Uk Guide: Getting Started With Bitcoin Investments

Bitcoin is a risky investment. It's a volatile, unregulated asset class and there is no guarantee of making a profit. In fact, you should be prepared to lose all your money. But if you're still interested in investing in Bitcoin in the UK, the first step is to choose a broker or crypto exchange. A cryptocurrency broker provides an online mechanism to facilitate your contact with a cryptocurrency exchange. A cryptocurrency exchange is an online platform that brings together buyers and sellers to trade cryptocurrencies. You'll then need to decide on a payment option and choose a safe storage option.

How to choose a Bitcoin wallet

When you buy your first bitcoin, you need to decide where to put it. A Bitcoin wallet acts as an ultra-secure digital vault and as the app you use to manage your bitcoin. The best Bitcoin wallets enable you to send and receive bitcoin, trade between cryptos, discover new ways to use your bitcoin and other cryptos, get market updates and news, and even interact with smart contracts.

• Access to private keys: When you elect to buy Bitcoin, you become the owner of your bitcoin. This means that you have access to your private keys, which are crucial to accessing your wallet and authorising transactions.
• Multisig (shared wallets): Some wallets have the ability to require more than one key to authorise a transaction. This can be used to divide responsibility and control over multiple parties.
• Security: Some wallets offer two-factor authentication (2FA) as a way to add additional security to your wallet. The first 'factor' is your password for your wallet. The second 'factor' is a verification code retrieved via text message or from an app on a mobile device.
• Transaction privacy: Some wallets make it harder for others to spy on your transactions by rotating addresses. They do not disclose information to peers on the network. They can also let you set up and use Tor as a proxy to prevent others from associating transactions with your IP address.
• Transaction fees: Some wallets give you full control over setting the fee paid to the bitcoin network before making a transaction, or modifying it afterward, to ensure that your transactions are confirmed in a timely manner without paying more than you have to.
• Compatibility with other currencies: If you are interested in investing in other cryptocurrencies, you may want to consider a wallet that supports multiple currencies.
• Compatibility with your device: Bitcoin wallets are available for Android and iOS-based operating systems. Make sure to check that the wallet you choose is compatible with your device.
• User-friendliness: If you are new to Bitcoin, you may want to choose a wallet that is designed for beginners and offers an intuitive user interface.

It is important to note that there are different types of Bitcoin wallets, including software wallets (e.g. mobile and desktop wallets) and hardware wallets. Software wallets are more commonly used and offer convenience and ease of use, while hardware wallets provide a high level of security by allowing you to store your funds offline.

How to find an exchange or broker

A cryptocurrency broker provides an online mechanism to facilitate your contact with a cryptocurrency exchange. A cryptocurrency exchange is an online platform that brings together buyers and sellers to trade cryptocurrencies.

With some exchanges, you can buy crypto using normal currency, such as sterling. Others require you to use one form of crypto to buy another. Here, you’d need to find a second exchange to buy coins that your chosen exchange uses, before you could start trading.

With brokers, check the rules regarding moving your cryptocurrencies away from a given platform. Some brokers stop customers from transferring crypto holdings away from their account. This could become an issue if you decide to lodge your cryptocurrencies in a crypto wallet.

The FCA has a UK list of registered crypto asset firms.

When deciding on an exchange or broker, it is important to assess whether or not the platform is regulated by the FCA and what fees will apply when depositing funds and completing the purchase.

For example, Coinbase charges a 3.99% fee to buy Bitcoin with a debit card, while eToro accepts debit/credit cards and e-wallets like PayPal and charges a 0.5% deposit fee.

How to decide on a payment option

When deciding on a payment option for your Bitcoin investment, there are several factors to consider. Firstly, it is important to choose a reputable and secure platform that is authorised and regulated by the Financial Conduct Authority (FCA). This will ensure that your investment is conducted in a safe and secure environment. Examples of FCA-regulated brokers include eToro and Crypto.com.

Once you have chosen a platform, you will need to consider the payment method that you would like to use. Each platform will offer different options, but some common methods include bank transfers, debit/credit cards, and e-wallets like PayPal. It is important to review the fees associated with each payment method, as they can vary significantly between platforms. For example, Coinbase charges a 3.99% fee for purchasing Bitcoin with a debit card, while eToro's fee is only 0.5%.

Another factor to consider is the processing time for your chosen payment method. Bank transfers may take a few days to clear, while debit/credit card and e-wallet payments are usually processed instantly. If you want to invest in Bitcoin immediately, an instant payment method may be preferable.

It is also worth noting that some platforms may require you to upload a copy of your passport or driver's license for identity verification purposes before you can make a deposit. This is an important step to ensure the security of your investment and to comply with regulatory requirements.

When deciding on a payment option, it is crucial to assess the risks involved in investing in cryptocurrencies. Bitcoin is a volatile and high-risk investment, and there is a possibility of losing all your money. Therefore, it is essential to only invest an amount that you are comfortable losing. Additionally, it is recommended to have an emergency fund and pay off any high-interest debts before investing.

By considering the fees, processing times, security, and risks associated with each payment option, you can make an informed decision that aligns with your investment goals and risk tolerance. Remember to always do your research and understand the potential benefits and drawbacks of each payment method before proceeding.

