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How to Invest in Bitcoin UK

Bitcoin has always been a volatile asset, rising and falling like the tides, presenting opportunity for investors alongside enormous risk. The current ‘crypto winter’ has seen the price of Bitcoin fall from it’s all-time high of £69,000 in November 2021, to below £19,000 in July 2022.

If, like many analysts, you believe the price of Bitcoin could rise again in the future, then you may be looking at the best possible way to purchase Bitcoin now. I’ve done all the research into the various crypto exchanges, in order to identify your best options when it comes to buying, storing, and selling Bitcoin.

Also consider: How to buy ethereum in the UK

5 Simple steps for buying Bitcoin in the UK

  1. Choose a cryptocurrency exchange – I have detailed your best options below.
  2. Verify your account – this is simply a case of uploading the appropriate ID.
  3. Deposit funds – Deposit at least the minimum amount.
  4. Buy Bitcoin – Search for BTC and buy your Bitcoin
  5. Store your Bitcoin – Keep your Bitcoin safe in your crypto wallet

Top 5 cryptocurrency exchanges in the UK

eToro logo

eToro

For investors looking to buy Bitcoin as part of a diversified portfolio, eToro is an excellent, low-cost option that provides access to a large number of assets including stocks, crypto, CFDs, and exchange-traded funds.

In terms of cryptocurrencies, you have over 120 to choose from, so you needn’t be limited to just Bitcoin.

Opening an account with eToro can be completed in minutes and once registered you can access the eToro demo account in order to practice using the platform and conducting trades.

Once you are ready to start trading you simply need to deposit your fiat currencies and buy your Bitcoin. All Bitcoin transactions are conducted in USD, however, in order to counteract FX fees, eToro have provided the eToro Money app where you can convert your GBP to USD completely free of charge. This app also acts as a eToro money crypto wallet for storing your Bitcoin and other cryptocurrencies.

Possibly one of the best features offered on eToro is the copy trading facility that allows you to automatically copy the trades and Bitcoin investment strategy of more experienced and successful traders. eToro has one of the largest social trading communities available.

Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.

Crypto dot com logo

Crypto.com

When it comes to usability, Crypto.com have provided a seamless experience with an excellent interface on both their browser-based exchange platform and the mobile app. With simple navigation and a range of tools that includes price alerts and real-time portfolio data, it makes keeping track of all your investments easy.

The other advantage of buying Bitcoin at Crypto.com is the access it provides to over 250 cryptocurrencies meaning you can easily convert your Bitcoin to any currency of your choice. The platform is also highly liquid and has some of the lowest trading fees in the industry. Expect to only pay a maker/taker fee of 0.4% per position for a monthly trade volume of less than £25,000. This can even be reduced further by paying in Crypto.com’s own coin CRO.

For new traders, Crypto.com have provided a handy education section, designed to advance your trading knowledge. This is mostly in the form of articles.

Cryptocurrency is not regulated by the UK Financial Conduct Authority and is not subject to protection under the UK Financial Services Compensation Scheme or within the scope of jurisdiction of the UK Financial Ombudsman Service. Investing in cryptocurrency comes with risk and cryptocurrency may gain in value, or lose some or all value. Capital gains tax may be applicable to profits from cryptocurrency sales.

Coinbase logo

Coinbase

If you are looking to enhance your trading skills then head to Coinbase to buy Bitcoin and enjoy their robust education facility, complete with online learning modules, where you can earn free crypto for each module you master.

This free crypto can then be used to offset some of the higher costs at Coinbase as credit and debit card deposits currently attract a 3.99% fee in addition to trading commissions of up to 0.60%. This is not the cheapest option on the market, however, over 56 million users still consider Coinbase a great option and worth the extra expense.

Coinbase have also provided a really excellent user experience with an account opening process that takes about 1 minute to complete and deposits that appear in your account instantly.

Being one of the only crypto exchanges listed on the stock market also adds to the attractive proposition at Coinbase as this makes all their financial data public, providing peace of mind that the company will go insolvent. Being that cryptocurrencies are unregulated, this is of significant value in terms of security.

