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How to invest in Cryptocurrency UK?

One can establish an account with a reputable FCA-registered crypto exchange such as eToro, Coinbase, or CoinJar to engage in cryptocurrency investment in the UK. Investing in cryptocurrency in the UK proves to be a relatively uncomplicated process, with the primary challenge being the decision-making process of selecting the specific cryptocurrency and platform for invest.

For comprehensive information on various cryptocurrencies like Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Bitcoin Cash (BCH), Ethereum Classic (ETC), and others, one can explore platforms like Coinbase that provide pricing and related details.

Upon registration with a crypto exchange, one must undergo security checks, including providing a mobile phone number and passport, before adding a payment method. This payment method facilitates the transfer of funds from a bank account for cryptocurrency trading. Different currencies correspond to varying amounts of cryptocurrencies, and a simple Google search for terms like “Bitcoin” or “Bitcoin price” can reveal the current price in the local currency.

In the realm of investments, it is advisable to construct a diversified portfolio. Rather than investing in a single cryptocurrency, spreading investments across several can mitigate the risk of total loss if one experiences a significant downturn.

Should the decision be to hold a single cryptocurrency, it can be incorporated into an existing stock portfolio to enhance diversification. However, it is crucial to bear the associated risks, as capital is at stake, and the possibility of losing the entire investment exists.

What is the method for storing cryptocurrency?

Cryptocurrency storage options include both online and offline methods. The prevalent approach for storing cryptocurrency is through online means, utilizing a crypto exchange or wallet. These platforms facilitate the secure storage, transmission, reception, and conversion of crypto, all accessible through your computer, tablet, or smartphone.

Where to Buy Cryptocurrency in the UK?

In the UK, cryptocurrencies can be acquired through various crypto exchanges, such as eToro, Coinbase, and CoinJar.

Below is a compilation of the finest apps, crypto trading platforms, and exchanges suitable for purchasing cryptocurrency in the UK. The last column includes whether a crypto exchange is registered with the UK’s financial regulatory body, the Financial Conduct Authority (FCA).

It’s important to remember that crypto assets are highly volatile and unregulated investment products, lacking UK or EU investor protection. There is a risk of losing the entire invested amount.

Listed below are the top locations for purchasing cryptocurrencies in the UK:

eToro

eToro emerges as a user-friendly haven for both novices and experienced traders. Beginners can leverage educational resources, intuitive desktop mobile apps, and copy-trading tools. These tools enable users to replicate the success of top-performing crypto traders on the eToro platform.

For the advanced trader, eToro provides advanced features, including superior charting and analytics tools, a staking service, social trading capabilities, and real-time market news and insights. Dive into the crypto world confidently, armed with risk management tools such as Stop Loss, Take Profit, and Trailing Stop Loss to fortify your positions and secure profits. It’s important to note that while Stop Loss and Take Profit offer risk management, they are not guaranteed.

eToro

Getting started with eToro is not only hassle-free but also cost-effective. Opening an account is free, accompanied by a complimentary US$100,000 demo account for users to practice trading without risking real money. eToro doesn’t impose a deposit fee, but a 1% trading fee applies to all cryptocurrency positions.

Navigating eToro’s financial landscape involves understanding fees and managing your funds strategically. Withdrawals incur a modest fee of US$5 (£4), with a minimum withdrawal amount of US$30 (£24). It’s worth noting that trading on eToro happens in USD, and if you transact in a different currency, a conversion fee will apply. UK customers can leverage the eToro Money app, facilitating free GBP to USD conversions, thereby minimizing foreign exchange costs. The app is a secure crypto wallet storing digital assets and enables seamless transfers between exchanges or wallets.

Cautionary Notes for Investors

Before you embark on your investment journey, it’s crucial to acknowledge the inherent risks. Cryptocurrency investments are high-risk endeavors, and investors should be prepared to face potential losses. Take a moment to educate yourself about the risks involved in cryptocurrency trading, and consider that 76% of retail investor accounts lose money when trading CFDs with eToro.

Coinbase

Coinbase is more than just an exchange; it’s a holistic platform for buying, selling, and holding cryptocurrencies, NFTs, and DeFi products. Boasting a staggering 240+ cryptocurrencies, including staples like Bitcoin and Ethereum, Coinbase also introduces users to new and rare coins not readily available on other exchanges. The platform updates its listings, sometimes incorporating new cryptocurrencies every few days.

