MONEY: Pam Walkley delves into the world of cryptocurrencies
Thinking of jumping on the bitcoin bandwagon? We delve into the world of cryptocurrencies and find easy, secure ways to get started.
Bitcoin has been hot news as its value jumped about 1700 per cent over 2017 to $25,410 on December 17. It’s now virtually halved to $13,332 at the time of going to press. For investors it’s been a wild ride, leading many investment experts to advise people to steer well clear.
Bitcoin was created after the global financial crisis as a currency enabling people to transact without banks. And while cryptocurrencies have been hijacked by speculators hoping to make quick profits, others are using them like conventional currencies to buy goods and pay bills.
Anyone can buy bitcoin or other cryptocurrencies through a specialist exchange or broker, getting started with as little as $250. Websites such as bitcoinreviews.com.au can help you find a reputable exchange, as well as offer price and feature reviews.
Some of the local options that have been around for a while include Australian Crypto Exchange, CoinJar, Independent Reserve and BTC Markets. Once you choose your exchange you register, create an account and upload 100 points of ID. Once you transfer Australian dollars to your account you’ll be able to buy bitcoin on that exchange.
Your exchange will then create a “crypto wallet”, the virtual address which holds your bitcoin. Each wallet has a public address, like a bank account number, and unique private cryptographic key, like your PIN. If you lose your key, your bitcoin is gone forever, so you have to protect it. Given your exchange could be hacked, it’s not a good idea to leave your crypto on an exchange platform, so move it to a mobile online wallet, such as Blockchain Wallet, or for extra security, an offline “hardware” wallet like the Ledger (finder.com.au has information on these).
You can use your crypto to pay bills or even wages. An Australian website called livingroomofsatoshi.com makes it easy to use bitcoin, allowing use of up to 11 different cryptocurrencies to make BPAY, credit card or direct bank account payments.
If you have under $10,000 worth of bitcoins and you’re only using them to pay bills, they’re not taxed. If you have more and are trading for profit, it’s likely you’ll pay capital gains tax.
Warning: Because bitcoin is flavour of the month, scammers are rife. Never respond to emails advising you have a bitcoin balance you didn’t know about, or those telling you you’ve won some bitcoin in a lottery – these scammers are hoping to get your account details. And be very wary of “phishing” scams, where a fake website mimics a legitimate website and steals your account details. If you do decide to go ahead, only invest money you can afford to lose.