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How to Invest in Bitcoin in the UK

How to Invest in Bitcoin in the UK

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Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take two mins to learn more.

Investing in Bitcoin is easy and can be done in a few simple steps:

1. Find a reputable crypto exchange that has the features you want
2. Add money to your account through your preferred method
3. Buy your bitcoin and store it in a digital wallet
4. Manage your investment and track the price of Bitcoin

Bitcoin is by far and away the most renowned cryptocurrency in the world. Since its inception in 2009, it has become increasingly attractive as an investment opportunity. It has the promise of substantial returns and those in the UK can easily invest in the coin.

Before investing in Bitcoin, it’s important to know how it can be done, what the best platforms are and what the risks are. Here we'll give you all the information you need while also answering some key frequently asked questions. Read on to find out more.

An Overview of Investing in Bitcoin

Bitcoin was launched in 2009 and since then, it has become synonymous with cryptocurrency. For many casual observers, it’s the only cryptocurrency they can name. That in itself can give Bitcoin a huge amount of appeal and has led to a market capitalisation of around £268 billion.

Investors love Bitcoin for a wide range of reasons but mainly for its high returns and diversification benefits. The currency is famous for its incredible appreciation over time, which was particularly lucrative to those who bought into the coin early on. Since then, investors have hoped for their own slice of fortune.

Another reason why Bitcoin has become increasingly attractive to investors is that cryptocurrencies have started to gain wider acceptance as a genuine currency and investment option. Their decentralised ledger drew scepticism at first but is now appreciated for its transparency and security.

That decentralised nature means that the coin can exist without the use of central banks and without input from any government. This allows it to sit outside any of the pressures that can come from authorities, while also having more privacy and reduced transaction costs.

Furthermore, the scarcity of Bitcoin also adds to its appeal when it comes to bitcoins as an investment. The coins have a cap of 21 million, which can't be altered due to the coin's source code. Due to this, investors can have more security knowing that there is only a finite amount of the coin.

While Bitcoin investing UK is attractive, it isn't without its risks. The crypto market is highly volatile, with rapidly fluctuating prices. You need to have the courage and patience to understand that the value of your investment can swing quite wildly.

For those who want to invest in Bitcoin, the lure of potential rapid price rises can be very appealing. However, before investing in Bitcoin UK, it’s wise to look at the history of its price changes so you can be more informed about whether or not you should invest in Bitcoin UK.

What Is the Difference Between Buying and Investing in Bitcoin?

The terms 'buying' and 'investing' in Bitcoin are often used interchangeably, but they represent different approaches to acquiring and holding the cryptocurrency.

Let's explore the differences between buying and investing in Bitcoin:

Buying Bitcoin

'Buying' Bitcoin refers to the act of purchasing the cryptocurrency with the intention of using it for various purposes, such as transactions, online purchases or sending funds to others.

Essentially, it is acquiring Bitcoin as a form of digital currency to be used for day-to-day transactions.

Investing in Bitcoin

'Investing' in Bitcoin involves acquiring the cryptocurrency with the primary objective of holding it as a long-term asset for potential capital appreciation. Investors view Bitcoin as a store of value and a speculative investment that may provide returns over time as its value increases.

Key Differences

  • Purpose – The primary purpose of buying Bitcoin is to use it as a means of exchange for goods and services, similar to traditional currencies. On the other hand, investing in Bitcoin is a strategic decision aimed at holding the asset for potential long-term returns, much like investing in other assets like stocks or real estate.

  • Time Horizon – Buying Bitcoin for transactional purposes typically involves short-term use, as the cryptocurrency is spent relatively quickly in various transactions. Investing in Bitcoin, however, has a longer time horizon, with investors typically looking to hold the asset for an extended period to benefit from potential price appreciation.

  • Risk Profile – The risk associated with buying Bitcoin for transactions is limited to the transaction itself. If the value of Bitcoin fluctuates between the time of purchase and transaction, it may affect the cost of the purchase slightly. On the other hand, investing in Bitcoin involves exposure to higher market risks, as the cryptocurrency's price can be volatile and subject to significant fluctuations.