With Coinbase, managing your crypto portfolio becomes a seamless experience. Gain access to a self-custody crypto wallet, consolidating all your crypto assets and NFTs in one secure location. The Coinbase Wallet supports many tokens and dApps, enabling users to use DeFi liquidity pools for crypto supply, borrowing, and asset swapping on decentralized exchanges.

Taking a step beyond traditional exchanges, Coinbase introduces a crypto card powered by an FCA-licensed e-money institution. This innovative card empowers users to spend their crypto as easily as conventional currencies, accepted anywhere Visa cards are welcomed.

Coinbase

Coinbase offers an “earn” feature for those keen on understanding specific cryptocurrencies. Engage in online courses on cryptocurrencies and get rewarded with a small amount of crypto. This educational initiative caters to beginners and seasoned investors looking to expand their knowledge.

While Coinbase offers a plethora of features, it’s essential to navigate the fee landscape. Fees are calculated at the time of order placement and are influenced by payment method, order size, and market conditions. The trade preview screen transparently displays basic trading fees before transaction submission. Advanced traders encounter Maker and Taker fees, ranging from 0.40% to 0.00% and 0.60% to 0.05%, respectively. Notably, Coinbase extends commission-free trading for USDC.

Cautionary Notes for Potential Investors

Before embarking on your crypto journey with Coinbase, it’s crucial to acknowledge the risks involved. Cryptocurrency investments are inherently high-risk, and investors must be prepared for potential losses. Additionally, it’s important to note that the FCA does not regulate crypto assets and does not fall under the protection of the FSCS or the jurisdiction of the Financial Ombudsman Service. Capital gains tax may apply to profits from cryptocurrency sales.

CoinJar

CoinJar stands as a versatile cryptocurrency app and exchange, providing a seamless experience for users in the UK and Australia. With CoinJar, you can access a diverse range of 50+ cryptocurrencies, including famous names like Bitcoin, Ethereum, XRP, USD Coin, Dogecoin, and Shiba Inu Coin. The platform caters to the needs of crypto enthusiasts looking to trade or invest in various digital assets.

One distinctive feature of CoinJar is its integrated crypto card. This card enables users to purchase online and in-store, anywhere Mastercard is accepted. Activating the CoinJar card is free, and no monthly fees are associated with its usage. When using the card, your crypto is automatically converted to fiat currency at CoinJar’s best rates during the transaction. Whether you prefer a virtual or physical card, CoinJar has you covered. Additionally, Android users can enjoy seamless spending through Google Pay integration.

CoinJar

CoinJar introduces a groundbreaking feature called Crypto Bundles, akin to crypto index funds or ETFs. These themed baskets of cryptocurrencies provide users a convenient way to diversify their investments. For instance, the CoinJar Universe bundle encompasses the entire range of cryptocurrencies on the platform. Investing in a Crypto Bundle means investing in multiple cryptocurrencies with a single click. Bundles can be proportional or cap-allocated, offering flexibility based on market cap performance.

Custom Solutions for Every Trader

CoinJar caters to a broad audience and is equally suitable for beginners and advanced traders. The user-friendly app and ready-made crypto portfolios are valuable tools for those new to crypto trading. On the other hand, professional traders can leverage CoinJar’s institutional-grade solutions, such as the CoinJar OTC, featuring razor-thin spreads and globally sourced liquidity.

Getting started with CoinJar is accessible to all, with a minimum deposit requirement of just £10. Deposits are made in GBP, eliminating the need for FX fees. The platform charges a reasonable trading fee of 1% on both the CoinJar mobile app and website. For those using the CoinJar Exchange, Taker orders incur a 0.00% fee, while Maker orders range from 0.10% to 0.04%, with the percentage decreasing for larger orders.

Cautionary Notes for Potential Investors

Before venturing into the world of cryptocurrency investment, it’s crucial to acknowledge the inherent risks. Cryptocurrency investments are high-risk endeavors, and investors should be prepared for potential losses. Furthermore, it’s essential to note that cryptoassets are not regulated by the FCA, lacking protection under the FSCS or the Financial Ombudsman Service’s jurisdiction. Capital gains tax may apply to profits from cryptocurrency sales.

Uphold

Uphold stands out with its impressive collection of over 250 cryptocurrencies. It provides diverse options, from major players like Bitcoin and Ethereum to emerging tokens like ApeCoin and PancakeSwap. Users can seamlessly buy and sell these digital assets, including altcoins and national currencies like GBP, EUR, and USD.

