Bitcoin Trading in Australia – A Beginner’s Guide

Launched in 2009, Bitcoin is the de-facto cryptocurrency of choice across the world. If you’re based in Australia and you wish to trade some coins of your own, the process couldn’t be easier. You simply need to choose a cryptocurrency broker, open an account, deposit some funds and you’re good to go. But how do you know which Bitcoin trading platform is best for you?

In this guide, we show you everything you need to know to start trading Bitcoin in Australia. Not only do we review Australia’s best Bitcoin trading platforms, but we also take you through the basics of Bitcoin trading and provide a step-by-step guide on how to get started.

How to Trade Bitcoin in Australia in 3 Quick Steps

Don’t have time to read our guide all of the way through? Below you will find our three quick steps on how to trade Bitcoin right now!

Step 1: Choose an Australian Bitcoin Trading Platform

When it comes to choosing an online platform to trade Bitcoin, you typically have two options. This includes a conventional cryptocurrency exchange or an online broker. We would suggest avoiding the former, as most cryptocurrency exchanges do not accept Australian payment methods. Instead, you will need to deposit funds with a digital currency. Many cryptocurrencies are also unregulated, meaning they offer less protection than licensed Bitcoin brokers.

By using an online cryptocurrency broker, not only can you fund your account with a debit/credit card or bank account, but the trading platforms that we discuss below are regulated by tier-one licensing bodies like ASIC, the FCA, and CySEC. Let’s take a look at the best Australia Bitcoin trading platforms.

 

Step 2: Learn How the Bitcoin Trading Market Works in Australia

So now that we have discussed the best Bitcoin trading platforms currently available to Australians, we now need to take a closer look as to how cryptocurrency trading actually works. While you might have years of experience in the traditional online investment space, cryptocurrencies like Bitcoin are a completely different kettle of fish.

Bitcoin is regarded as a very volatile asset, so it’s important that you understand the risks before taking the plunge. Let’s take a closer look at what you need to know before trading Bitcoin in Australia.

What is Bitcoin and How do you Trade it?

In a nutshell, Bitcoin is a digital currency that you can send and receive virtually. The project was launched in 2009 by an anonymous developer known as ‘Satoshi Nakamoto’. Interestingly, although still to this day nobody knows the true identity of Nakamoto, Australian citizen Craig Wright claims that it was himself that created Bitcoin.

Anyway, the underlying Bitcoin network is backed by ‘blockchain’ technology. In its most basic form, the blockchain ensures that Bitcoin operates without a third-party intermediary. It also ensures that the system is not controlled by any financial institution, nation-state, or central bank.

Instead, all Bitcoin transactions and sent and received in a ‘decentralized’ manner. As Bitcoin is a virtual currency, it must be stored in a digital wallet. This then allows you to send and receive coins at the click of a button. As great as the underlying technology is for the future of money, it is important to note that most people buy Bitcoin for speculative reasons.

That is to say, investors purchase Bitcoin because they think it will increase in value, as opposed to buying it to use as a medium of exchange. On top buying Bitcoin as an investment vehicle, you can also trade it. This works much like forex trading, insofar that you will speculating on whether you think the Bitcoin price will go up or down. You can do this against fiat currencies like the US and Australian dollar, or against other digital currencies like Ethereum and Ripple.

You can either buy Bitcoin while purchasing the underlying asset and then sell it, or you can trade contracts for difference (CFDs), meaning you speculate on the price without actually owning any Bitcoin. This means you can go short and speculate on the price going down as well as up, and you can also trade with leverage, meaning you borrow capital from a broker to make larger trades.

How to Make Money from Bitcoin Trading in Australia

The way you make money from Bitcoin trading is by speculating on its future value. This can either be in the short or long run. As is the case in the traditional forex arena, Bitcoin trading is based on ‘pairs’. In other words, you will be trading Bitcoin against an alternative currency. As noted earlier, this can be against fiat currencies like the US dollar, or against other digital currencies.

Once you have selected a pair to trade, you then need to speculate which way you think the exchange rate will move. Much like any other asset class in the investment space, the Bitcoin price will change on a second-by-second basis. This provides ample opportunity to trade Bitcoin, not least because the markets operate on a 24/7 basis.

