Joe Bridge has bought two motorbikes, two boats and his first house with the $1 million-plus he made on Bitcoin, but he doesn’t recommend trying to replicate his success.
The 38-year-old became enamoured with the obscure art of coin mining in 2013 while living with his parents in Paddington, in inner Brisbane.
He was studying law and had no IT training, but ran software day and night on a network of three computers and 10 graphics cards that would win him litecoin and dogecoin.
So intense was the operation, pockets of the house reached 50 degrees Celsius and the power bills topped $600 a month, despite a “fairly advanced solar system on the roof”.
He mined enough litecoin and dogecoin to swap them for more than a dozen Bitcoins.
For the next four years they were just “lying around”, unsecured, on a number of phones and computers.
The penny dropped that he was sitting on a gold mine at the start of summer 2017, their value had skyrocketed and even his mother began asking him across the dinner table what he was going to do.
Mr Bridge decided to sell off a small amount of his stock to treat himself in “dribs and drabs”, buying motorbikes and boats.
But he held on to the lion’s share in belief their worth would increase.
And that it did.
By November 2021 Bitcoin reached what would be its all-time peak.
Coincidently Mr Bridge and his partner wanted to buy a home “by the water” in Clontarf, north-east of Brisbane.
They had enough cash already for a deposit and had their offer in, but Mr Bridge did not know exactly how much he would make on the remainder of the Bitcoins, in order to buy the house outright, as promised.
Their price was fluctuating hourly.
“It was difficult to do my job because there was constant checks on the price, I wouldn’t really recommend it,” he said.
“The main issue was proving to the real estate agent that I had the money.
Mr Bridge ended up selling off 85 per cent of what he had, or 11 coins at $80,000 a piece, making $880,000 to buy the home, mortgage free.
He then sold off more to pay for his impending tax bill — estimated to be $290,000.
“It is definitely the biggest I have paid by a long, long margin .”
‘It’s a dangerous time’
Looking back at the experience, Mr Bridge said there was a “lot of luck” involved.
It has afforded him a mortgage-free life and a career change.
He now works in IT for a finance software company, an area it turns out he has “a bit of an aptitude for”.
It does weigh on his mind though, that the people he sold the coins to would have lost money.
“I’ve done well, and fortuitously I didn’t hang on to it,” he said.
“I think it’s a dangerous time to be getting in to it.
“I would imagine it’s possible [to still make money]. Would I recommend it? No. I’m not currently participating.”
Mr Bridge had “believed in the magic” of cryptocurrencies when they first emerged.
They had promised cheap trade and transactions, like digital cash, that would benefit people who did not have bank accounts, or had very low incomes.
Instead, Mr Bridge said crypto had turned into “vehicles of speculation, like digital gold, that’s held onto”.
“I do think there will be a shake out and the speculative bubble that surrounds it will disappear,” he said.
“I don’t think it’s Bitcoin.”
Bitcoin becoming mainstream
More than 800,000 Australian taxpayers have transacted in digital assets in the past three years, with a 63 per cent increase in 2021 compared with 2020, data from ASIC showed.
Senior lecturer in business information systems at University of Queensland, Christoph Breidbach, believed it was partly driven by the younger generations, the millennials, entering the workforce and investing their money.
There is also another group, like Mr Bridge, who just do not really trust or believe in the currency system anymore.
“Crypto and the idea behind crypto of being decentralised of being a more quote unquote ‘democratic means of human economic exchange’. I think for those individuals, it’s very enticing,” he said.
How the ATO recommends offsetting crypto losses
No matter who is investing, the Australian Tax Office (ATO) is upping its scrutiny of earnings.
Assistant Commissioner Tim Loh said it did not matter what cryptocurrency people were investing in, the ATO would use data matching to make sure there was compliance with tax obligations.
“We know a million Aussies have a crypto account and over 800,000 of those have invested in the last few years,” he said.
“It’s definitely becoming a mainstream asset that people invest in.
“We know a lot of millennials are starting to invest more in crypto, more so than the general population.
“I think everyone always gets caught up in the media hype a little bit in terms of why they want to invest.”
Mr Loh said cryptocurrencies seemed “a lot riskier than traditional investment assets” and any capital losses would be able to be offset against other gains from investment assets like shares or property.
The risks involved in Bitcoin investing
The Australian Securities and Investment Commission (ASIC) warns that crypto is a high-risk investment, due to its volatility and fluctuation.
Many crypto-assets were commonly not considered to be financial products and because of that, the platforms where people buy and sell may not be regulated by ASIC.
That means investors may not be protected if the platform fails or is hacked.
The federal government is currently seeking feedback on how to regulate the system, particularly service providers who give consumers and businesses access to crypto-assets.