The Uk's Guide To Investing In Bitcoin

Bitcoin is a digital currency famed for its volatility. It is the biggest cryptocurrency and is currently worth £31,000 ($41,000) per coin. Its value has fluctuated since its launch in 2009, and it has been described as a risky investment. However, its popularity has grown, and it is now possible to purchase Bitcoin across a wide range of exchanges, brokerages, and apps. This article will explore the different ways to invest in Bitcoin in the UK, including the risks and benefits of each method.

Bitcoin wallets

When it comes to Bitcoin wallets, there are a few things you should know. Firstly, you'll need to select a wallet that is compatible with your operating system. Wallets are available for Android and iOS-based operating systems, as well as Linux, MacOS and Windows-based operating systems.

Secondly, you should be aware of the two main types of crypto wallets: hot wallets and cold wallets. Hot wallets are connected to the internet and are often free to use, offering add-on services such as trading or staking in exchange for fees. While they make it relatively easy to carry out transactions, they may be more vulnerable to hackers. Cold wallets, on the other hand, are not connected to the internet and tend to be physical hardware devices that you can buy. They may be harder for other users to reach but if you lose the device, recovery could be difficult.

Thirdly, you should research the different types of Bitcoin wallets available and choose one that suits your needs. Some popular options include:

• Trust Wallet: This is a multi-chain self-custody cryptocurrency wallet that is used by 130 million people. It supports over 10 million digital assets, non-fungible tokens (NFTs), and over 100 blockchains.
• Coinbase Wallet: Coinbase is a well-known crypto exchange, and its wallet allows users to store cryptocurrency themselves rather than keeping it in Coinbase's custody.
• MetaMask: This is a free and open-source wallet that can store any digital asset built on Ethereum. It also integrates with many "Web3" applications.
• Ledger: Ledger is one of the best-known names in crypto wallets and offers a highly-rated mobile app and a dedicated desktop app. It integrates with many popular software wallets and offers two-factor authentication.
• Trezor: Trezor offers high-end hardware and built-in services such as staking and crypto purchases. It has a desktop and mobile app offering.

Finally, remember that with non-custodial crypto wallets, you are in control of your private data and private keys. This means that if you lose access to your private keys, you may never get your cryptocurrency back. So, be sure to research and choose a wallet that suits your needs and offers the necessary security measures.

Crypto exchanges

• EToro: Overall Best Crypto Exchange in the UK (FCA Regulated). eToro is licensed by the FCA and accepts debit/credit card payments at just 0.5%. It also offers a mobile app and a crypto wallet app.
• Coinbase: Popular Crypto Exchange for Beginners – Debit Cards Supported. Coinbase is now used by more than 100 million investors. It offers a mobile app that doubles as a crypto wallet and provides industry-leading security. However, its fees are very high.
• Binance: Trade Hundreds of Crypto Assets at a Commission of 0.1%. Binance is the largest crypto exchange globally in terms of registered account holders and daily trading volume. It offers more than 350 coins and super low trading fees.
• OKX: Low-Cost Crypto Exchange With Passive Income Tools. OKX supports hundreds of digital currencies and charges just 0.1% per slide when buying and selling crypto. It also offers several ways to earn passive income, such as crypto savings accounts and staking.
• Kraken: Best for Advanced Features. Kraken is one of the longest-running crypto exchanges and has constantly improved its services. It offers advanced trading features, a broad range of coins, and flexible account funding options.
• Crypto.com: One of the Best Apps for Buying and Selling Crypto. Crypto.com is one of the best crypto exchanges in the UK for mobile trading. It offers a user-friendly mobile app, low trading commissions, and additional services such as a crypto card and an NFT marketplace.
• Gemini: Great Crypto Exchange for Security and Storage. Gemini charges high fees but offers solid security features, including crypto insurance coverage, SOC certifications, and two-factor authentication.

Bitcoin ATMs

Using a Bitcoin ATM, you can typically buy or sell Bitcoin using cash or a bank card. The ATM will send the purchased Bitcoin or other digital currencies to your wallet, which could be a smartphone app or your email address. Some ATMs can also print "paper wallets" that you can scan to access your cryptocurrency later.

It's important to note that the fees for using Bitcoin ATMs can vary, typically ranging from 3.1% to 17.6% of the transaction amount. Additionally, the FCA has warned that crypto ATMs may be operating illegally, and users could be at risk of losing their money or handing it over to criminals. As of July 2023, the UK had only 10 crypto ATMs remaining after the FCA's crackdown.