One notable advantage of Uphold is its competitive forex rates. Users can enjoy cost-effective transactions when buying and selling national currencies, making it an appealing choice for those seeking cheap forex solutions. Whether dealing with majors or exploring emerging tokens, Uphold ensures you get the best rates.

Uphold introduces a free virtual crypto card that allows users to spend their digital assets anywhere Mastercard is accepted. Not only does this card offer convenience, but it also rewards users with up to 1% cashback on card transactions paid in GBP. With no transaction fees for local or international spending, the Uphold crypto card is a versatile tool that can be easily linked to Apple Pay or Google Pay.

Uphold

Uphold goes beyond simple trading; it offers additional avenues for users to earn. As an Uphold customer, you can earn staking rewards with an attractive Annual Percentage Yield (APY) of up to 13%. The staking rates are variable and subject to change at Uphold’s discretion. Additionally, Uphold provides crypto wallets for seven cryptocurrencies and networks, including Bitcoin, Ethereum, and XRP.

Advanced Trading Features for Every User

Uphold empowers users with advanced trading features. AutoPilot allows you to schedule regular transactions, enabling you to set up recurring buy or sell orders and mitigate the impact of price volatility. The limit order feature is another valuable tool, allowing users to buy or sell a cryptocurrency at a specified price. With Uphold, you can place up to 50 limit orders using a single pool of capital.

While exploring Uphold’s offerings, knowing the associated fees is essential. The key components to consider are trading fees, FX fees, and market spreads. Uphold charges a market spread ranging from 0.9% to 1.2% on BTC and ETH in the UK, US, and Europe. It’s crucial to note that spreads may vary for low-liquidity cryptos and tokens. Withdrawal fees are $3.99 for bank transfers and $2.99 for crypto transfers.

Cautionary Notes for Potential Investors

Before embarking on your crypto journey with Uphold, it’s crucial to acknowledge the inherent risks. Cryptocurrency investments come with uncertainties, and investors should be prepared for potential losses. Uphold reminds users only to invest what they can afford to lose. Additionally, it’s important to note that the FCA does not regulate crypto assets and does not fall under the protection of the FSCS or the jurisdiction of the Financial Ombudsman Service. Capital gains tax may apply to profits from cryptocurrency sales.

Kraken

Kraken stands out with its vast selection of over 200 cryptocurrencies, ranging from the well-known Bitcoin and Ethereum to Tether, XRP, USD Coin, and Litecoin. Whether you’re a novice or a seasoned trader, Kraken provides a robust platform to trade and invest in various digital assets.

Kraken caters to a broad audience by offering user-friendly mobile apps, educational materials, and 24/7 customer support. Beginners can navigate the platform seamlessly, gaining insights and assistance. For advanced traders, Kraken Pro opens the door to spot, margin, futures trading, and staking within a powerful interface boasting low spreads and deep liquidity across markets.

Kraken

Kraken enables users to earn staking rewards by putting their cryptocurrencies to work. Customers can enjoy staking rewards of up to 24% annually, subject to changes and compliance with Kraken’s terms and conditions. Kraken regularly publishes proof of reserves audits to instill confidence, allowing customers to verify the legitimacy of their held balances.

Advanced traders on Kraken benefit from a suite of risk management tools. From basic Limit and Market orders to more sophisticated Advanced (Stop Loss and Take Profit) Orders, these tools empower traders to manage positions, safeguard investments, and secure profits in the dynamic cryptocurrency market.

Kraken’s Fee Structure

While Kraken offers a user-friendly experience, navigating the fee landscape is essential. Opening an account with Kraken is free, but the first trade must be worth at least US$10 (£8). Trading fees vary based on factors such as order type and size; for mobile app users employing basic features, a Maker fee ranging from 0.20% to 0.00% and a Taker fee ranging from 0.26% to 0.001% apply. Larger orders entail smaller fees on a percentage basis.

In addition to trading fees, users should be aware of potential withdrawal, FX, and instant buy fees, depending on their chosen assets and trading preferences. It’s crucial to factor in these costs when planning your trading strategy on Kraken.

Cautious Considerations for Potential Investors

Before delving into the world of cryptocurrency investment with Kraken, it’s imperative to recognize the inherent risks. Cryptocurrency investments are high-risk endeavors, and investors should only invest what they can afford to lose. Kraken reminds users to take the time to understand the risks involved in crypto trading.

