Bitcoin down under - where and how to buy it?

Summary

• Today, it seems the turbulence of Bitcoin from last month has subsided, with the price of the coin rallying to US$40,197 at the time of writing. With this rallying comes the bulls who ever-optimistically claim that correction is over the price will reach US$100,000 by year’s end.
• While one can’t purchase Bitcoin directly from the ASX, it is possible to own Bitcoin indirectly through purchasing shares in companies that do own Bitcoin.
• If an investor wishes to own or hold Bitcoin, they can do this by purchasing it through a cryptocurrency exchange.
• If a person uses a broker to trade Bitcoin, they’re also purchasing many derivative products. What this means is that the trader won’t directly own or hold a Bitcoin. Instead, they’ll be speculating on where the price of Bitcoin is going to go.

Now that the coronavirus has been all but eliminated from Australia, people are gathering with friends at restaurants, bars, cafes, barbecues, football stadiums and attending social events that involve standing around and talking. On any given timeline during last weekend’s gatherings, the conversation invariably got around to two things: How New South Wales gave Queensland an absolute hiding in Game One in The State of Origin and Bitcoin.

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The sophistication of the Bitcoin conversations varies depending on the gathering, but it seems every man and his dog has an opinion on the world’s largest cryptocurrency. Some may even have money invested in Bitcoin. You can usually tell the ones who have purchased a large amount of Bitcoin because instead of being engaged in the conversation, they’re locked into their phones, staring at their TradingView app, tracking the digital currency movement.

For those who have had money invested in Bitcoin in 2021, it’s so far been an emotional roller coaster as the coin reached a record high of around US$65,000 in April before encountering a typhoon during most of May.

Today, it seems the turbulence has subsided, with the price of the coin rallying to US$40,197 at the time of writing. With this rallying comes the bulls who ever-optimistically claim that correction is over the price will reach US$100,000 by year’s end.

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So, with the price of Bitcoin cheaper than it’s been since February and the bullish sentiment of those touting potential riches at barbecues and dinner parties around the country, people will inevitably be tempted to purchase Bitcoin.

But how does it work? Do you call the Bitcoin service centre and give them your card number? Is it the same as buying shares on the ASX? Is it even legal to purchase Bitcoin in Australia?

Let’s talk about it.

Is Bitcoin Available on the ASX?

While one can’t purchase Bitcoin directly from the ASX, it is possible to own Bitcoin indirectly through purchasing shares in companies that do own Bitcoin.

On the NASDAQ, the most famous (or infamous) example is Tesla (NASDAQ:TSLA) which added US$1.5 billion worth of Bitcoin to its portfolio earlier this year.

On the ASX, there’s currently only one company that has Bitcoin as part of its portfolio. That company is DigitalX (ASC:DCC), and it owned around US$27 million worth of Bitcoin in April, which of course, was just before the sell-off, which saw Bitcoin lose nearly half its value in the space of a month.

Despite Bitcoin’s recent crash, more companies may diversify their portfolio to include cryptocurrencies, including Bitcoin.

How To Invest in Bitcoin in Australia

There are two ways one can speculate on Bitcoin in Australia.

Through a Broker: This means you buy the Bitcoin at a set price. However, it’s important to note that if a  person uses a broker to trade Bitcoin, they’re also purchasing several derivative products. What this means is that the trader won’t directly own or hold a Bitcoin. Instead, they’ll be speculating on where the price of Bitcoin is going to go.

There are three different ways a trader can do this.

• Crypto Contracts for Difference (CFDs) means that traders speculate on Bitcoin's price rise and fall.
• Crypto Futures are when the trader forms an agreement with the broker to buy or sell the Bitcoin at a predetermined price sometime in the future.
• Crypto Options are similar to futures, except the trader can withdraw from the bet, whereas with futures, the trader is obligated to buy or sell. With options, however, the trader loses a deposit if they do decide to withdraw.

Some popular brokers in Australia are Plus500 and eToro, which anyone can download onto their phone from the App Store. Alternatively, they have their own websites.

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Crypto Exchange: If an investor wishes to own or hold Bitcoin, they can do this by purchasing it through a cryptocurrency exchange. A cryptocurrency exchange is much like the stock exchange except that there’s currently little to zero regulation on those exchanges and – unlike stock exchanges with fixed trading hours, crypto exchanges are open 24 hours.

The fact that cryptocurrency exchanges are always open is of particular importance for investors or traders in Australia, given Australia’s geographic location relative to the rest of the world, particularly the US, where most of the Bitcoin price movements are generated from.

New York is 14 hours behind Sydney and Melbourne, and California is 17 hours behind. This means that when moves are being made on crypto exchanges, they’re being made during the very early hours of the morning in Australia.

If one wishes to invest in Bitcoin using crypto exchanges, they’ll likely need to get a crypto wallet where they can store not just Bitcoin but any cryptocurrency.

The most popular crypto exchanges in Australia are Coinbase, which was the first crypto exchange to become publicly listed on the NASDAQ earlier this year. One of the advantages of Coinbase is that it offers educational tools for those who may be new to crypto.

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Another popular crypto exchange in Australia is Kraken. This exchange is accessible for traders of all levels and also offers derivatives.