Cryptocurrency investing in Australia continues to be on the rise with more interest being expressed by the media, governments and major institutions.
Recently, Commonwealth Bank opened crypto services to customers. Making them the first bank and major institution in Australia to offer these services.
And the thing is …. it’s not only a hot topic amongst the big players … but has started to gain recognition from everyday people, high school graduates, and other retail investors.
Not surprisingly, we’ve been inundated with requests to teach about cryptocurrency investing in Australia so we’ve listened and decided to write an article on our 5 tips every beginner should know when entering the crypto space.
THE THREE (3) KEY HIGHLIGHTS:
- It’s so easy to lose all your money in cryptos when you’re complacent so make sure you understand the basics of this newfound technology before entering the space
- You can legally save fortunes in taxes by using the right Australian or offshore structures. Not just like that … but by doing this you also protect yourself from ATO regulations, crackdowns and/or audits on cryptos
- To keep your money safe in cryptos, you must take your security, privacy and risk management seriously otherwise you’re prone to scams, hacks or losing an account
1. Understand The Crypto Space, or At Least the Basics
You may’ve heard all the stories of people who’ve made millions from cryptos. And even all the passive income opportunities out there such as 1% per day or 100x in 1 year.
However, have you paid attention to the horror stories? Such as people forgetting their passwords and losing their cryptos, putting money into a rugpull (scam) and other horrific circumstances? Or someone who bought at the top and sold at the bottom?
The trouble is, these kind of stories are far more common than you think … as most retail investors don’t understand the space and instead let their emotions and infatuations with the possibilities dictate their financial decisions.
Cryptocurrencies is a high risk investment. This is due to the inherent volatility as well as the very nature of blockchain technology (the platform behind cryptos) not having a governing 3rd party. Meaning, if you lose your money to a scam, send to a wrong address or simply forget your password, that money is gone forever.
And the harsh reality is, most investors end up losing their money. Mostly because they don’t understand the space sufficiently and thus neglect important details. Don’t make this mistake.
Equally, avid skeptics who avoid this space have the assumption it’s a scam. Such people also don’t understand the space well enough either. If they were to see the value (or potential value) behind the technology, they may reconsider their opinion.
Warren Buffet, one of the greatest investors to ever live, is constantly emphasising the urgency of research and understanding what you’re getting into before investing money into it. This is something we strongly agree with.
When you buy, trade or invest in a project you’re unfamiliar with, you’re merely speculating and gambling. Not much different to a casino.
“Risk comes from not knowing what you’re doing”
To find good projects and profitable opportunities, one must understand the space sufficiently and be capable to do their own due diligence. Three of the basic things this involves is…
1 – Mastering the language (read our crypto terms for beginners guide here), 2 –understanding the technology behind it, and 3 – getting familiar with all the features and use cases.
Connor Marshall, our crypto mentor, has created a series of free 5-10 minute videos to help you master this space in record time. You can watch this by clicking the link below:
2. Legally Minimise Taxes & Protect Your Cryptos
Governments and regulators have left the crypto space alone for the most part. But that’s about to change.
Make no mistake, The ATO and FED have made their intentions clear they want to target cryptos through audits, regulations and tax bills. And unfortunately, they’ll win.
Most cryptocurrency investors are poorly structured, assume cryptos are untraceable and don’t understand how the regulations work. For these reasons, the government will have a field day while investors will be left obliged to pay taxes.
The world we live in isn’t 100% digital or barter yet as people still view fiat as the most accepted and trusted currency. Although cryptos are decentralized and presently not seen as legal tender, any income you make will still be taxable.
It’s the bridge when you transfer your cryptos to fiat when you’ll start to be questioned about taxes. Where it came from, what’s it for, etc.
Our prediction is it won’t be long until the governments start to majorly crack down on this. Are you prepared?
This is an extract from a statement made by the ATO in May 2021:
“This year, we will be writing to around 100,000 taxpayers with cryptocurrency assets explaining their tax obligations and urging them to review their previously lodged returns. We also expect to prompt almost 300,000 taxpayers as they lodge their 2021 tax return to report their cryptocurrency capital gains or losses.”
“While it appears that cryptocurrency operates in an anonymous digital world, the ATO closely tracks where it interacts with the real world through data from banks, financial institutions, and cryptocurrency online exchanges to follow the money back to the taxpayer.”
– Tim Loh, ATO Assistant Commissioner
Most people won’t realize this problem until it’s too late. But by this point, investors won’t have much choice but to pay their “fair share” of taxes while the sovereign and elite will continue to make money paying minimal tax by setting up their structures correctly.
By getting onto this quickly, you not only protect yourself from potential crackdowns or audits … you can also save a small fortune in unlawful taxes. The best part is it’s creative, out-of-the-box but 100% within the law.
If the elite and super rich LEGALLY pay minimal taxes, sometimes even 0, why shouldn’t you?
Being involved in cryptocurrencies ourselves, this is an area and part of the law we specialise in and have helped clients to achieve minimal taxes and asset protection. We’re confident we can do the same for you.
