A digital-only form of money that uses cryptography to protect it came out more than ten years ago when Bitcoin came out.
They are divisive and not for everyone. The Financial Conduct Authority (FCA), for example, warns customers about the crypto business on a regular basis, alerting would-be investors that crypto assets are unregulated, high-risk entities that offer little in the way of financial protection if things go wrong.
People should be prepared to lose all of their money if they decide to invest in cryptocurrencies, the regulator cautions.
Despite the warnings, almost two million adults in the UK own crypto assets, with an average holding of a few hundred pounds per person.
It can be difficult to figure out how to buy Bitcoin, Ethereum, or any of the thousands of other cryptocurrencies that currently exist if you’re new to the world of crypto and are aware of the possibility of loss.
To get started, follow these steps.
1. Choose a cryptocurrency exchange or a broker.
If you wish to buy cryptocurrencies, you must first choose between a broker and a crypto exchange, similar to how you would visit a bureau de change to convert pounds sterling to euros.
Both options allow you to acquire cryptocurrency, but there are some distinctions between them:
What is the definition of a cryptocurrency exchange?
This is an online marketplace where buyers and sellers gather to trade cryptocurrencies in exchange for fees paid to the exchange.
They often have more complicated interfaces that allow for a wide range of trades, as well as tools like detailed performance charts.
Well-known cryptocurrency exchanges include Coinbase, Binance, and eToro.
The basic trading interfaces offered by some cryptocurrency exchanges can be a little overwhelming for novices if you don’t have any experience buying equities and shares. However, the same companies may also offer more user-friendly, simple-to-purchase solutions.
Convenience, on the other hand, usually comes at a price. If you choose a beginner-friendly version, you should anticipate paying more for crypto than if you used an exchange’s conventional trading facility.
If you’re a new crypto investor from the United Kingdom, double-check that your preferred exchange or brokerage supports “fiat” currency transfers and purchases in sterling (a fiat currency is a government-issued currency, such as sterling or dollars, that is not backed by a physical commodity, such as gold, but is instead backed by the government in question).
It’s important to double-check because certain exchanges will only let you buy cryptocurrency with another coin. This means you’ll have to go to a different exchange to buy the tokens that your favorite exchange allows before you can start trading crypto on it.
What is the definition of a cryptocurrency broker?
Cryptocurrency brokers, an alternative to exchanges, take some of the hassles out of buying cryptocurrency by providing simple interfaces that engage with an exchange on your behalf.
Some brokers charge more fees than exchanges, while others claim to be “free,” earning money in other ways, such as selling information about what you and other traders are buying and selling to large brokerages.
While it’s undeniably convenient, it’s critical to understand how your crypto broker and you will work together. For example, you can face restrictions if you try to move your cryptocurrency holdings away from a specific platform. Before you sign up with a broker, read the terms and conditions regarding transfers and what this means for your crypto holdings.
To newbies, the question of where their assets are housed may not seem important. Advanced cryptocurrency investors, on the other hand, prefer to store their money in so-called “cryptocurrency wallets” for further security. A crypto wallet is a program that lets users store and retrieve digital assets.
For even more safety, some people choose to use hardware crypto wallets that aren’t connected to the internet.
2. Create an account and validate it.
You can open an account with a cryptocurrency broker or exchange after you’ve decided on one.
Depending on the platform you choose and the quantity of cryptocurrency you want to buy, you may need to verify your identity with official documents like a passport or driver’s license. Is there a chance you’ll be asked to upload a selfie to your account?
You will be allowed to buy and sell cryptocurrencies only after the verification procedure is completed. If you want to buy cryptocurrency, keep an extra day or two in your budget in case the verification process doesn’t work out.
3. Make a cash deposit
As soon as you have enough money in your bitcoin exchange or brokerage account to buy cryptocurrency, you can do so.
You can fund your cryptocurrency account by linking it to your bank account or by paying with a debit or credit card. It’s vital to keep in mind that choosing the latter may result in significant credit card fees.