What Is Cryptocurrency?

Cryptocurrency, a form of digital currency crafted for online transactions, facilitates the transfer of value between individuals or entities akin to traditional currencies. Its functionalities mirror conventional money in bank accounts or physical cash, enabling activities such as purchasing goods and receiving compensation for services rendered.

Diverging from traditional currencies, cryptocurrencies operate without government or central bank oversight, allowing users to engage in transactions independently, without reliance on intermediaries like banks or payment processors.

What Is Cryptocurrency

Exchanges provide a platform for buying, selling, investing, and trading cryptocurrencies, akin to traditional stock exchanges handling various assets. However, the value of crypto is subject to market dynamics, with fluctuations influenced by supply and demand, potentially leading to gains or losses for investors.

The vast array of cryptocurrencies includes names like Bitcoin, Ethereum, Dogecoin, XRP, Solana, and Cardano. As the pioneering cryptocurrency, Bitcoin was introduced in 2008 and remains the most widely recognized and used digital currency.

The term “crypto” in cryptocurrency is derived from the Greek word “Kryptos,” meaning “hidden.” Cryptographic methods safeguard cryptocurrency transactions, ensuring privacy and security for the parties involved. These transactions undergo verification through a blockchain, a decentralized ledger distributed across the entire network of a cryptocurrency, distinguishing it from a centralized bank ledger. The blockchain operates without control from any individual, company, bank, or authority, allowing open participation for anyone interested.

How Does Cryptocurrency Work?

Cryptocurrency facilitates secure online value transfers, money transactions, and interest accrual without relying on intermediaries like banks or payment processors. Imagine the convenience of sending money globally without concerns about foreign exchange rates, transfer limitations, exorbitant fees, or governmental regulations—all made possible by cryptocurrency.

Employing decentralized technology, cryptocurrency enables direct peer-to-peer transactions, bypassing the traditional banking system and government-regulated bodies we are accustomed to.

Rather than relying on government oversight, the safety and security of cryptocurrencies are upheld by a blockchain, a comprehensive database documenting all transactions associated with a specific cryptocurrency.

Cryptocurrency units are created through a process known as crypto mining, wherein computers solve intricate mathematical problems in exchange for crypto coins. The initial computer to successfully solve each mathematical challenge receives a cryptocurrency reward.

Obtaining cryptocurrency involves either mining or purchasing it from an existing owner. Cryptocurrency buying or selling is a trade and can be executed through crypto exchanges. The prevalent method for acquiring crypto today is purchasing it on platforms like eToro or Coinbase, using funds from your bank account, or exchanging existing crypto for another.

What Is Cryptocurrency Mining?

Cryptocurrency mining, commonly known as crypto mining, involves solving complex mathematical equations to earn cryptocurrency. These equations validate a block of transactions, and upon successful validation, the block is appended to the blockchain.

The initial computer to successfully solve the complex equation or algorithm receives a reward in the form of cryptocurrency, creating an incentive for cryptocurrency holders or those aspiring to own cryptocurrency to employ their computers in solving these mathematical challenges.

Upon validation of a block of transactions, it is seamlessly incorporated into the blockchain, initiating a cyclical process where the crypto-mining process begins anew.

What Is Cryptocurrency Mining

While open to anyone with a computer and internet connection, it’s essential to note that mining is only sometimes a profitable endeavor. Competitive mining often requires substantial investments in expensive computing machines. The associated costs of these computers and local electricity rates may diminish the profitability of crypto mining, given its significant demand for computing power. Consequently, most mining activities today are undertaken by specialized companies or groups pooling their computing resources.

Also Read: Can you mine Crypto on a Virtual PC?

Understanding Cryptocurrency Taxes in the UK

Let’s delve into the key aspects you must be aware of regarding taxes associated with receiving or selling cryptocurrencies.

Tax Implications When Receiving Cryptoassets

The tax implications of receiving crypto assets hinge on specific transaction circumstances. Generally, if you receive crypto assets as income, you may be required to pay both Income Tax and National Insurance contributions.

When you acquire cryptocurrencies through purchase, no tax is incurred. However, if you obtain them through mining and aren’t engaged in trading, completing a Self-Assessment tax return may be necessary, depending on the asset value or other untaxed income.