  • Investment Strategy – Investing in Bitcoin requires a more deliberate investment strategy, including considerations of risk tolerance, portfolio diversification, and potential allocation to other asset classes. Buying Bitcoin for transactions does not require a specific investment strategy, as it serves more as a medium of exchange.

Best Bitcoin Platforms

Now you know the steps you should be taking when it comes to how to invest in Bitcoin UK, what exchange should you pick to buy your first bitcoin?

Let’s take a look at five of the best options out there.

1. eToro

Pros

  • User-friendly
  • Highly regulated
  • Great for beginners

Cons

  • High fees
  • Slow withdrawal process

Fees: 0.5% fee on GBP deposits, 1% fee for buying Bitcoin plus market spread

eToro is a user-friendly platform that allows easy buying and selling of Bitcoin. It offers a social trading feature, allowing users to follow and copy successful traders. The platform also provides a wide range of other cryptocurrencies to trade.

However, eToro charges relatively higher fees compared to other platforms. Additionally, the withdrawal process can sometimes be slower than expected.

Visit eToro

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take two mins to learn more.

2. Uphold

Pros

  • Easy account setup, ideal for newcomers
  • Intuitive user interface and app
  • Abundance of advanced trading features
  • Ability to trade across various asset categories (cryptocurrency, fiat currencies, metals)
  • Regular addition of new, low-liquidity altcoins
  • Transparent and secure reserve system

Cons

  • Limited charting capabilities

Best for: Diverse asset support
Type: App & web

Uphold stands out as a top choice for purchasing Bitcoin and other cryptocurrencies in the UK.

With over 10 million users spanning 150 countries, Uphold makes buying, trading, and storing assets, including Bitcoin and 250+ other cryptocurrencies, simple and secure. Uphold prioritizes safety and transparency, operating on a 100% reserve model to hold user funds securely.

Additionally, the platform regularly updates real-time asset and liability data, accessible to the public every 30 seconds, ensuring transparency.

Visit Uphold

How to Invest in Bitcoin in the UK
How to Invest in Bitcoin in the UK

3. CoinJar

Pros

  • Low fees
  • Easy to use
  • Instant card payments

Cons

  • Limited services available
  • Longer withdrawal wait time

Fees: 0% to 2% deposit fees, 0.020% to 0.10% trading fees

CoinJar is a UK-based platform that offers a simple and intuitive interface, making it easy for beginners to buy and sell Bitcoin.

It provides a mobile app for convenient trading and offers additional features like a cryptocurrency debit card.

However, the range of supported cryptocurrencies may also be more limited. Also, some users can be frustrated by the longer withdrawal times.

Visit CoinJar

How Has the Price of Bitcoin Changed Over the Years?

As mentioned, the price of Bitcoin has changed dramatically since its inception.

Before we look at the best way to invest in Bitcoin, it’s important to know what you're letting yourself in for. This will never be an investment for the faint-hearted.

Shortly after its inception in 2010, the price of one bitcoin was only a fraction of a penny and very few people had heard of cryptocurrencies. Many of us wish we had known about Bitcoin at the time, but that opportunity is long gone.

Over the next few years, the price of Bitcoin steadily rose, with a significant jump in 2013. At this time, the price of one coin went to over £100. The coin was establishing itself as an alternative to regular currency and more and more people were wondering how to invest in bitcoins.

The price kept rising again, with another huge jump in value happening in 2017. By the end of the year, one bitcoin rose to a value of £15,000. The attention the coin received went to a whole new level and all of a sudden, it felt as though everyone knew about cryptocurrencies. Both experienced investors and complete beginners were drawn toward the coin.

Soon after that, the price of Bitcoin fell and many thought that the coin was on its way down. A year later in December 2018 the value was barely over £2,500. It recovered to around £8,000 by October 2020, and then increased dramatically.

By March 2021, the value had risen to over £40,000, then dropped to around £25,000 in May of the same year. Another boom would soon follow that included Bitcoin’s highest ever value of £48,000 in November 2021.

Since then, there have been many peaks and troughs in the value of the coin. That has led us to the present day when the value sits at a little over £20,000. As of the 10th of June 2023, the price of Bitcoin in the UK is £20,485.02.

