Cryptocurrency is one of the most talked-about investment options today. Some see it as the future of finance, a revolutionary way to take control of your money without relying on banks. Others see it as a speculative gamble, fraught with risks and scams. So, should you buy crypto? And if so, how do you do it safely?

In this episode of the Get Rich Slow Club podcast, hosts Tash and Ana sit down with Tracey Plowman from Bamboo, a micro-investing crypto platform, to break down the basics. They explore what crypto is, why people invest in it, the risks involved, and how to avoid scams.

Whether you’re crypto-curious or just want to understand the hype, this guide will help you make informed decisions about diving into digital assets. You can read our summary below, or scroll to the end for the full episode.

What is cryptocurrency?

Cryptocurrency is often described as "digital money" or "digital value." Bitcoin is the original and most well-known, but there are many, many other forms of crypto, including stablecoins, altcoins, and meme coins.

Tracey explains that Bitcoin was created in 2008 by an anonymous entity known as Satoshi Nakamoto. The goal was to enable peer-to-peer transactions without the need for banks, solving a problem called "double spending."

Learn more in our articles ‘ How does cryptocurrency work? ’ and ‘ How does blockchain work? ’

Why people invest in crypto

Some investors see cryptocurrency as a hedge against inflation and an alternative to traditional banking. Others are drawn to the decentralised nature of crypto, which removes intermediaries like banks from transactions.

Tracey shares her own reasons for being passionate about cryptocurrency: "The banking system globally has some big issues … I feel like the little guy needs that leg up,” she says. “There needed to be another option for people to be able to take control of their own wealth.”

She points out that large banks make billions in profits while everyday people struggle with fees and loan accessibility.

Cryptocurrency can also provide financial inclusion for people in countries where banks are inaccessible or untrustworthy.

"There are a lot of developing countries where people don’t have a bank account, but they have a mobile phone," Tracey says.

The risks of investing in crypto

Despite its potential, investing in cryptocurrency is risky. "Crypto is highly volatile," says Tracey. "But we are getting less volatile as time goes on, and the market is very cyclical."

According to Plowman, crypto prices tend to move in four-year cycles This is largely driven by Bitcoin’s halving events, where the rewards for mining Bitcoin are cut in half, reducing new supply. Even during "bull markets," where prices are rising, there can be corrections of 20-70%.

The hosts suggest that one way to potentially reduce risk is to use dollar-cost averaging (DCA) , where investors regularly buy small amounts of crypto over time. This strategy can possibly help smooth out price fluctuations and remove the emotional stress of market swings.

Common crypto scams and how to avoid them

Crypto has gained a reputation for being associated with scams, and new investors need to be careful.

Red flags to watch out for include:

• Promises of guaranteed returns: If someone claims you will "definitely make money," it's likely a scam.
• Random messages from strangers: If someone messages you on social media offering crypto investments, it's very likely a scam.
• Celebrity-endorsed coins: Many influencers and even politicians have launched their own tokens, only for them to collapse shortly after.
• Fake hardware wallets: Some scammers sell tampered hardware wallets that steal your funds.

Tracey advises: "If it’s sounds too good to be true, it almost certainly is.”

How to buy crypto safely in Australia

There are multiple ways to buy crypto in Australia, but the safest approach is to use a reputable exchange. Tracey recommends using well-known Australian exchanges that are properly regulated.

For beginners, micro-investing apps like Bamboo allow users to invest small amounts of money using round-ups from everyday purchases. This method can make it easier to "set and forget" rather than trying to time the market .

The role of Bitcoin and Ethereum in a portfolio

Bitcoin and another cryptocurrency known as Ethereum dominate the crypto market, with Bitcoin often called "digital gold." According to Tracey, these two cryptocurrencies make up around 75% of the market. And even then, many professional investing funds take a conservative approach. ETFs in the US, for instance, only allocate anywhere from 2-10% of their funds to crypto assets.

Ethical considerations and environmental concerns

Some critics argue that Bitcoin mining consumes a lot of energy. However, Tracey notes that many mining companies are shifting to renewable energy sources like hydropower.

"When I looked into this, I compared Bitcoin mining to gold mining, and the impact wasn't that far off," she says.

Crypto storage: Hot wallets vs cold wallets

Security is a major concern for crypto investors. Digital assets can be stored in hot wallets (connected to the internet) or cold wallets (offline storage, like a USB device).

Cold wallets generally offer greater security, but there are risks involved. For instance, if a cold wallet is lost or damaged, the funds may be irretrievable.

"There was a gentleman who had $740 million worth of Bitcoin on an old hard drive … and it’s now in a landfill in Wales somewhere," says Tracey. "He's trying to buy the entire plot because they won't let him excavate it.”

The future of crypto regulation

Crypto regulation is evolving, with governments worldwide looking to introduce policies to ensure investor protection. Tracey believes regulation is necessary for the industry to mature and gain wider adoption.

In Australia, crypto exchanges are required to register with AUSTRAC, which helps prevent money laundering and financial crime. This gives investors an added layer of protection when choosing where to buy crypto.

Is crypto the right investment for you?

Ultimately, whether or not to invest in crypto depends on your risk tolerance and financial goals. If you are interested, start by learning about the technology and understanding the risks.

For those keen to learn more, Tracey recommends resources like Cointelegraph, Decrypt, and Coin Bureau, as well as her own Crypto Curious podcast.

If this episode sparked something in you, give it a five-star rating, drop a review, or better yet, share it with a friend. And if you're just starting out, the first ten episodes will get the financial gears turning. Follow us at @getrichslowclub and catch our personal updates at @tashinvest or @anakresina.

Happy investing!