Want to buy Bitcoin or other cryptos? You’ll be flying solo

A cryptocurrency craze continues to sweep the financial world, prompting former sceptics to buy in, but advice is hard to find.

Investor Jody Sha, 28, has held cryptocurrency since 2017. Picture: Monique Harmer

Australians wanting to buy into the global cryptocurrency craze are on their own when it comes to advice about what to do.

Financial planners remain cool on crypto, and most cannot advise on it because digital currencies remain off their approved product lists despite surging public interest.

But this lack of professional advice hasn’t stopped an estimated 20 per cent of Australians diving in, lured by spectacular price gains.

Given the takeup, the federal Government is being encouraged to put in place new regulations around crypto.

A recent Senate report, Australia as a Technology and Financial Centre, says serious regulatory reform is needed to “realise the benefits of the digital economy”.

Committee chair, Liberal Senator Andrew Bragg, said Australia “needs to be better and stronger in this space”.

A physical imitation of a Bitcoin, which only exists in cyberspace. Picture: Ozan Kose/AFP

Cosmos Capital director James Manning said “crypto assets are rapidly becoming a growing financial asset class” and the government should be discussing regulations with key stakeholders.

“Australian retail investors are investing in markets that have little or no regulation at all,” Mr Manning said.

“This stops neither retail investors from investing in them nor unscrupulous offshore operators from taking advantage of the system.”

In the past year Bitcoin, the big fish, has jumped more than 400 per cent to $71,646, while number two crypto Ethereum has surged 1600 per cent to $5094 and former joke currency Dogecoin’s rise has been astronomical, from one-third of a cent to 58c.

Financial advisers and crypto specialists agree the sector is volatile, high-risk and should form at most 10 per cent of an investment portfolio.

Four out of five financial advisers have been asked about cryptocurrency, and CreationWealth director Andrew Zbik said clients typically opened accounts themselves with a few thousand dollars they were “willing to lose”.

“A lot of them are asking, and I say to them ‘it’s a currency, so you’re currency trading’,” he said.

Digital currencies can drop heavily, as they did in 2018, and trading platform Coinstash’s co-founder, Mena Theodorou, said another “crypto winter” could occur at some point.

However, today’s crypto sector was backed by big investment companies and people such as billionaire Elon Musk, he said.

“Overall crypto is high-risk because of the volatility … but if you consider the digital revolution is coming, everyone should have some involvement.”

Jody Sha, 28, has held cryptocurrencies since 2017 for “diversification”.

“I like to investigate and monitor interesting asset classes and explore their value proposition, as well as growth and mainstream potential,” she said.

Jody Sha, 28, first bought cryptocurrencies for diversification. Picture: Monique Harmer

Ms Sha’s top tip for crypto buyers was “don’t invest what they can’t afford to lose”.

Australia’s largest crypto exchange, Coinspot, recently signed its one millionth customer, and co-founder Russell Wilson said cryptocurrency could form part of a balanced portfolio.

“While cryptocurrency markets can be volatile like many investments, it is important to note that the market is regulated in Australia,” he said.

Mr Wilson said people could reduce risk by protecting their identity, using a certified and audited crypto exchange, and security measures such as two-factor authentication.

Crypto exchange Binance Australia’s chief operating officer, Sam Teoh, said there had been a spike in crypto scams as the sector boomed, but people who protected themselves could trade safely.

“Some people believe bitcoin faces an inherent security risk, but most of the funds that go amiss are usually down to human error and failure to do one’s due diligence,” he said.

Catapult Wealth director Tony Catt said cryptocurrencies were not covered by research companies and people should be careful what they read.

“There are people out there promoting things with bias in their information,” he said.

Pride Advice CEO Brett Schatto said many crypto buyers were wanting to make a quick buck rather than be long-term investors.

“High-profile investors such as Warren Buffett and Charlie Munger label cryptocurrency as worthless, labelling them as disgusting and contrary to the interests of civilisation,” he said.

Originally published as Want to buy Bitcoin or other cryptos? You’ll be flying solo