With CBA (Commonwealth Bank of Australia) today likely to announce they will be bringing Bitcoin and “cryptocurrencies” to their banking app it would be remiss of me not to share some insights into what this means and how you should approach it.
No doubt by now you have heard of Bitcoin and cryptocurrencies. If you’ve spent any time with me chances are you’ve heard me talking of such things. You may have bought some over the years or more likely you have dismissed it altogether because it’s too complicated or “backed by nothing”.
The media for many years has portrayed all crypto as a joke, scam and something you should avoid like the plague all the while the dollar values of a lot majors have appreciated dramatically. However, the reality of the industry is that the media isn’t entirely wrong — the point they get wrong is lumping everything together.
With one of Australia’s 4 major banks about the bring easy access to their customers finger tips other banks will almost certainly follow and further down the track broader adoption will start to take shape. With this new technology becoming easily available to you some points need to be raised before you jump in.
Bitcoin or “cryptocurrencies”
If CBA goes ahead it is a given they will be offering Bitcoin. It is the original technological breakthrough that started it all.
The unconfirmed reports also speculate that other cryptocurrencies will be on offer as well. If this is true it will no doubt be Ethereum and potentially a whole host of other names you’ve never heard of.
So where do you put your dollars? Well, this is a whole topic all on its own and I will go into much more depth in another article but for now you can think of it like this:
Bitcoin is savings technology.
It has a limited supply that can never be increased. It is truely decentralised, can not be controlled or co-opted by anyone. Over the last decade it has appreciated in dollar value on average just under 200% per year. If you look at this on a long time frame it will be a good place to squirrel away your spare change. Set up an automatic savings plan and forget about it for 5 years or more.
If Bitcoin is savings technology what about cryptocurrencies?
You can think of them as a lottery ticket or akin to playing the pokies. All are highly centralised, controlled by small groups of VCs. A lot have unknown or very large supplies available and offer no real working product or valid use-case. Most have kept large amounts for their founders or backers so when you purchase all you are doing is enriching already rich people that had access before you. You might get lucky and strike it rich but there’s a higher chance you’ll get burned.
Buying through your bank
This industry has grown rapidly and some large and wealthy companies have been created from this rapid rise. Banks have been watching and want their piece of the pie. Buying through a bank is going to be pretty easy for you but there’s some things you need to keep in mind when buying from a bank instead of another established company.
Fees
Until the official announcement we don’t know what fees they will charge but keeping in mind banks are banks they are here to make money for themselves. Before buying through your bank be sure to check out what fees they are charging. On top of this you will also need to compare the buy/sell price they are offering — they can hide fees within the price when compared to other exchanges.
Shop around and find the best value for you.
Can you withdraw to your own “wallet”?
PayPal and some other apps that offer Bitcoin purchasing will not allow you to transfer what you purchase to an external wallet. There’s a good chance CBA will take the same approach.
If you can’t transfer to an external wallet this is an issue. There’s a saying in Bitcoin “not your keys, not your coins”. This means that if your Bitcoin is held with a third-party you are not in control of it. They own it, not you.
Financial Claims Scheme
In Australia registered bank deposits up to $250,000 are guaranteed by the government. If the bank collapses in theory you won’t lose your money (although this remains to be seen). You may feel more comfortable buying Bitcoin through your bank but this FCS will not cover your Bitcoin so in reality you are no safer buying through a bank than any other exchange (especially if the bank doesn’t let you withdraw your Bitcoin).
Should you jump in?
Some of this might seem a bit scary especially if you’ve never ventured down the rabbit hole. If you are interested there is plenty of help out there among Bitcoiners who will help steer you in the right direction.
My recommendation would be if you are looking to get rich quick then forget about it. On the other hand if you are looking to store your hard earned savings in a world where the RBA prints $4b of new money every week, this might be for you.