At the time of writing, over 6.2 million Australians are believed to own some form of cryptocurrency. Every week, hundreds more join their ranks. However, if you intend to be one of them, you can be forgiven for being concerned about potential safety risks around Bitcoin, Ethereum, and other digital assets.

You might be aware of horror stories about scams. Over the years, there have been a few high-profile ones, including the Ponzi scheme OneCoin, founded by Ruja Ignatova (aka the "Cryptoqueen") in 2014, and the meme coin $HAWK, launched by Hailey Welch, the infamous “Hawk tuah” girl. So, it is understandable that you’ll want some crypto safety tips as a first-time buyer.

That is why we have put together this post for beginners who want clear and practical guidance on purchasing digital assets. In it, we’ll focus on factors like cryptocurrency safety, avoiding crypto scams, and how to make sensible, low-risk decisions early on. Hopefully, you’ll find it a useful resource.

What is cryptocurrency?

Cryptocurrency is a form of digital money that exists online rather than as cash or coins. It is designed to be used for payments, savings, and transfers. Crucially, it does not rely on banks or traditional financial institutions to operate. That is because, instead of a central authority controlling transactions, cryptocurrencies operate on decentralised networks.

Most digital currencies use blockchain technology. A blockchain is a public ledger that records transactions in a secure and transparent way. Each transaction is verified by the network and permanently added to the chain. This makes it difficult to alter or remove.

The first cryptocurrency launched was Bitcoin back in 2009. (In Australia, you can purchase Bitcoin from bitcoin.com.au.) Since then, thousands of other cryptocurrencies have been created. Many of which are referred to as altcoins. These digital assets can be bought, sold, and stored using online exchanges and crypto wallets.

Why crypto safety is essential for beginners

The great thing about crypto is that it gives you direct control over your money. However, as there is no bank to support it, there is no easy undo button. This means that once a transaction is sent, it cannot be reversed. Therefore, if you lose access to your digital assets, they can be gone permanently.

Unfortunately, many first-time crypto investors jump in without understanding the full implications of doing so. This can expose them to increased stress, the risk of scams, or simply common mistakes that end up costing them real money. 

For this reason, the best way to buy crypto safely is to take the time to familiarise yourself with how it works and what the risks of accumulating cryptocurrency could be.

How to choose a reputable crypto exchange

When investing or trading in crypto, it is important to do so on a reputable exchange that provides you with transparency, a clear fee structure, and strong security measures.

As a beginner, you would be best off picking one that operates in Australia initially, as there are laws in place to protect you. All of the compliant ones will have a suite of security features you should look out for. This includes:

• Two-factor authentication
• Secure storage practices
• Clear customer policies

The best exchanges clearly explain how funds are protected and how users can secure their accounts. However, before signing up for one, it is worth checking independent reviews written by other users and doing your due diligence by researching how long the exchange has been in operation.

Understanding crypto wallets and private keys

If you are to purchase a cryptocurrency like Bitcoin, Ethereum, or Binance, you will need a crypto wallet. Contrary to what some beginners think, these wallets do not hold money in the traditional sense. Instead, they store the keys that give you access to your funds. For this reason, it is essential to take the security of your wallet very seriously.

There are two types of wallets - “hot” and “cold”. The former are usually built into exchanges, which makes them easy to use. They also work well for small amounts, although there is always the risk they might be compromised.

By contrast, offline wallets store information away from the internet. Therefore, they offer stronger protection, especially for those who want to hold on to their digital assets over the long term. Crucially, private keys and seed phrases are the most sensitive part of this system. Indeed, anyone with access to them can control your crypto. So, if they are lost, you are highly unlikely to recover them.

In crypto, users are responsible for their own security. There is no central support team that can restore your access. You should be aware of this before you start investing in it.

Common mistakes new crypto buyers should avoid

Many beginners run into problems with cryptocurrency because they rush into it without doing enough preparation. One of the most common mistakes people make is trusting unsolicited advice from email messages or social media accounts. Regularly, these come from people who are trying to scam you or have no expertise in the field of digital assets.

Another issue is that new buyers tend to believe hype or chase quick profits, without taking the time to understand what they are investing in. Often, investors also aren’t as on the ball with security as they can be. Reusing passwords from elsewhere, skipping two-factor authentication, and failing to store private keys securely online only increase the risk of losing funds. 

Sending funds without double-checking wallet addresses is another costly error. As mentioned, crypto transactions cannot be reversed once confirmed, so once it's gone, it's gone. It's gone. Learning slowly, starting with small amounts, and focusing on remaining safe when buying or selling cryptocurrency is a great way to avoid these common mistakes.