Cryptocurrency is not regulated by the UK Financial Conduct Authority and is not subject to protection under the UK Financial Services Compensation Scheme or within the scope of jurisdiction of the UK Financial Ombudsman Service. Investing in cryptocurrency comes with risk and cryptocurrency may gain in value, or lose some or all value. Capital gains tax may be applicable to profits from cryptocurrency sales.

BlockFi logo

BlockFi

BlockFi are the only crypto exchange that currently offer up to 15% APY on any crypto you store in your BlockFi interest account. In the current economic climate, this is a great deal and definitely worth consideration.

To actually get the full 15% APR you would have to hold Polkadot in your account, however, with Bitcoin, you can still earn between 2% and 3.5% APR which is market-leading at this time.

The other big selling point is the loan facility which allows you to borrow fiat against your cryptocurrency holdings. This allows you to retain your position in the cryptocurrency market without having to release funds when you need them.

You may be thinking that BlockFi must be charging hefty fees in order to make a profit and still offer interest. However, this isn’t the case. BlockFi are actually one of the cheapest options I have come across, with no transaction fees, inactivity fees, or crypto trading costs.

BlockFi manage to offer these great rates by loaning crypto to institutions. Of course, loaning your crypto funds does add an additional layer of risk, however, historically this has worked out well for Bitcoin investors with no interruptions or hacks. However, unlike other savings accounts, there is no insurance with the Blockfi interest account.

Cryptocurrency is not regulated by the UK Financial Conduct Authority and is not subject to protection under the UK Financial Services Compensation Scheme or within the scope of jurisdiction of the UK Financial Ombudsman Service. Investing in cryptocurrency comes with risk and cryptocurrency may gain in value, or lose some or all value. Capital gains tax may be applicable to profits from cryptocurrency sales.

Coinsmart logo

Coinsmart

If this is your first time buying Bitcoin or any other cryptocurrency, then Coinsmart is the perfect platform to launch your trading experience. Not only do Coinsmart provide a platform with excellent navigation and clear, concise design, but they also provide an outstanding education section which is awash with excellent learning tools including articles, blogs, and how-to guides.

At Coinsmart there is no need to wait days for your verification to be approved as they offer the SmartGuarantee which assures you will experience same-day deposits, same-day verification and all fiat withdrawals within five days.

Cryptocurrency is not regulated by the UK Financial Conduct Authority and is not subject to protection under the UK Financial Services Compensation Scheme or within the scope of jurisdiction of the UK Financial Ombudsman Service. Investing in cryptocurrency comes with risk and cryptocurrency may gain in value, or lose some or all value. Capital gains tax may be applicable to profits from cryptocurrency sales.

Useful information about Bitcoin

This section contains all the information relevant to buying Bitcoin in the UK.

What is Bitcoin?

In its simplest form, Bitcoin is a digital currency with no physical version of the coin but rather created using an encrypted code.

  • Bitcoin is used in the same way as normal currencies to send and receive money
  • Bitcoin is the world’s largest cryptocurrency
  • Payments are conducted peer to peer, without the intervention of a bank or financial institution
  • Bitcoins are mined (created) using a code consisting of a string of numbers and letters
  • Bitcoin uses blockchain technology to send data
  • There are only 21 million Bitcoins that can be mined in the world
  • Bitcoin is a highly volatile, unregulated investment

How do I start investing Bitcoin UK?

Warren Buffett once described investing as ‘the process of laying out money now in the expectation of receiving more money in the future.’

If you are intending to buy Bitcoin with the expectation of making more money, then the first step toward Bitcoin investing is to accept that this may not happen. Bitcoin is a volatile asset with violent price swings that make up its trading history. Also, Bitcoin is unregulated in the UK, which means you have no insurance against complete loss of funds.

So the first step toward investing in Bitcoin is to identify whether you can afford to lose all of your investment. This is only possible if you carry no debt and have at least 3 months of salary saved.

You may also consider whether you should diversify, with a mix of assets that make up your portfolio. This can help offset losses in one area, with gains made in another area.

Should you still decide that investing in Bitcoin is the right move for you, the next step would be to select a cryptocurrency exchange from the list above and register an account.

