Cryptocurrency is a form of digital money (coins or tokens), which people may use to make transactions, buy goods and use services online. This form of digital cash requires a crypto wallet to store the private keys, or passwords, that keep it secure. As interest in the topic is increasing globally, we want to know the latest cryptocurrency news in Australia.
In this article, we explain what crypto is, the reasons why Australians invest in digital currency, and how crypto wallets work. Capterra surveyed 1,000 Aussies familiar with cryptocurrency to gain insight for this article, which is the first of a two-part series. Find the detailed methodology of our survey at the bottom of the page.
Nearly a quarter of respondents buy and use crypto
All Aussies who were surveyed by Capterra were familiar with cryptocurrency and recognise that it’s a digital currency. In fact, 57% of respondents are ‘aware of what crypto is’ whilst 43% are ‘a bit familiar with it’. It comes as no surprise, therefore, that nearly a quarter of respondents (23%) currently buy and use crypto.
Cryptocurrency may be popular with supporters because, unlike fiat currencies (the Australian dollar or Great British pound), it is decentralised and no intermediaries such as the government or banks are in charge of it. It also means that crypto traders’ money is not subject to inflation. Banks can print more currency, but crypto relies on different algorithmic programs (or hashing algorithms) in order to create more.
Cryptocurrency can, however, be considered quite a volatile and unpredictable market. This was highlighted with Bitcoin, the original and oldest brand of cryptocurrency. Bitcoin hit an all-time high (US$64,000) in April 2021 and significantly dropped by more than 50% to a value of US$32,000 —all within a matter of months. In October 2021, Bitcoin again succeeded itself and reached over US$66,000 in market value. The resurgence comes following the launch of Bitcoin exchange-traded funds (ETFs), but even so, the future of crypto remains uncertain.
It seems that respondents are sharply divided over the future of digital coins. In total, 77% of survey respondents have never bought cryptocurrencies before, but within this group, 33% say that they plan to.
Bitcoin is the most popular cryptocurrency to invest in
Currently, there are more than 6,500 different types of cryptocurrencies in existence. Bitcoin was one of the first cryptocurrencies on the market and still remains the most well-known to date. This is reflected in our survey, as 80% of Aussies in the group who use crypto say they buy, or plan to buy, Bitcoin. This is followed by Ethereum (51%) and Dogecoin (27%) as the second and third most popular choices.
Bitcoin is the most favoured cryptocurrency on a global scale too. When it launched in 2009, there was no other form of decentralised digital currency around. Another key component of Bitcoin is that it uses a decentralised blockchain, a technology that was developed specifically for it. Other cryptocurrencies, such as Dogecoin and Ethereum, have since been supported by blockchain.
Bitcoin and other cryptocurrencies rely on blockchain technology, which is a form of a distributed ledger. The encrypted system stores information of digital transactions in a way that makes it very difficult to change or hack. A ‘blockchain’ consists of a number of blocks, each containing records of past transactions with the latest transaction stored in the newest block. These are chained together and managed by cryptography, which encrypts the transmission of secure data between peers.
Why Aussies invest in cryptocurrency
There is a lot of divide between financial experts as to whether investing in crypto is a good or bad idea. Our survey results found that just over half of Australians (52%) surveyed who buy crypto do so because they make a profit, even though they consider it risky. This was closely followed by 51% of Australians who ‘like to be a part of something innovative and alternative,’ and 44% of people who like that cryptocurrency is decentralised.
A combined total of 57% of survey respondents said that they are ‘a little satisfied’ (32%) or ‘very satisfied’ (27%) with their cryptocurrency investments. The majority of people (30%) in the group who buy crypto said they dedicate less than 5% of their savings to investment. Similarly, 31% of people also dedicate less than 5% of their investment portfolio —stocks, real estate, and commodities— to buying and trading cryptocurrency.
