BUYING ALTCOINS IN AUSTRALIA:
WHAT TO KNOW

Looking to get involved in the newest crypto-type on the block, altcoins? Find out what they are, where and how you can purchase them using crypto and everything else you need to know right here!

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For decades, investors have stuck to the tried-and-true strategy of building their wealth from things such as shares, commodities, property, term deposits and high interest savings accounts. 

But with the rapid — and disruptive — rise of blockchain technology and Bitcoin over the past decade, there’s a new player in town: cryptoassets. It’s made huge headlines, soared and plummeted in value, and ultimately brought a new audience to the investment world.

While Bitcoin is the most well-known cryptocurrency, there are many alternative coins, or altcoins, that you can invest in. So, how can you dive into crypto and learn how to trade altcoins in Australia? 

This guide will provide everything you need to know — from defining what altcoins are and how they work, to sharing insights into some of the most popular altcoins in circulation today.

What are altcoins?

Altcoins, or alternative coins, are cryptocurrencies that were created following the success of Bitcoin. Unlike Bitcoin, the first and most well-known cryptocurrency, altcoins have different features and functions that make them unique and attractive to investors and users. Some common examples of altcoins include Ethereum, Litecoin, and Dogecoin.

Altcoins are often built on different blockchain technology than Bitcoin, allowing them to offer various features and benefits. For example, some altcoins have faster transaction times or lower fees than Bitcoin, while others have unique features such as smart contract functionality or anonymity. 

Additionally, altcoins often have different market values and levels of popularity compared to Bitcoin, making them more or less appealing to investors depending on their goals and strategies.

Overall, altcoins are an important part of the cryptocurrency landscape, offering various options and opportunities for investors and users. Whether you are new to the world of crypto or an experienced trader, learning about altcoins and how they differ from Bitcoin can help you make informed decisions and maximise your potential returns.

So, why are altcoins becoming popular?

Well, there are a few different reasons. For one, there is a high cost barrier of entry to Bitcoin, at least if you want to own a ‘whole’ coin. At one stage during 2021, the value of a single Bitcoin exceeded AU$84,000. 

For those with an aggressive trading strategy, the high volatility and low value of some cryptocurrencies can be just as attractive as investing in microcap penny stocks on the ASX.

Can you purchase altcoins in AUD?

Despite the huge popularity of traditional stock market investing, it is — by its very nature — geographically siloed. That means it is very easy to start trading on the ASX if you are Australian, but it can be more complicated to invest in, for example, the New York Stock Exchange (NYSE). This is because you may need to create a separate international trading account. 

Online platforms can make it simpler, but there are still time differences, the exchange rate of the USD, and other factors to consider.

In contrast, crypto is not restricted by geography. As the altcoins are not ‘companies’ being listed on the ASX, they can be bought and sold anywhere, anytime, through a variety of platforms that support crypto trading.

The good news for Australian investors is that you can purchase altcoins in AUD in a very simple, straightforward manner, depending on the platform you are using to trade crypto

Should you purchase altcoins using crypto?

While it is true that you can purchase altcoins using crypto, whether or not you should do it will depend on a number of factors.

• You will need to ensure the platform you are using to trade crypto allows you to purchase altcoins using another crypto that you already hold.
• If permitted, the next step is finding out whether the platform allows you to make a purchase with the coins you currently hold.
• Most platforms will allow you to buy altcoins with two of the biggest cryptocurrencies in circulation: Bitcoin and Ethereum.
• In some cases, Ethereum may be the better option as it tends to be cheaper to transfer between exchanges than Bitcoin.
• For lower-value altcoins, making a purchase with your low-value coins could be the best way to purchase. This’s because many trading platforms only show crypto to eight decimal places, which can make it very expensive or even impossible to purchase low-value coins with Ethereum or Bitcoin.

Why would you decide to buy altcoins with cryptoassets?

There are many reasons why you might decide to buy altcoins with cryptoassets. 

Maybe you do not want to wait a day for your bank details to be approved on a crypto trading platform — especially if you predict the price of your chosen altcoin will surge in the next 24 hours. 

Or perhaps you want to stick to your initial strategy of only investing a specific amount of money into crypto, in which case you could use the profits from one altcoin trade to purchase a new cryptoasset.

Where can you buy altcoins?

Thanks to altcoins such as Dogecoin making global headlines and a wave of new retail investors looking into cryptoassets, you can now buy altcoins from a number of different platforms.

Before diving into a trading platform, do your research to ensure it:

• Has the altcoin you want to buy
• Supports your preferred way to make a deposit
• Is a reputable provider
• Clearly states any fees and rates associated with altcoin trading

Cryptoasset trading platforms are good options for traders of varying investing experience due to:

• Their ease of use
• Staking and leveraging options 
• The wide range of cryptoassets available

There are also plenty of guides to help you start investing in altcoins and keep on top of the latest crypto news.