Is Bitcoin a good investment in UK?

“The price of a bitcoin can unpredictably increase or decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets. Consequently, keeping your savings with Bitcoin is not recommended at this point. Bitcoin should be seen as a high-risk asset, and you should never store money that you cannot afford to lose with Bitcoin.” – Bitcoin.org

This is an excellent summary of how you should view Bitcoin as an asset. Yes, there were early investors who made a significant amount of money on Bitcoin, but equally, many an investor have seen their investment lose all of its value.

With an asset as risky as Bitcoin, you should view your investment in much the same way as you would a lottery ticket. Take a gamble but never with more than you can afford to lose.

How much money should I invest in Bitcoin as a beginner?

Experts recommend that you should seek to invest between 5% and 30% of your total investment capital in Bitcoin. Which end of this scale you go for will really depend on your appetite for risk. However, you should at least ask yourself the following questions:

  1. Do you have any debt?
  2. Do you have any savings?
  3. Do you have a rainy day fund?

This will answer whether you can afford to lose the money you have invested. If you cannot afford to lose your Bitcoin investment, then the answer to this question is zero.

What do I need to start investing in Bitcoin?

Firstly in order to start investing in Bitcoin you will need:

  • Personal identification documents
  • National Insurance Number
  • UK bank account information
  • A secure internet connection

Can you get rich with Bitcoin?

Several early investors became millionaires on the back of their Bitcoin investments, however, just as many people have lost significant sums of money investing in Bitcoin and indeed, some of the early millionaires don’t have as much money to show for their investments as they once did.

In fact, over 80,000 Bitcoin millionaires have been wiped out in the ‘crypto winter’ of 2022.

There is no getting away from the fact that investing in Bitcoin is a risky endeavour and not for the faint hearted. However, there are some steps you can take to ensure you are making the right decisions.

Buy the selloffs

In other words, wait for a significant dip in the market and then buy your Bitcoin with the intention that you will treat it in much the same way as you would a portfolio of stocks, as a long term investment.

Diversify your portfolio

Buying just one currency will add to your level of risk so you should therefore look to diversify with a handful of cryptocurrencies that appear to be sustainable for the long term.

Day trade 

This requires careful timing, however, the volatility of the crypto market lends itself well to day cryptocurrency trading.

Be prepared to lose it all 

There are many successful investors who believe that cryptocurrency will eventually crash to a valuation of zero.

What is the safest way to buy Bitcoin from UK?

The safest way to buy Bitcoin is to do so via a cryptocurrency exchange such as the selection I have detailed above. How you then store your Bitcoin after you have purchased it is paramount to its safety.

Often the Bitcoin exchanges will offer a digital wallet. This provides scope for monitoring your investment and using your Bitcoin to purchase other cryptocurrencies or fiat. Whilst this does offer a level of convenience, it is not the safest way to store your Bitcoin.

Moving your Bitcoin to a secure digital wallet or cold storage would be the safest option.

Your crypto holdings are kept secure within the wallet using Private Keys. This is a password made up of a string of letters and numbers and should not be shared with anyone. Should you lose this password, your Bitcoin will also be lost and can never be retrieved.

A public key acts like an email address and can be shared with others in order to facilitate receiving Bitcoin.

Is Bitcoin legal to buy UK?

Yes, you can legally buy Bitcoin in the UK, however, it’s important that you understand the risks. Cryptocurrencies are not currently regulated in the UK, which means that as a consumer, you will have little to no protection should things go wrong.

It is unlikely that you will have access to entities such as the Financial Services Compensation Scheme, EU Investor Protection, or the Financial Ombudman Service. However, whilst the Financial Conduct Authority do not regulate cryptocurrencies, they do publish a list of crypto exchanges that are registered with them.

What is the minimum amount of Bitcoin that I can purchase?

The minimum order size on the Bitcoin Market is 1 Satoshi 0.00001 BTC. However, the minimum Bitcoin investment will depend on the exchange you have chosen. Often you will be able to purchase as little as £2.00 worth of Bitcoin.

