Cryptocurrency is a form of currency that exists solely in digital form. Cryptocurrency can be used to pay for purchases online without going through an intermediary, such as a bank, or it can be held as an investment.

If you buy and sell coins, paying attention to cryptocurrency tax rules is important. Cryptocurrency is treated as a capital asset, like stocks, rather than cash, which means that you need to pay your marginal tax rates on the crypto when you register your return with the ATO. It also means that if you sell cryptocurrency at a profit, you’ll have to pay capital gains tax. You can read our guide to crypto and tax in Australia.

Don’t succumb to the misconception that cryptocurrencies are anonymous and can’t be tracked. The ATO has data-sharing agreements with all exchanges in Australia, giving them access to the list of taxpayers who own and trade cryptocurrency. Transferring from an exchange to a wallet is also relatively simple to track due to the public nature of blockchain data.

You can buy cryptocurrencies through Australian-based crypto exchanges, such as CoinSpot and Swyftx or platforms such as eToro Australia. You can read our review of the Best Exchanges for Australians in 2023.

When we first think of crypto, we usually think of Bitcoin first. That’s because Bitcoin represents more than 45% of the total cryptocurrency market. So when we talk about any cryptos outside of Bitcoin, all of those cryptos are considered altcoins.

Ethereum, for instance, is regarded as the most popular altcoin.

Here are the top three cryptocurrencies by market capitalisation as of January 2024:

1. Bitcoin (BTC): The original cryptocurrency, Bitcoin continues to hold its position as the market leader. With its price standing at around US$45,800, it boasts a market capitalisation of US$895 billion. Its widespread acceptance and status as digital gold make it a cornerstone of the crypto market.
2. Ethereum (ETH): Ethereum has firmly established itself as the second most popular cryptocurrency, thanks to its versatile platform that enables decentralized applications (DApps) and smart contracts. Priced at US$2,400, its market capitalisation sits at US$290 billion. Its ongoing developments and widespread use for DeFi and NFTs contribute to its strong position.
3. Tether (USDT): Tether stands out as the most popular stablecoin, pegged to the US dollar to maintain a consistent value of US$1. With a market capitalization of US$91.7 billion, it’s a favourite among investors looking for stability in the often volatile crypto market. Its primary use is to provide a stable currency for trading and hedging in the crypto space.

These cryptocurrencies represent the forefront of the digital asset world, each with unique attributes that cater to different needs and preferences within the market. Whether you’re looking for a store of value, a platform for innovation, or stability, these top three cryptocurrencies offer something for every investor.

Part of what makes Bitcoin so valuable is its scarcity. Bitcoin’s maximum supply is limited to 21 million coins. Currently, there are 19 million coins in circulation.

To create supply, Bitcoin rewards crypto miners with a set Bitcoin amount. (To be exact, 6.25 BTC is issued when a miner has successfully mined a single block.). To keep the process in check, the rewards given for mining Bitcoin are cut in half almost every four years.

The cryptocurrency market is highly unpredictable and extremely volatile, with some tokens doing well one day and then falling rapidly the next.

Because of this, the most profitable cryptocurrency changes constantly. Once a cryptocurrency increases drastically in value, buying into the project expecting further gains is not always the best idea.

The profitability of investing in cryptocurrencies is affected by market conditions, supply and demand, regulatory changes, technological developments, and how you manage your investments. It is important to do your own research (DYOR) and consult with a trusted  financial advisor before making any investment decisions.

The future performance of cryptocurrencies is uncertain and depends on various factors, including the recent regulatory uncertainty surrounding the crypto space, as well as the unstable economic climate characterised by high levels of inflation and rising interest rates.

While some investors are optimistic about the potential growth of the crypto market despite these challenges, others may be more cautious or sceptical. It’s important to note that the performance of cryptocurrencies is generally volatile and unpredictable, and is often significantly impacted by external factors beyond the digital asset space. It is essential for anyone interested in this space to conduct thorough research and, if necessary, consult with a financial advisor before making any investment decisions.

Figuring out which cryptocurrencies to invest in can be quite a challenge, but there are some steps you can take to increase your chances of choosing a more promising project. To make well-informed decisions, it’s essential to:

1. Get familiar with cryptocurrency and blockchain technology—understanding the fundamentals is key.
2. Dive into research on various cryptocurrencies, their purposes, and the dedicated teams behind them.
3. Keep an eye on market sentiment and the long-term potential of each cryptocurrency you’re considering.
4. Stay in the loop with the latest news, regulatory updates, and technological breakthroughs in the crypto world.
5. Reflect on your personal risk tolerance and investment goals to ensure you make the right choices for you.

Don’t hesitate to consult with a financial advisor if you’re new to crypto investing or have specific concerns about your investment plan. Just keep in mind that cryptocurrencies can rise and fall in price rapidly, so investing in them comes with inherent risks.

Finding the perfect crypto wallet can be a bit tricky, as the best one for you will depend on your specific needs and preferences. Crypto wallets come in different types, such as hardware and software wallets, each with its own pros and cons. Don’t forget to consider factors like security, ease of use, and compatibility with various cryptocurrencies when selecting a wallet. To help you make an informed decision, we recommend reading our crypto wallet review of the Best Crypto Wallets for Australians.

Answering the question of which cryptocurrency has the potential to increase 1000x in value is complex and speculative. No one can predict the future of the crypto market with absolute certainty. Several factors can influence a cryptocurrency’s growth potential:

1. Utility and Adoption: Cryptos addressing real-world problems with clear use cases are more likely to gain traction
2. Regulatory Environment: Clear and favourable regulations can boost a crypto’s growth prospects.
3. Community Support: An engaged community can promote awareness and adoption.
4. Technological Innovations: Unique features or solutions can set a crypto apart.
5. Market Capitalisation: Cryptos with a lower market cap have an easier time achieving high multipliers, simply due to their smaller size. 
6. Market Sentiments: Perception and overall market sentiment can swing a crypto’s value.

Always conduct thorough research and consider consulting financial experts before investing. Remember, while some cryptos show promise, predicting 1000x returns remains inherently risky.