In order to clear the mist, below we list an example of what a Bitcoin trade would look like in practice.

• You want to trade Bitcoin against the Australian dollar
• The current price of the pair is $14,873
• You think that Bitcoin is overpriced, so you decide to place a sell order
• You stake AUD $2,000
• A few days later, the price of BTC/AUD goes down the $12,289
• This represents gains of  17.3%, so you decide to cash in your profits by placing a buy order
• All in all, the trade made you a profit of $346 (17.3% of $2,000)

Of course, had the price of Bitcoin gone the other way, you would have lost money. You would also need to factor in trading fees, the spread, and overnight financing.

What Regulations are in Place for Bitcoin Trading in Australia?

One of the most important things that you need to assess before choosing a Bitcoin trading site is that of regulation. This is because the cryptocurrency exchange space has gone through hack after hack in recent years, with billions of dollars worth of digital coins subsequently being stolen.

The good news is that there are now lots of traditional online brokers, including forex brokers and share trading brokers, that are slowly but surely moving into Bitcoin. This means that you will benefit from the same regulatory safeguards that you would expect when trading other assets like stocks and shares, forex, or commodities.

At the forefront of this is the Australian Securities and Investments Committee (ASIC), the Australian body responsible for governing the domestic financial sector. By sticking with cryptocurrency brokers that are regulated by ASIC, you will stand the best chance possible of being able to trade Bitcoin in a safe and secure eco-system.

What Risks are Involved with Bitcoin Trading in Australia?

The main risk associated with Bitcoin trading in Australia is that of losing money. As we noted earlier in our guide, cryptocurrencies operate in a highly speculative financial arena. While volatility levels are much thinner than they once were, it is not uncommon for a digital currency to go up or down by 10% in a single trading day. When you start factoring in the added risks of leverage, you must ensure that you have effective risk management tools in place.

There is also a risk associated with regulation. Sure, while Australians can freely buy, sell, and trade Bitcoin at the click of a button, there is no guarantee that this will always be the case. It is likely that cryptocurrency-specific legislation will one day come into force in the country, so there is no knowing how this will impact the industry.

Finally, you also need to consider the risks of using a cryptocurrency exchange that is not regulated by a tier-one licensing body. Such exchanges are actually very popular with Australians, not least because they often offer less common digital currencies that cannot be found at established brokers. However, without a respected regulatory body overseeing the platform, your security is potentially at risk.

How do Trading and Investing in Bitcoin Differ From Each Other?

It is super important to make the distinction between ‘trading’ and ‘investing’ in Bitcoin. The latter refers to the process of buying Bitcoin in the traditional sense, and holding on to the coins long-term. If and when the price of Bitcoin continues to increase, the investor will look to sell them back to Australian dollars at a profit. This operates much in the same way as how investors buy shares.

At the other end of the spectrum, Bitcoin ‘trading’ refers to the process of buying and selling cryptocurrency pairs on a short-term basis. This is like trading forex, oil, gold, or natural gas. Instead of holding on to your coins for a number of months or years, you will be looking to make small, but frequent gains. In fact, most Bitcoin traders will buy and sell crypto-pairs on either a day trading or swing trading basis.

An additional difference between the two investment streams is that of ownership. That is to say, when you invest in Bitcoin you will typically own the coins, and then withdraw them to a private wallet. In the case of Bitcoin trading, you will likely find it more beneficial to buy and sell cryptocurrency CFDs. In doing so, you’ll benefit from lower spreads, more competitive fees, and the protections of an ASIC regulated broker.

What Analysis Techniques Can be Used for Bitcoin Trading?

With the Bitcoin trading markets moving at an incredibly fast pace, it is important for you to understand how analysis works. Much in the same way as the traditional financial markets, seasoned cryptocurrency traders will use a combination of technical and fundamental analysis. This gives them the best chance possible of predicting which way a particular Bitcoin pair is likely to go in the short-term.

