Why You Should Consider Investing In Bitcoin Uk

Bitcoin is a decentralised, digital currency, created in 2009 by Satoshi Nakamoto. It is the original cryptocurrency and runs on a blockchain, or a ledger logging transactions distributed across a network of thousands of computers.

Bitcoin is a high-risk investment and is extremely volatile. In 2016, one bitcoin was worth $500, but by August 2024, it was worth $55,175. In 2022, its value plummeted, but by 2024, it had soared again.

If you're thinking of investing in Bitcoin in the UK, you can do so through a crypto exchange, such as eToro, Uphold or CoinJar. You can also use a crypto wallet, like Bither Wallet or eToro Money Wallet.

Before investing, it's important to remember that cryptoassets are high-risk and largely unregulated. You should only invest what you can afford to lose.

Where to buy Bitcoin in the UK

There are several ways to buy Bitcoin in the UK. One of the easiest ways is via cryptocurrency exchanges, such as Coinbase, Binance, Houbi, Kraken, eToro, and Uphold. These platforms allow you to buy and sell cryptocurrencies using different traditional fiat money options or other digital currencies.

To buy Bitcoin on a crypto exchange, you will typically need to open an account and go through some know-your-customer (KYC) and anti-money-laundering (AML) procedures, which may include submitting your official ID and proof of address. Some exchanges offer restricted access and benefits when you sign up with just your email without verifying your identity, which is a good option if you wish to stay anonymous and don’t plan to buy a large amount.

Once you have an account, you can fund it through bank transfers, credit cards, debit cards, PayPal, or wire transfers. Most platforms will charge fees for certain funding options, such as credit card deposits, and you will also need to pay a fee for each transaction.

Another option is to use a mobile payment app such as Venmo, Cash App, or PayPal, which offer a convenient and accessible way to purchase Bitcoin quickly from a mobile device. However, these apps generally do not give you control over your private keys, meaning less control over your cryptocurrency.

Bitcoin can also be purchased directly from other Bitcoin owners via peer-to-peer platforms like Paxful, Binance P2P, and NoOnes. This method can be risky, but these platforms offer an in-house escrow service to ensure the exchange process runs smoothly.

Finally, you can buy Bitcoin using a Bitcoin ATM, which operates similarly to a regular cash ATM. These ATMs will send Bitcoin to your wallet in exchange for cash. However, they typically charge high fees of around 5-10% per purchase.

How to invest in Bitcoin

Investing in Bitcoin can be a risky endeavour, so it's important to do your research and understand the basics of how to buy and store it safely. Here's a step-by-step guide on how to invest in Bitcoin:

• Set up a wallet: Before purchasing Bitcoin, you need to set up a wallet to store, receive and send Bitcoin. You can download a wallet app or use a digital wallet provided by a cryptocurrency exchange.
• Choose a Crypto-Trading Service or Venue: You can buy Bitcoin through a cryptocurrency exchange or a traditional broker that supports crypto trading. Popular exchanges include Coinbase, Kraken, Gemini, and Binance.
• Connect Your Exchange to a Payment Option: You'll need to fund your exchange account using a bank account, debit card, or credit card. Be aware of any fees associated with different payment methods.
• Place an Order: Decide how much Bitcoin you want to buy and place a buy order through the exchange.
• Safe Storage: Consider the security of your Bitcoin wallet. Online "hot wallets" are convenient but are more vulnerable to hacking. Offline "cold wallets" are more secure but require technical knowledge to set up.
• Understand the Risks: Investing in Bitcoin is risky due to its volatile nature and lack of regulatory protection. Only invest what you can afford to lose.
• Tax Implications: Buying and selling Bitcoin may have tax implications, so be sure to understand the relevant regulations in your country.

Remember to do your own research, only invest what you can afford to lose, and always prioritise security when dealing with cryptocurrencies.

Risks of investing in Bitcoin

Bitcoin is a form of digital money that you can buy, sell, or securely send to anyone, anywhere in the world without the interference of banks, payment platforms, or central governments. However, investing in Bitcoin comes with several risks that you should be aware of before making any financial decisions. Here are some of the key risks associated with investing in Bitcoin:

Volatile and Fluctuating Market

The price of Bitcoin is constantly changing and unpredictable. With such volatility, there is no guarantee that you will get a return on your investment. For example, on November 6, 2018, one bitcoin was worth $6,461.01. Just over a week later, on December 17, 2017, the price topped $20,000. Days later, on the 24th, buyers could not sell their investment for more than $14,626. To avoid massive losses, it is recommended to make small investments and keep a vigilant eye on the market.