Is Bitcoin the best cryptocurrency to buy right now?

Bitcoin is one of thousands of cryptocurrencies that you can choose from and knowing which one is the best one to buy can prove difficult. Bitcoin is the original cryptocurrency, and in terms of market capitalisation, it is still the largest cryptocurrency in the world with a Market cap of over £362 billion.

Bitcoin has experienced enormous growth since its conception, rising from a value of £370 for 1 Bitcoin in May 2016 to £18,929 in August 2022.

However, due to the environmental impact of Bitcoin, many investors have turned their eye to Ethereum, as it has also experienced extreme growth and offers a host of potential applications.

Is Bitcoin bad for the environment?

Elon Musk famously stopped accepting Bitcoin as payment for Teslas due to the environmental impact caused by mining. This alone caused the value of Bitcoin to fall significantly, but what is that impact and can it really be that bad?

The answer is yes. Bitcoin uses as much power as the Netherlands every year. In fact, there are only 30 countries on the planet that use more energy than Bitcoin. This is based on data released by the university of Cambridge that found mining Bitcoin was responsible for the use of 1% of the world’s electricity supply.

This includes the use of fossil fuels, further damaging the environment, although Bitcoin claims to use an estimated 39% renewable energy.

Do I need to pay tax on Bitcoin in the UK?

Like any investment, Bitcoin is subject to Capital Gains Tax in some circumstances. This requires you to pay Capital Gains Tax on the profit you make on Bitcoin in exactly the same way as you would for stocks.

How do I sell Bitcoin?

Selling your Bitcoin is a very similar process to how you purchased it. When you feel the time is right to sell, simply log into your exchange and place a sell order and select the amount of your Bitcoin holdings you wish to sell.

There are often advanced options in terms of the order type you select, such as only selling when Bitcoin has reached a certain price.

What fees will I pay when buying Bitcoin?

Depending on the Bitcoin exchange you select, there will be some fees associated with the buying and selling of Bitcoin. It is best to check with the individual exchange, and I have listed the fees you can expect in each review, however, you should look out for the following:

  • Transaction fees
  • Deposit fees
  • Withdrawal fees
  • Bitcoin Trading fees

What is the safest way to invest in Bitcoin?

Bitcoin is a very risky asset, however, there are ways to mitigate that risk including buying Bitcoin funds, Bitcoin stocks, Bitcoin investment trusts, Bitcoin ETFs, stablecoins, and buying shares in the companies associated with Bitcoin. This is generally considered a safer way to trade Bitcoin, although it is still subject to movements in the financial markets.

Why has the value of Bitcoin dropped?

There are many entities that can affect the value of any cryptocurrency, however, the latest downward spiral can be attributed to the following factors:

  • Rising inflation and interest rates have prompted investors to take less risk, affecting the value of more risky assets, such as Bitcoin.
  • Cost of living crisis. This has led to less disposable income for investments.
  • Legality of Bitcoin in China.
  • Rumours of further regulation for cryptocurrency investments to come.

Can I use Bitcoin to buy goods and services?

Yes. Although most people will purchase Bitcoin and hold it as an investment, it is also possible to use Bitcoin to send and receive funds. You will need to find an online merchant who accepts Bitcoin as payment.

What is the current price of Bitcoin?

The current live price for Bitcoin (BTC) compared to GBP is as follows:

Source: Livecoinwatch.com

How to Buy Bitcoin FAQs

What is the best way to invest in Bitcoin in the UK?

The best way to invest in Bitcoin in the UK is via a crypto exchange. These make it easy to buy, store and hold crypto assets from your computer or smartphone.

Is Bitcoin a good investment right now?

With Bitcoin’s price currently being so low, many investors believe that now is a great time to buy. However, you could still lose all your money in this way. We recommend investing in bitcoin with eToro.

A note about cryptoasset regulations

Crypto assets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital.

Cryptocurrencies and other digital financial services are also not covered by existing consumer protection laws.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested when you buy crypto.

Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

This article is for informational purposes only and does not constitute financial investment advice. All contents are based on my understanding of HMRC legislation, which is subject to change.

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Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.