How to choose a safe storage option

When it comes to choosing a safe storage option for your Bitcoin, there are several factors to consider. Here are some detailed guidelines to help you make an informed decision:

• Custodial vs Non-Custodial Wallets: Firstly, understand the difference between custodial and non-custodial wallets. Custodial wallets are managed by a third party, such as an exchange, that stores your private keys. Non-custodial wallets, on the other hand, give you full ownership and control of your private keys. Non-custodial wallets are generally considered safer as they reduce the risk of hacks and theft.
• Hot vs Cold Wallets: Another important distinction is between hot and cold wallets. Hot wallets are connected to the internet, making it convenient to access and transact with your Bitcoin. However, they are more susceptible to hacks and online attacks. Cold wallets, on the other hand, are offline and provide a higher level of security. Cold wallets are ideal for long-term storage and large amounts of Bitcoin.
• Security and Backup: When choosing a storage option, prioritise security features such as two-factor authentication and regular software updates. Additionally, ensure that your Bitcoin wallet provider offers backup options in case of device failure or loss. This could include backing up your private keys or using a seed phrase to recover your keys if needed.
• Accessibility and Usability: Consider how often you plan to access and transact with your Bitcoin. If you require frequent transactions, a hot wallet or an exchange wallet might be more suitable despite their lower security. On the other hand, if you prioritise security over accessibility, opt for a cold wallet or a non-custodial wallet.
• Amount of Bitcoin: The amount of Bitcoin you plan to store should also influence your choice of storage. If you hold a significant amount of Bitcoin, it is generally recommended to use a combination of wallets. You can use a hardware or cold wallet for long-term storage and security, while keeping a small balance in a hot wallet for quick transactions.
• Device Compatibility: Choose a storage option that is compatible with your devices. Some wallets may require specific software or hardware to function, so ensure that it suits your technical setup.
• User Experience: Research the user experience of different wallet options. Consider factors such as ease of use, customer support, and the overall interface to find a wallet that aligns with your preferences and needs.
• Fees: Different wallet options may come with varying fees for transactions, storage, or other services. Compare the fee structures to make an informed decision, especially if you plan to transact frequently.
• Regulation and Reputation: Opt for wallet providers that are authorised and regulated by relevant financial authorities. Additionally, consider the reputation and track record of the wallet provider, including their security measures and history of hacks or theft.
• Multiple Wallets: Seasoned Bitcoin users often utilise multiple wallets for different purposes. For example, you could use a hardware wallet for long-term storage, a mobile wallet for everyday transactions, and an exchange wallet for trading specific coins.

Remember, there is no one-size-fits-all solution when it comes to Bitcoin storage. Assess your individual needs, risk tolerance, and technical expertise to make an informed decision. Prioritise security while also considering the accessibility and usability of the storage option. By following these guidelines, you can choose a safe storage option for your Bitcoin investment.

How to buy Bitcoin with a debit card

If you're looking to buy Bitcoin with a debit card, there are several platforms that can help facilitate the transaction. Here's a step-by-step guide on how to get started:

• Choose a Reputable Platform: Select a well-known and trusted cryptocurrency exchange or broker that supports debit card purchases. Examples include Coinbase, Binance, eToro, Crypto.com, and Changelly.
• Create an Account: Sign up by providing your basic personal information, such as your name, email address, and contact details. You may also need to set up two-factor authentication for added security.
• Verify Your Identity: Most platforms will require you to verify your identity before making a purchase. This process may vary but typically involves submitting a government-issued ID, such as a passport or driver's license, and sometimes a proof of address.
• Add Your Debit Card: Navigate to the payment methods section of the platform and add your debit card details. This may include the card number, expiration date, CVV, and any other required information.
• Buy Bitcoin: Once your account and payment method are set up, you can proceed to buy Bitcoin. Specify the amount of Bitcoin you want to purchase or the amount of local currency you want to spend. Review the transaction details, including any fees, and confirm the purchase.
• Store Your Bitcoin: After purchasing Bitcoin, you can choose to keep it on the exchange or transfer it to a crypto wallet. Some platforms offer in-built wallets, while others allow you to withdraw your Bitcoin to an external wallet of your choice.

It's important to note that fees and transaction times may vary depending on the platform and your location. Be sure to review the fees and read the terms and conditions carefully before proceeding with any transaction. Additionally, remember that investing in Bitcoin carries significant risks, and you should never invest more than you are prepared to lose.

Step-by-Step Example: Coinbase

Here's a more detailed example of how to buy Bitcoin with a debit card using Coinbase, a popular cryptocurrency exchange:

• Sign Up and Verify Your Email: Visit the Coinbase website or download their mobile app. Create an account by entering your email address and choosing a strong password. Confirm your email address by clicking the link sent to your inbox.
• Add a Payment Method: In the payment methods section, select "Debit Card" and enter your card details. Coinbase may make a small charge to your card to confirm that you own the account.
• Search for Bitcoin: On the Coinbase platform, search for Bitcoin by typing "Bitcoin" into the search bar or selecting it from the list of assets.
• Enter the Amount: Decide how much Bitcoin you want to buy. You can specify the amount in your local currency, and Coinbase will automatically convert it into the equivalent amount of Bitcoin.
• Finalize Your Purchase: Review the purchase details, including the amount of Bitcoin and any applicable fees. When you're ready, confirm the transaction by clicking "Buy Now."
• Store Your Bitcoin: Coinbase offers a free web wallet service, so your Bitcoin will be stored in your Coinbase account. Alternatively, you can choose to transfer your Bitcoin to an external wallet if you prefer.

Frequently asked questions