The volatility is there for everyone to see. The price can change rapidly and with that comes an obvious risk. There are many who would have invested in Bitcoin during one of its rapid rises only to be stung when the value fell back down. When it comes to Bitcoin investment UK, it’s always wise to understand what you’re entering into before making any decisions.

How to Invest in Bitcoin in the UK

For those wondering how to invest in bitcoins, the process is straightforward. Below are the steps of how to invest in Bitcoin.

Step 1. Have an Investment Strategy

Before asking yourself how do I invest in Bitcoin UK and committing funds, it's crucial to determine your investment goals and risk tolerance.

Consider your financial objectives, whether you're looking for long-term growth, short-term gains or diversification.

Assess the market trends and do research on Bitcoin's price history and market conditions.

Step 2. Choose an Exchange

The first part of the process for how to invest in Bitcoin UK is choosing an exchange.

This is a place that will let you freely invest in Bitcoin and there are many user-friendly options out there such as eToro.

If you’re wondering where to invest in Bitcoin, we look at the best exchanges a little further down this page.

Step 3. Set Up a Wallet

After purchasing bitcoins, you have two options for storing your investment.

You can leave it within the crypto exchange's wallet or transfer it to a digital crypto wallet. It's generally recommended to use a digital wallet for added security.

Digital wallets come in different forms such as physical devices or software wallets, such as applications on your device.

They provide you with control over your private keys, which are essential for accessing and managing your Bitcoin investment securely.

Step 4. Store Your Investment

When it comes to cryptocurrencies, security is paramount. It's essential to follow best practices for wallet and private key security.

If you choose to use a digital wallet, ensure you set a strong password and enable two-factor authentication for added protection.

Consider using a hardware wallet, which keeps your private keys offline. Additionally, back up your wallet's recovery phrase or seed, so you can recover your funds if your device is lost or damaged.

Step 5. Manage Your Investment

Stay informed about the performance of your investment by regularly tracking the price of Bitcoin.

Keep up-to-date with market news and developments that may impact the cryptocurrency market.

Consider adjusting your investment portfolio periodically to align with your investment strategy and changing market conditions.

However, be cautious about making impulsive decisions based on short-term price fluctuations.

Bitcoin's value can be volatile, and it's important to maintain a long-term perspective and be patient where you can. Now you know how to invest in Bitcoin UK, let's look at the best place to do it.

Will I Have to Pay Tax on My Bitcoin Investment in the UK?

Investing in Bitcoin in the UK can have tax implications, as cryptocurrency profits are considered taxable assets. It's important to understand the tax obligations associated with your Bitcoin investment to ensure compliance with HMRC regulations.

With Bitcoin, there can be many different taxable ‘events’, which just means any type of action or transaction that can mean there is money owed. Buying and owning Bitcoin is not seen as a taxable event, but profiting from it can be.

In the UK, you can be liable to pay what's called Capital Gains Tax. This is a tax placed on the profit from any asset. The most obvious example of this is when you sell a second property that isn't your main home for a large profit.

There are a few different ways Capital Gains Tax can be due in relation to Bitcoin. These include selling your tokens, exchanging them for another crypto asset, using them for goods/services or gifting them to someone else.

As stated, it’s important to note that you’re only taxed on the profits. For example, if you buy £10,000 worth of Bitcoin but sell those tokens for £8,000, you’d have no tax to pay as you would have lost money.

If you’re using Bitcoin for goods or services, then it may be subject to income tax. The value of the Bitcoin received should be converted to its equivalent in fiat currency (Pound Sterling) at the time of the transaction for tax purposes.

HMRC has issued guidelines and regulations regarding cryptocurrency taxation. It considers each case individually and looks at the specific facts and circumstances. HMRC treats cryptocurrencies as assets and they are subject to Capital Gains Tax or income tax depending on the nature of the transaction.

The exact amount you pay can vary depending on your income. There are also a range of exemptions and exclusions that can alter your taxable amount. Due to this, it’s always recommended to seek professional advice from a qualified tax advisor or accountant experienced in cryptocurrency taxation.