When using a Bitcoin ATM, it is essential to be cautious and aware of the risks involved. Make sure to research the ATM provider and check for any warnings or negative reviews before using their services. It is also crucial to have a secure and reliable wallet to store your Bitcoin or other cryptocurrencies purchased through the ATM.

In summary, while Bitcoin ATMs offer a convenient way to buy or sell cryptocurrencies, it is important to approach them with caution due to the associated risks and the ongoing regulatory actions against unregistered machines in the UK.

Peer-to-peer markets

A peer-to-peer (P2P) Bitcoin exchange allows you to exchange Bitcoin directly with another user. While every cryptocurrency trade is from one person to another, you rarely get to choose who you are trading with when using a centralised or decentralised exchange. This is the key difference when using a P2P exchange, as you can browse different sellers and pick the rate that suits you best. It is completely anonymous, has lower fees, and offers more accepted methods of payment.

On a P2P exchange, you can browse buy and sell offers posted by individuals. Each offer will have a different rate, different accepted methods of payment, and a minimum or maximum purchase or sale amount. You can then contact the seller to set up the transaction. As a seller, you simply post what you have for sale, what you will accept as payment, and if any extra fees are involved.

Once a transaction is initiated, there are a couple of different ways it can be completed. Some sites require both the buyer and seller to send Bitcoin or some other collateral to an escrow contract. In the event of a conflict, the escrow is used to reimburse the affected party. Other sites require the seller to send the Bitcoin to an escrow account, which is only released to the buyer once the seller confirms receipt of payment.

When choosing a P2P exchange, you should consider security, trading fees, volume, and payment methods. While P2P exchanges have safety measures in place, the onus of security falls on the user. You are responsible for looking at a buyer or seller’s profile to determine whether they are reliable.

P2P exchanges have lower fees than traditional centralised exchanges because there is no central authority to take a cut. Most P2P exchanges have no fees for buying or selling Bitcoin; you only pay a fee if you advertise on the site. When there are fees, they are generally 1% or less and often only on the seller side.

Some popular P2P exchanges include Paxful, Localbitcoins, Hodl Hodl, Bisq, Local.bitcoin.com, and LocalCoinSwap.

Traditional stock brokers

Traditional stockbrokers are a good option for those who want to invest in Bitcoin in the UK. Here are some things to keep in mind when considering this route:

• Finding a Broker: It is important to choose a reputable and trustworthy broker. Look for one that is regulated by financial authorities, such as the UK's Financial Conduct Authority (FCA) or the Australian Securities and Investments Commission (ASIC). This ensures your investment is secure and protected.
• Variety of Cryptocurrencies: Select a broker that offers a wide range of cryptocurrencies, including Bitcoin. This will allow you to diversify your crypto portfolio and reduce risk.
• User-Friendly Platform: Opt for a broker with an intuitive and easy-to-navigate platform, especially if you are a beginner. A user-friendly interface will make it simpler to execute trades and manage your investments.
• Educational Resources: If you are new to the world of cryptocurrencies, consider choosing a broker that provides educational resources, such as guides, tutorials, and webinars. This can help you improve your knowledge and make more informed investment decisions.
• Security and Regulation: Ensure that your broker prioritises security and adheres to regulatory compliance. Look for features like two-factor authentication, encryption, and other measures to protect your personal and financial information.
• Customer Support: Opt for a broker that offers 24/7 customer support to assist you with any issues or queries. This is particularly important in the fast-paced world of crypto trading.
• Risk Management Tools: Choose a broker that provides risk management features such as stop loss, trailing stop, and price alerts. These tools can help you manage your risk effectively and make more strategic investment decisions.
• Demo Account: Consider selecting a broker that offers a demo account, which allows you to practise trading without risking real money. This can be beneficial for beginners to gain experience and build confidence before entering the live market.
• Fees and Commissions: Be mindful of the fees and commissions charged by the broker. These can include trading fees, deposit/withdrawal fees, and spread costs. Compare the fee structures of different brokers to find the most competitive rates.
• Advanced Trading Tools: If you are an experienced trader, look for brokers that offer advanced trading tools and charting features. These can help you make more sophisticated investment decisions and improve your trading strategies.
• Account Options: Consider the different account options offered by the broker. Some brokers may have minimum deposit requirements, so ensure that you are comfortable with the amount needed to open an account.

Remember, investing in cryptocurrencies like Bitcoin carries a high level of risk due to its volatile nature. Conduct thorough research, understand the risks involved, and only invest what you can afford to lose.

Frequently asked questions