People who use a credit card to buy bitcoin usually pay interest on the money right away, even if they pay off the debt in full on the next payment date.
When you take out a cash advance with a credit card, for example, you may be required to pay the provider up to 5% of the transaction value. If your exchange or broker charges you a fee to make the deal happen, this is on top of that.
You may have to wait a few days before the money you’ve placed is accessible to buy bitcoin, depending on the financing method you’re using and the exchange or broker you’ve chosen.
4. Purchase a cryptocurrency
You’ll be able to place your first bitcoin order once the funds are in your brokerage or exchange account.
Thousands of cryptocurrencies are available, including well-known ones such as Bitcoin and Ethereum. You can learn more about some of the most valuable cryptocurrencies by visiting this page.
Once you’ve made your decision, enter the ticker symbol for the cryptocurrency you want to buy into your account. This is the three-or four-letter shorthand used to identify a certain cryptocurrency—for example, BTC for Bitcoin and ETH for Ethereum—as well as the number of coins you’d want to buy.
Customers can acquire fractional shares of specific cryptocurrencies on most exchanges and brokers. When you consider that a currency like Bitcoin is presently trading at around £31,000 per coin (March 2022), this is a viable possibility. It’s been more than £50,000 in the past.
Similar to how you might put your cash in a safe, it’s critical to have a secure storage location for your cryptocurrency.
If you buy cryptocurrencies through a broker, keep in mind that you may have little or no control over how your cryptocurrency is stored.
With bitcoin exchanges, the situation is different. Exchanges, unlike other areas of the UK financial industry, are not covered by the Financial Services Compensation Scheme, a financial lifeboat scheme.
You could lose your investment if you forget or misplace the codes to access your account, which is why it’s critical to keep them in a secure location. These are the alternatives you have when buying cryptocurrency on an exchange:
Leave your cryptocurrency on the platform. When you purchase bitcoin, it is usually stored in a crypto wallet that is linked to the exchange. If you don’t like your exchange’s wallet provider or want to relocate your money to a more safe location, you can move it from the exchange to a separate “hot” or “cold” wallet. You may be charged a fee depending on the currency rate and the size of your transfer.
It’s a hot wallet. This is an online crypto receptacle that operates on internet-enabled devices like smartphones and tablets. Hot wallets are convenient, but because they are always connected to the internet, they are more vulnerable to theft.
I have a cold wallet. Cold wallets, on the other hand, are not connected to the internet, making them a more secure way to store cryptocurrency. External devices, such as USB drives or hard drives, are examples. It’s worth remembering that if you lose the key code to a cold wallet or the device fails in any way, you will never be able to recover your cryptocurrency.
Other ways to invest in cryptocurrencies
ETFs (exchange-traded funds) are very popular investment tools because they allow people to buy a lot of different things (like a lot of different stocks or a lot of different cryptocurrencies) all at once.
In the United States, Canada, and Brazil, crypto-based ETFs made their debut last year. But in the United Kingdom, they haven’t been approved.
Consider buying shares in companies that use or own cryptocurrencies and the blockchain that drives them to get a chance to get into the crypto market through real businesses that are subject to regulation.
To buy shares in publicly traded companies, such as US corporations, you’ll need an online investment account.
- Nvidia – A company that makes and sells graphics processing units, which are used in bitcoin mining systems.
- PayPal – PayPal says that customers can now buy and sell specific cryptocurrencies with their PayPal accounts.
- Square – According to the payment services provider for small businesses, Bitcoin assets accounted for around 5% of the cash on the company’s balance sheet last year. The Cash App from Square also allows users to buy, sell, and store cryptocurrencies.
In the same way that you need to figure out your investment goals and figure out how much money you have available to invest, you need to do the same thing before investing in companies that have ties to cryptocurrency.
Cryptocurrencies can be very volatile, so you should be careful when investing in them as a speculative investment.