They can provide guidance tailored to your specific situation, help you calculate and report your tax liabilities correctly and keep you updated on any changes in regulations.

What Are the Main Risks to Consider When Investing in Bitcoin?

When looking at how to invest in Bitcoin UK, it’s vital that you understand the risks associated with it. Here’s everything that you need to consider.

High Volatility

Bitcoin is known for its high volatility, which means its price can experience significant fluctuations within short periods. Various factors can influence Bitcoin's price, including market demand, investor sentiment and regulatory developments. You should be prepared for rapid and unpredictable price changes.

The regulatory landscape surrounding cryptocurrencies, including Bitcoin, is still evolving and subject to change. Governments and regulatory authorities may introduce new regulations or policies that could impact the use, trading or taxation of cryptocurrencies.

It’s important to stay updated on the latest regulations and be aware of the potential legal risks associated with investing in Bitcoin.

Security Risks and Scams

Storing and securing bitcoins comes with risks. Bitcoins can be vulnerable to hacking, theft or loss if you don’t have proper security measures. It's crucial to use reputable cryptocurrency exchanges and secure digital wallets to protect against potential security breaches.

Frequently Asked Questions

When looking at the best way to invest in bitcoins, you can follow these steps. Choose a reputable cryptocurrency exchange and then set up a digital wallet. Once you do so, you can develop an investment strategy and monitor and manage your investment regularly.

When deciding how much to invest in Bitcoin, the amount you should invest depends on your personal financial situation. It’s always wise to invest only what you can afford to lose. While you’re dreaming of profits, you also need to plan for the worst-case scenario.

The decision of whether Bitcoin is worth investing in in the UK depends on individual circumstances. Bitcoin has the potential for high returns, but it also carries volatility and risks.

Determining the right moment to invest in Bitcoin is challenging as the cryptocurrency market is highly volatile. Some investors use market analysis but you'll also need to use your own judgement to know whether the price is likely to trend up or down.

Several popular platforms in the UK for investing in Bitcoin include eToro, Uphold and Gemini.

When considering the best way to invest in bitcoins, it's recommended to research and compare platforms based on factors such as fees, security measures, user experience and available features before making a decision on where to invest in Bitcoin.

Don’t invest in unless you’re prepared to lose all the money you invest.

Investing in Bitcoin carries risks, including price volatility, regulatory changes, security vulnerabilities and scams. While Bitcoin has gained mainstream recognition, it's important to exercise caution, use secure platforms and wallets and stay informed about the latest developments and security practices in the cryptocurrency space.

Investing in Bitcoin can be driven by various reasons, including its potential for high returns, diversification of an investment portfolio, belief in the technology and hedging against inflation.

There is no set minimum amount to invest in Bitcoin. You can invest any amount and even buy a fraction of a bitcoin. However, keep in mind that some platforms may have minimum deposit or trade requirements.

Some cryptocurrency platforms offer demo accounts or simulated trading features, allowing users to practice trading without using real money. This can be a helpful way for beginners to familiarise themselves with the platform and gain experience before investing real funds.

Diversification is generally recommended in investing to spread risk. Consider diversifying your investment across different cryptocurrencies based on your risk tolerance and research.

For beginners, using a user-friendly cryptocurrency exchange or brokerage platform is often the easiest way to invest in Bitcoin. Platforms like eToro offer intuitive interfaces and provide a seamless experience for buying and selling Bitcoin.

Don’t invest in unless you’re prepared to lose all the money you invest.

These are the same factors you should consider before any investment. What are your financial goals? How much can you risk? What market research have you done? What security measures are you going to take? Think through all these questions before deciding to invest.

Final Thoughts

Bitcoin is an exciting investment opportunity for anyone in the UK. Hopefully by now you know the answer to the question of how do I invest in Bitcoin UK. It’s a simple process with the first step being to find an exchange.

Once you do so, then you can decide on how much to invest in Bitcoin and then manage that investment through your digital wallet. Remember, the price of Bitcoin is volatile and it’s important to appreciate the risks before deciding to invest.

WikiJob does not provide tax, investment or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

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

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take two mins to learn more.


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