3. Keep Your Money Safe In Cryptos Through Privacy & Security
Let me briefly touch on a horror story. Stefan Thomas, a German-born programmer living in San Francisco, has only 2 guesses left to figure out a password worth approximately, as of this week, 250 million. Imagine that…
This man got into Bitcoin when the price was low, managed to buy 7002 BTC and then lost his password. Now, he can’t access his digital wallet. And he’s not the only one.
Back in 2013, a man named James Howells threw out a hard drive he no longer used unaware that all his crypto passwords were stored on it. Long story short, 7500 BTC he bought in 2010 was all gone. The value of that drive is now worth 450 million USD at the time of this article.
You may be thinking … there’s no way I’d lose my passwords or fall for a scam. However, these stories are more common than you’d think. The most dangerous position is thinking…
“I’d never make that mistake”. Complacency begets laziness, and therefore will likely result in a loss of funds due to neglection.
People across the world regularly lose their passwords and information to access their virtual wallets and crypto accounts.
That’s an alarmingly high number. The biggest problem? You’ll never recover it if you haven’t backed up your passwords.
And guess what, that’s not where the problems ends!
You’re not only prone to forgetting your password … there’s other factors such as phishing, scams, hacks and more.
The idea of full ownership over your assets and no 3rd party may intrigue you but with that comes self-responsibility. Managing your passwords, accounts and setting up all the necessary protection measures are essential if you wish to keep your cryptocurrencies safe.
In building wealth, there’s 2 things to consider. How you make your money and how you keep it.
Connor Marshall has prepared a series of free videos on the best tips to get keep your cryptocurrencies safe. In this series, you learn how to keep your money safe in cryptos by setting up encrypted emails, extra security measures you can take and best places to store your passwords.
4. Leverage From Crypto Communities & Groups
One of our core philosophies is that 1 is a dangerous number. 1 income, 1 structure, 1 investment, 1 bank account, 1 advisor, etc. The reason it’s dangerous is because if you lose the 1, you lose everything. Let’s apply this into cryptocurrencies.
Many minds are better than one. Simply because you can hear an alternative viewpoint to your own on the market movements, potential project opportunities you otherwise wouldn’t have known about and receive support on your questions.
If you’re not already in a good community or group, this is something you may wish to consider as it’s one of the fastest ways to speed up your learning. i.e. People who are familiar in this space will make a profound difference to your understanding.
Not only does it help the above … but it strongly helps with due diligence, a key component to finding profitable opportunities & projects.
Find the common places where successful crypto investors “hang out”. Twitter and Reddit, for example, are two (2) of the biggest platforms used for cryptocurrency investors in Australia and worldwide.
Other platforms include … Discord for project details, community discussions, information, etc. Telegram is where you can find some groups. Conversely, I’ve found that Tik Tok, Instagram or Facebook aren’t as used by the savvy crypto investors & community.
5. Practice Risk Management & Balanced Portfolio
As mentioned many times across this guide, cryptocurrency investing in Australia inherently comes with great risk. Due to its volatility, sometimes you’ll see your portfolio up 50% to -25% in a blink of an eye.
*Past results are not indicative of future results and thus should not be relied upon as financial advice
Knowing how to manage the volatility within cryptocurrencies is essential. Not only for your wealth but also your sanity. Studies have proven if you lose more than 10% of your net worth or capital, it affects the mind.
Our opinion is quite similar and we’d never recommend anyone to put in more than 10% (or even 5%) of their net worth into one project without understanding the risks involved.
People hear about the potential passive income opportunities in cryptocurrencies and the 10x their friend made from Dogecoin. Then, they end up speculating in hope they achieve the same results. This is NOT encouraged for many reasons.
Who knows if cryptocurrencies will even be around for the long term or, I dare say, if you’ll make profits from this space … you can never be too safe. Therefore, we always teach our clients and audience to spread their risk, balance their portfolio and never overleverage their wealth in one sector.
Remember our philosophy … 1 is a dangerous number. If all your investment capital is in cryptocurrencies, and not spread across other assets such as property, precious metals, stocks, bonds, cash and others, then if you cryptos crash you lose everything.
By contrast, a balanced and diversified investment portfolio spreads your risk and mitigates the damages of a crash in a particular sector. For example, if cash collapsed while gold shot up, having some of your wealth in gold would help to mitigate the loss in cash.
Historically, this has been proven to perform the best even in the toughest economic conditions which is why we teach this at the Global Wealth Club.
Although it may slow down the potential returns … it’s far healthier and the safest approach in the long term.
FINAL TIP: Just like any other investment or asset class, only put it money you can afford to lose. Don’t have high expectations or make decisions based on your emotions as this is one of the biggest killers when cryptocurrency investing.
“Be fearful when others are greedy and greedy when others are fearful.”
If you’d like to start mastering cryptocurrency investing in Australia (or even if you live offshore) then make sure to navigate to our free education centre and watch our free crypto module where we explore everything you need to know to potentially generate income another income stream as well as keep your money safe in cryptos.
Or simply click the link below to start mastering the crypto space:
Disclaimer: As we are NOT licensed financial advisors, on financial and investment matters, the information is provided for educational purposes only. It should not be relied upon as financial product advice. None of the information takes into account your personal objectives, financial situation or needs. You must make your own decision how to proceed. If you want financial product advice that takes account of your particular objectives, financial situation or needs, please seek financial advice from a licensed financial advisor before making any financial decision.