I’ve bought Bitcoin with a few different platforms whilst reviewing them, and despite it’s popularity buying Bitcoin in the UK is not as simple as you think.
But it is easy and safe if you do it right. However, there are some significant risks compared to investing in stocks and shares. So, in this guide, I explain how to buy Bitcoin safely in the UK using FCA-regulated providers who must treat customers fairly.
Here are five ways to reduce risk when buying Bitcoin in the UK.
1. Use a Bitcoin exchange
It is possible to send cryptocurrency to others and pay privately through money transfers, but this is very dangerous as there is no middleman supervising the deal and could lead to you getting ripped off. A cryptocurrency exchange acts as a broker between buyers and sellers and means that you are trading anonymously and all transactions are managed online in a environment which is now regulated by the FCA.
The process of actually buying Bitcoin is based on following these steps:
- Find a crypto exchange that offers Bitcoin like eToro, Coinbase or Revolut.
- Open an account – you will have to prove your identity and answer some suitable questions. It’s important to note that if you want to withdraw money from a Bitcoin exchange, you will have to provide ID documents for AML (anti-money laundering)
- Deposit funds (GBP, USD or Euro) – you can do this using a debit card or a money service like Paypal (most banks and credit cards in the UK have banned transactions to crypto exchanges).
- Choose how much Bitcoin you want to buy. As a single Bitcoin is very expensive, you can buy fractions of a Bitcoin as a decimal transaction.
- Once you have bought your Bitcoin you can decide to keep it on the exchange in the hope of selling it for profit at a later date. Or you can withdraw it to a crypto wallet.
2. Use a Bitcoin Wallet
A Bitcoin wallet or an account with a cryptocurrency exchange. A wallet lets you withdraw your Bitcoin and keep it in digital storage offline. With crypto platforms like eToro you can buy Bitcoin online and then withdraw it to a cryptocurrency wallet.
The advantage of using a Bitcon wallet is that you are in complete control of your Bitcoin, but it’s a bit like keeping your cash under the mattress. Whilst you are not at risk of your broker going bust, if you lose your crypto wallet you also lose all your Bitcoins.
There is an ongoing saga of a man who claims that he through his Bitcoin out, which is now worth an estimated £500m.
however, even institutional funds and professional investors use crypto wallets, Binance reported that Blackrock (one of the world’s biggest Bitcoin investors) quietly moved 100,000 Bitcoin ($BTC) to undisclosed wallets to keep it safe.
3. Understand that buying Bitcoin is not like buying shares
On the surface, investing in Bitcoin is the same as investing in shares. You open an account deposit funds and buy Bitcoin. Bitcoin is an obvious target for investors and traders due to its history of rapid gains and falls in value.
This volatility makes it both very risky and potentially very lucrative as an investment. Unlike investing in shares, though, where stocks are traded on stock exchanges, cryptocurrencies like Bitcoin are traded on a peer-to-peer basis on cryptocurrency exchanges and are recorded in the blockchain.
Bitcoin is a very high-risk investment. Whether or not Bitcoin is a good investment depends on your investment objectives.
4. Avoid getting scammed
If something sounds to good to be true it probably is! Our research has shown that social media platforms are rife with scammers, who promise high returns for investing in cryptocurrency.
These usually come in the form of video’s promising copy trading or quick profits. These are all fake; the FCA has even recently stated fining “finfluencers” for promoting fake investment schemes related to crypto.
5. Manage your risk
Whilst there is no denying that the price of Bitcoin has skyrocketed over the last decade, it’s important to follow one of the most basic rules of investing, diversification. Basically, don’t put all your eggs in one basket.
Bitcoin is a very volatile and risky investment, and cryptocurrency as an asset class could still crumble without warning.
For instance, over the last month, the price of Bitcoin has gone down by nearly 4%.
So when buying Bitcoin treat it as a high risk investment and allocate a percentage of your portfolio accordingly. By this I mean that only a small percentage of your investments should be in high risk volatile asset classes like cryptocurrency.
The rest should be sensibly allocated to your pension, ISA or GIA in what are considered safer investments like the stock market and bonds.
Where is it safe to buy Bitcoin in the UK?
it’s important to understand that buying Bitcoin safely does not refer to keeping your profits safe, as there is no way to proftect yourself from the price of Bitcoin going down and lose money that way. But it is possible to reduce the risk of not being scammed and avoiding unscrupulous unregulated platforms.
The below providers are deemed safe by the Financial Conduct Authority as they are FCA Registered Cryptoasset Firms:
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
You can contact Richard at richard@goodmoneyguide.com
