)
You’ll also need charting tools other than the trading platform and hardware wallets. These tools show you the price movements of the crypto coins you’re interested in. They can also alert you when the prices reach a certain point. Moreover, you’ll also need to get a news aggregator that’ll alert you to any news or rumors that can affect crypto prices. All of these tools will help you better insight into the market and make more informed decisions. (5)
- Manage your risk
Cryptocurrencies are very volatile, hence there’s no guarantee that you’ll make profits when investing. So, first, understand that investing in cryptocurrency is highly speculative and risky. If you invest more than you can afford to lose, you could lose everything. As a beginner, you can start small until you learn how the market works. Then, you can increase your investment over time as you continue to learn. (3)
Second, you need to know a way to store your cryptocurrency securely. Generally, the most appropriate place to store your crypto is in a hard wallet, as hackers can’t access it. A hard wallet stores your private keys offline––away from the exchange platform––making them inaccessible to anyone else. Third, make sure that if you do decide to invest, you spread your investments out over different kinds of cryptocurrency to reduce your risk as much as possible. (3)
Conclusion
Investing in cryptocurrency is an excellent way to make money, though you could also lose your investment. It all depends on your actions as an investor. In Australia, you need to research the right exchange platform, the best coins to invest in, and your tax obligations. Understanding all of these will help you become a successful investor.
References
- “5 Factors to consider in before choosing crypto exchange”, Source: https://roboticsandautomationnews.com/2021/08/12/5-factors-to-consider-in-before-choosing-crypto-exchange/45438/
- “Crypto Tax Australia Guide 2022”, Source: https://swyftx.com/au/blog/crypto-tax-australia-guide/
- “How to start investing in cryptocurrency: A guide for beginners”, Source: https://www.bankrate.com/investing/how-to-invest-in-cryptocurrency-beginners-guide/
- “How to Invest in Cryptocurrency”, Source: https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/how-to-invest-in-cryptocurrency/
- “Best Crypto Tools: The Ultimate Checklist for 2022”, Source: https://cryptomaniaks.com/guides/best-crypto-tools-checklist