• Technical Analysis: Technical analysis is the process of analyzing Bitcoin trading price charts and is typically used by day traders. For example, if you wanted to determine which way BTC/USD will move in the coming days, you would need to look at historical pricing trends. This is a highly advanced skill that can take many months (or even years) to master. This is because you will need to learn how technical indicators work. These are tools that help you identify potential trends that are forming, and how these trends relate to current price action. There are more than 100+ technical indicators that can be used to help with this.
• Fundamental Analysis: Research that involves fundamental analysis will look at real-world news events, and how the event could impact the future price of Bitcoin. For example, when the US Securities and Exchange Commission (SEC) announced in 2018 that it had rejected a Bitcoin ETF application, the price of the digital currency nose-dived. This is why it is crucial to be kept abreast of new cryptocurrency developments. Fundamental analysis is used by both Bitcoin traders and investors.

Step 3: Choose a Bitcoin Trading Strategy

So now that you know the ins and outs of how Bitcoin trading works, what regulations you need to look out for, and what analysis techniques are used by seasoned investors, we are now going to discuss some specific Bitcoin trading strategies that you might want to consider.

Day Trading

Bitcoin Day traders will actively buy and sell cryptocurrency pairs. They will keep positions open for a number of minutes or hours, but rarely more than a day. The overarching objective is to make small, but frequent gains when the Bitcoin trading price changes throughout the trading day. Day traders actually seek volatility, as it presents ample opportunities to make gains.

Scalping

Scalping is the process of trading within a tight pricing range. This often happens with Bitcoin, where the price will go up and down by a small percentage for a number of days before it ‘breaks out’. In investment jargon, the pre-breakout stage is known as a consolidation period. For example, let’s say that Bitcoin trades at lows of $8,900 and highs of $9,100 for 8 days straight.

This would be highly conducive for a scalping trader, as they will capitalize by placing buy and sell orders at both ends of the range. Every time the price of Bitcoin bounces between the two ranges, the scalper would open and close positions. Crucially, scalping is well worth mastering, as it is often viewed as a low-risk way to trade Bitcoin.

Swing Trading

Swing traders focus on medium-term trends. This will see the investor keep a position open for a number of days, weeks, or even months. For example, let’s say that Bitcoin is on a downward trajectory, where it has just breached a key support line of $6,000.

The swing trader will likely keep the position open until it is approaching the next support line, or until it appears the trend is about to reverse. When it does, a shrewd swing trader might place a buy order to catch the new upward trend of Bitcoin.

Holding

‘Holding’ simply refers to a traditional ‘buy and hold’ strategy. In other words, you will be investing in Bitcoin with the view of selling your coins in a number of years. This is a hugely popular strategy with newbie traders that believe in the wider cryptocurrency phenomenon. If you do decide to buy and hold Bitcoin in the long run, it is important that you find a safe way to store the coins. The best option in this respect is to obtain a hardware wallet.

Bitcoin Breakout

As noted a moment ago, a Bitcoin breakout typically occurs after an extended consolidation period. In the example we gave earlier – where Bitcoin was trading in a tight range of $8,900 – $9,100 – a shrewd investor wouldn’t care which direction the breakout goes.

This is because the trader will place sensible buy and sell orders at both ends of the range. This will allow the investor to ‘catch’ the trend’ in a risk-averse manner. When a breakout does occur, Bitcoin will often go up or down in a parabolic manner.

Step 4: Open a Bitcoin Trade

At this stage, you are ready to open an account and initiate a Bitcoin trade with a broker of your choosing.

Pros and Cons of Bitcoin Trading

Conclusion

The Bitcoin trading scene is now a multi-billion dollar battleground. Not only can you buy and sell instruments against the Australian dollar, but you can also trade crypto-cross pairs. This provides ample opportunities for those of you that want to trade cryptocurrencies from the comfort of your home.

There are lots of trading platforms active in the space that now hold that all-important ASIC license, so you just need to find the right Australia Bitcoin trading platform for you.

References

To ensure we bring you the most reliable and accurate information possible, our writers use primary sources to support their content. These include studies, government resources and commentary from industry experts.

• Moneysmart.gov.au. “Cryptocurrencies and ICOs, https://moneysmart.gov.au/investment-warnings/cryptocurrencies-and-icos“, Accessed June 4, 2020.
• Comply Advantage. “Cryptocurrency Regulations in Australia, https://complyadvantage.com/knowledgebase/crypto-regulations/cryptocurrency-regulations-australia“, Accessed June 4, 2020.

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