Risks of investing in cryptocurrency
Despite the risk, it appears that the profit makes it worthwhile for Capterra’s survey respondents. When investing in cryptocurrency, the following risk factors should be taken into consideration:
- Vulnerability to cyber attacks and hacking
- The volatile market
- Strong competition between thousands of blockchain projects
- Cryptocurrency regulations
Even though it’s legal in Australia, Australian law does not treat crypto as ‘money.’ The government’s attitude has been to take a non-interventionist approach, allowing the industry to evolve quickly, without regulatory limitations.
Since its legalisation in 2017, however, crypto is subject to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and its associated rules. It is therefore treated as and subject to Capital Gains Tax (CGT).
In 2018, the Australian Transaction Reports and Analysis Centre (AUSTRAC) began to implement exchange regulations. This means that crypto businesses have to register with AUSTRAC and meet compliance and reporting obligations. In doing so, it minimises the risk of criminal activity, such as ‘money laundering, terrorism financing, and cybercrime’.
60% of Australians like to use a hot wallet
In order to trade with crypto, users need a wallet. A crypto wallet acts like a traditional wallet, but instead of holding paper money, it holds proof of digital currency. It does not physically store digital cash but is used by a trader to review, buy, or sell their assets. The wallet stores both the public and private keys that provide security for the owner’s assets. It also facilitates the digital signatures required to authorise any transaction.
The two main groups of crypto wallets are hot wallets and cold wallets.
A hot wallet connects to the Internet, which means an investor can conveniently access it anywhere with a WIFI connection. Transactions can be made instantaneously, but relying on the Internet, however, may make the owner prone to hackers. As crypto is decentralised, theft of the user’s private keys means that they will completely lose their assets without any support to recover them.
A cold wallet is offline. The biggest benefit of this is that hackers cannot access the owner’s assets. The only way theft could occur is through physical robbery. There are companies that specialise in the cold storage of crypto assets and use high-security vaults. Cold wallets are most commonly stored on portable devices, such as a USB flash drive. If an investor wants to trade coins, however, this cannot be completed via a cold wallet as blockchains are online and require Internet access.
60% of crypto users in Capterra’s survey say that they use a hot wallet compared to the 34% of people who opt for a cold wallet instead. Perhaps the hot wallet remains the most popular choice because of its convenience and easy access via the Internet.
- Global financial experts remain torn as to whether investing in crypto is good or bad.
- Crypto market value can wildly fluctuate —but making a profit outweighs the risk of investment for Australians.
- Bitcoin and Ethereum are the two most popular forms of cryptocurrency in Australia.
- Over half of Aussies who buy cryptocurrency are happy with their investment choices.
- Storing digital assets with a crypto wallet depends on whether the owner prefers convenience (hot wallet) or offline security away from cybercriminals (cold wallet).
In Australia, the prices of goods and services are currently measured in Australian dollars. Businesses worldwide, however, are increasingly using cryptocurrencies, such as Bitcoin, for operations, transactions and payments. Crypto for businesses may present both opportunities and challenges, but it is important to have a clear understanding of consumers’ attitudes towards cryptocurrency —especially as it becomes more mainstream.
Part one of Capterra’s cryptocurrency survey highlights that Aussies are certainly interested in and want to start or to increase their investment in digital currency over the next few years. In part two, we discuss how much Australians trust in both central banking systems and cryptocurrency, and what the future may hold for digital cash.
Correction: A previous version of this article identified respondents as representative of all Australians. Respondents were limited to those who demonstrated an understanding of cryptocurrency.
To collect data for this report, we conducted an online survey in October 2021. Of the total respondents, we were able to identify 1,000 Australian respondents that fit within our criteria:
- Australian resident
- Over 18 years-old
- Are aware of or are familiar with cryptocurrency
NOTE: This article is intended to inform our readers about business-related concerns in Australia. It is in no way intended to provide financial advice or to endorse a specific course of action. For advice on your specific situation, consult your accountant or financial consultant.