What to consider before trading altcoins

Before you start trading altcoins, it is important to conduct due diligence to ensure you select a cryptoasset to suit your financial goals, risk appetite and portfolio. Some ways you can do this include:

Market Capitalisation

Market capitalisation can be an indicator of an altcoin’s growth potential and stability. The higher the market capitalisation, the more stable the altcoin is likely to be.

Altcoin Purpose

Before you start investing in an altcoin, it is a good idea to familiarise yourself with the purpose of the altcoin, the underlying technology used and its potential future prospects. Altcoin creators typically release this information in documents known as ‘white papers’.

Past performance

Although past performance is not an indicator of future performance, it can be useful for gaining an understanding of the altcoin’s history, any volatility it has experienced and how demand has changed over time.

Compare similar altcoins

While there are many different altcoins available, you will find that some have been created with similar purposes or technology. To help you compare and contrast altcoins, look at those operating in the same categories or with similar technology, their white papers and their performance.

What are some popular altcoins?

Just like investing in the stock market, your strategy will be unique to your own investment goals and risk tolerance.

To help you get started, there are a few popular altcoins that might be of interest to your strategy. Even if they are not, this information will give you greater insight into cryptoassets and whether it is the right way for you to invest.

ETH

• Ethereum was launched in 2015 as a decentralised open-source software platform. 
• The platform has since been used in the creation of non-fungible tokens (NFTs), decentralised finance (DeFi) and various other applications, from advertising to gaming.
• While the platform encourages outside developers to launch their own decentralised applications and cryptoassets, Ether (ETH) is its native currency.
• After Bitcoin, Ether is the second-largest digital currency by market capitalisation, trading at approximately $1,218 per ETH as of December 7, 2022.
• The altcoin reached an all-time high in October 2021, having been valued at $4,585.

ADA

• Cardano (ADA) began life in 2015 as a way for its developer to ultimately provide banking services to the unbanked. 
• It drew immediate attention as it was created by Ethereum co-founder Charles Hoskinson, who declared Cardano would be an updated version of Ethereum. 
• The Cardano blockchain platform launched in 2017 and its crypto ADA (named after the 19th Century mathematician Ada Lovelace) debuted with a market cap of $600 million. 
• By 2018, that market cap rocketed to $33 billion. In September 2021, the coin’s value skimmed just before the $3 mark at its all time high of $2.96. The coin fell soon after and by late-May 2022 landed on $0.5.

BNB

• Binance Coin (BNB) is an altcoin that originally ran on the Ethereum network but has since become the Binance blockchain’s native coin. 
• It was created in 2017 as a ‘utility token’ for discounted trading fees, but in the years since it has become a way for people to pay for everything from travel bookings to financial services. 
• Like most altcoins, BNB’s value began modestly at less than US$1 before gaining traction in mid-2019. In 2021, people really began to take notice and it exploded in value, at one point hitting almost US$650 per coin. Like much of the market, BNB has been on a downward trajectory in 2022.

IOTA

• IOTA is a distributed ledger that was created to service the growing ‘Internet of Things’ ecosystem. 
• It records and executes transactions between devices and its crypto is known as MIOTA (or sometimes just IOTA). 
• Unlike many other altcoins, the price of IOTA coins surged in value within a year of its release, hitting an all-time high of more than US$4.60 at the end of 2017. 
• It returned to its original price within a year, but at the start of 2021 its value began to rise again. In April 2021, it reached the $2.15 mark and fell to around $0.33 in May 2022.

Cryptoassets are not for everyone, but if you are interested in expanding your portfolio with an intriguing — and often volatile — market, then altcoins could be the perfect match for your investment strategy.

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FAQs

How many altcoins are there?

As of March 2023, there are approximately 9,000 altcoins in existence worldwide.

How are altcoins created?

Most altcoins are created through Proof of Work (PoW) or ‘mining’ – a method by which systems solve difficult problems to create blocks and generate new coins, similar to Bitcoin.

How do altcoins work?

Altcoins are a peer-to-peer internet currency. There are thousands of altcoins and all are unique in their own way. Like Bitcoin, altcoins offer a distributed ledger that utilises the blockchain to allow and record crypto transactions.

How do altcoins gain value?

Similar to currencies, altcoins gain value through the level of community involvement, such as user demand, scarcity or the coin’s function. Altcoins are a volatile currency and can rise and fall based on changing government regulations and other external factors.

Where do you store altcoins?

Like Bitcoin, altcoins can be stored in physical or digital wallets. Physical wallets or ‘cold’ wallets are physical tools for keeping crypto purchase records. Digital wallets or ‘hot’ wallets are pieces of software that store your crypto either on a desktop, mobile or online.