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Bitcoin has fluctuated dramatically in recent years, hitting a high of $US68,000 in November 2021 before plummeting in a widespread crypto decline to below $US20,000 in May.

So, if you’re thinking about investing in Bitcoin, you should know there’s no guarantee you’ll see a return or break even, and that you could potentially lose a lot of money.

Such crypto volatility has led the Australian consumer group CHOICE to call for better protections for consumers. The Federal Government, meanwhile, is well aware of the need for regulation and plans are afoot to legislate a series of proposed reforms.

If you’re aware of the risks and still want to buy Bitcoin, however, here’s how you do it using a credit card.

To buy Bitcoin, you’ll need to exchange some currency for it.

However you want to pay for your Bitcoin, you’ll need to use a crypto exchange. Popular Australian exchanges include the likes of Coinjar, Independent Reserve; BTCMarkets and Swyftx.

Choose an exchange with a Bitcoin wallet built into its platform and you won’t have to sign up for one elsewhere. If you do want to hold your cryptocurrency in a wallet outside of your chosen exchange, make sure it allows withdrawals and check what, if any, fees apply.

If you’re intending to buy Bitcoin with your credit card, check if the exchange accepts the brand you have (for example, American Express, Visa, Mastercard). It’s also worth investigating the maximum amounts you can spend per transaction as there may be limits.

Once you’ve signed up for an account with an exchange, you’ll need to add funds to it.

Not all providers in Australia allow you to use their credit cards to buy crypto. 

Take note, too, that most credit card companies in Australia will treat crypto purchases as a cash advance, which attracts higher interest rates. You may also be charged a surcharge for using your credit card as well as a brokerage fee from the crypto exchange you’re using.

Taking on debt to buy Bitcoin is not advisable. If you do buy Bitcoin with a credit card, you should try to pay off your balance as soon as possible to minimise the fees it will attract.

Within the platform you’re using, navigate to Bitcoin and enter the amount you’d like to invest. Unless you’re investing north of $US30,000, you’ll be buying a share of one Bitcoin. If Bitcoin’s value were at $US30,000 and you invested $1000, for example, you’d own 3.33% of a Bitcoin. Remember that Bitcoin is divisible up to 100 million units.

You can store your Bitcoin in your exchange’s integrated wallet or, if you prefer and the exchange allows it, a wallet provided by a third party. But, if you feel uncomfortable holding your Bitcoin in a ‘hot’ wallet i.e. online, you can instead use a ‘cold’ wallet, which is a storage device not connected to the internet.

Bear in mind that there may be fees to pay for withdrawing your Bitcoin from the exchange, and if you go with a cold wallet you’ll need to keep safe your access codes or risk being locked out of your own holdings.

You can also sell your Bitcoin via a crypto exchange, either immediately or when it hits a certain price. Once sold, you can transfer the money back to your bank account – although in some cases you’ll have to wait a couple of days before you can withdraw it.

If you make an overall profit selling Bitcoin, then you’ll be liable to pay Capital Gains Tax (CGT). However, as the Australian Taxation Office (ATO) points out, you may be able to reduce capital gains costs using the 50% CGT discount if you have held the crypto asset for longer than 12 months.

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. 


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