Cyber Attacks and Fraud

Bitcoin is a technology-based investment, which makes it vulnerable to cyberattacks and hacking. There is also a fair amount of fraud in the Bitcoin market, with fake exchanges and a lack of security, creating a significant risk for investors. Additionally, if you lose access to your Bitcoin wallet or forget your key, there is often no way to retrieve your coins.

Little or No Regulation

The Bitcoin market currently operates with little to no major regulations. The government's stance on cryptocurrency is unclear due to its newness. The lack of taxation and regulation could lead to problems, especially if Bitcoin poses competition for government currency in the future.

Technology Reliance

Bitcoin is entirely reliant on technology. It is digitally mined, exchanged via smart wallets, and kept secure through various systems. This means that, unlike other forms of currency or investment, there is no physical collateral to back it up. If the technology fails or is compromised, Bitcoin owners could lose their investments.

Block Withholding

New bitcoins are created by solving mathematical equations called "blocks." However, a mining pool can use computational power to mine a block and hide it from honest miners, essentially benefiting a select few while leaving others with nothing.

Legal and Tax Risks

The legal standing of cryptocurrency is still evolving, and regulatory agencies, tax authorities, and central banks are working to understand its nature. As a result, there is uncertainty regarding the tax implications of investing in Bitcoin. In the US, for example, the IRS has defined cryptocurrencies as property rather than currencies, subjecting investors to capital gains tax laws. Similar regulations are in place in the UK, where HMRC requires residents to pay Capital Gains Tax (CGT) on profits made from Bitcoin.

Best crypto exchanges and platforms

• EToro: Good for beginners and advanced traders with over 70 cryptocurrencies available. It offers a free wallet and app, and is easy and quick to use for purchases.
• CoinJar: Ready-made crypto portfolios with over 50 cryptocurrencies. CoinJar is beginner-friendly and has low fees and spreads.
• Uphold: Beginner-friendly with over 250 cryptocurrencies available. It offers a free virtual crypto card and up to 1% cashback on card transactions.
• Kraken: One of the longest-running platforms with over 200 cryptocurrencies and advanced features. It has low spreads and provides deep liquidity.
• Gemini: Beginner-friendly with over 100 cryptocurrencies. It offers a range of tools for both new and advanced traders.
• Bitget: Instant buy and sell with over 550 coins and tokens. It offers a highly advanced trading platform and reliable customer support.
• OKX: A wide selection of coins and advanced trading tools. OKX is also compliant with new regulations for UK-based trading platforms.
• Bitstamp: An FCA-licensed platform with learning resources for newcomers and advanced tools for experienced traders.
• Swapzone: A non-custodial cryptocurrency exchange aggregator with no registration required. It offers a rewarding referral program.
• Coinbase: A user-friendly interface with high liquidity and a range of security options. However, it has relatively high fees.

How to invest in stocks and shares

Investing in stocks and shares can be done in many ways, from using an investment app to opening a stocks and shares ISA. Here is a guide on how to invest in stocks and shares:

Investment Apps

Investment apps are a great way to manage your investments on the go. Many apps, such as Freetrade and Plum, allow you to invest from as little as £1. These apps often provide access to a range of investment products, including Stocks & Shares ISAs, Pensions, and General Investment Accounts. When choosing an investment app, consider the minimum investment amount, account management fees, and investment fund fees.

Stocks and Shares ISA

A Stocks and Shares ISA allows you to invest up to £20,000 per year, free from UK tax. You can invest in funds, bonds, and shares in individual companies. When choosing a Stocks and Shares ISA provider, consider the platform charge, fund dealing charge, share dealing charge, and transfer-out fee. It is also important to remember that investing comes with risk, and you may lose money.

Direct Share Dealing

You can also invest in stocks and shares directly by opening a share dealing account with a broker. This option gives you more control over your investments, but it can be more complex and may have higher fees. When choosing a share dealing platform, consider the platform fees, trading fees, and the range of shares and markets available.

Diversify your Portfolio

It is important to diversify your portfolio by investing in different industries and countries. This helps to lower your risk exposure and protect your investments from market fluctuations.

Regular Investing

Instead of investing a lump sum, consider investing a regular amount each month. This can smooth out any ups and downs in the stock market and help you benefit from "pound cost averaging." By investing a fixed amount at regular intervals, you purchase more shares when the price is low and fewer shares when the price is high.

Remember that investing in stocks and shares comes with risks, and you may lose money. Always do your research and understand the companies you are investing in before committing your funds.

Frequently asked questions