If your employer compensates you with readily convertible crypto assets, they must handle Income Tax and National Insurance through PAYE. For assets that aren’t easily exchangeable, clarification on Income Tax should be sought from your employer, and if needed, a Self-Assessment tax return should be completed.

Maintaining comprehensive records of all received crypto assets, including type, date, amount, total holdings, value in pounds, bank statements, and disposal date, is crucial. If uncertainties persist, seeking guidance from a professional tax adviser is recommended.

Tax Implications When Selling Cryptoassets

The tax implications of selling crypto assets are contingent on specific transaction circumstances. Generally, Capital Gains Tax is applicable when gains from selling certain assets surpass the tax-free allowance.

In the current tax year, the Capital Gains tax-free allowance stands at £6,000 (£3,000 for trusts). This implies that you won’t be taxed on the first £6,000 profit from selling crypto assets unless your allowance has been exhausted elsewhere, such as on stock and share sales profits.

Capital Gains Tax may be applicable when selling crypto assets, exchanging them, using them for payments, or gifting them (excluding gifts to spouses or civil partners). Donating crypto assets to charity may trigger Capital Gains Tax, but assets already subjected to Income Tax do not incur additional Capital Gains unless gains are realized afterward.

Accurate record-keeping for each transaction is essential, covering disposal date, number of crypto assets disposed of, remaining assets, value in pounds, bank statements, wallet addresses, and pooled costs pre and post-disposal.

Are you uncertain about Capital Gains Tax on your crypto asset sales? Consulting a professional tax adviser is prudent. While HMRC’s guidance clarifies obligations, complex cases may necessitate expert advice to navigate the nuanced world of cryptocurrency taxation. Understanding and complying with tax regulations ensures a smoother journey in digital assets.

Risks of Investing in Cryptocurrency

Cryptocurrency scams are becoming increasingly prevalent, as reported by the Financial Conduct Authority (FCA). The FCA notes that fraudsters in the crypto space often exploit social media, leveraging images of celebrities or well-known figures to endorse cryptocurrency investments. These deceptive advertisements lead unsuspecting consumers to sophisticated websites, where they are coerced into investing using cryptocurrencies or traditional currencies. If you suspect falling victim to a scam, utilize the FCA’s reporting form to disclose pertinent details about the fraudulent firm or scheme.
The largest cryptocurrency hack to date, before recent events, transpired in 2018, amounting to US$532 million. However, on August 10, 2021, the Poly Network suffered a breach, resulting in the perpetrator’s pilfering of over US$610 million. This incident now stands as the most substantial cryptocurrency hack on record.
Another peril is cryptojacking, a malicious practice where malware is employed to mine Bitcoin on an unsuspecting individual’s device, with the malefactor reaping the financial gains. The frequency of reported cryptojacking incidents varies annually and within a given year. The Cyber Threat Alliance (CTA) reports a staggering 459% surge in cryptojacking rates from 2017 to 2018. In contrast, Kaspersky Security found a decline in cryptojacking attempts from 13 million to just under 9 million between 2019 and 2020.
Lastly, the inherent volatility of cryptocurrency values poses an evident risk. In a single day in May 2021, the price of Bitcoin plummeted by 30%. This volatility is attributed, in part, to the ever-changing demand for cryptocurrency. A volatility index is employed to quantify this volatility to compare different cryptocurrencies. A practical approach to mitigating this volatility is opting for stablecoins, pegged 1:1 to external factors such as fiat currencies or commodities. Stablecoins, like the USD Coin (USDC), maintain a stable value, making their fluctuations more predictable than other cryptocurrencies.

Frequently Asked Questions about how to invest in Cryptocurrency UK

Q1: Where can I buy cryptocurrency for beginners?

A: If you’re new to cryptocurrency, consider choosing a crypto exchange with a user-friendly interface for trading and educational content. Well-known exchanges like Coinbase, Gemini, and eToro are popular choices. Remember that while these platforms may be user-friendly, they may only sometimes have the lowest fees. Consider your priorities before making a decision.

Q2: How do beginners buy bitcoins?

A: Buying bitcoins as a beginner involves using a crypto exchange and following the five steps outlined above. If you need assistance choosing an exchange, refer to our guide on the best crypto exchanges for helpful insights.

Q3: Can I directly buy crypto?

A: Many cryptocurrencies have official websites where you can purchase them directly. For instance, Bitcoin.org allows visitors to buy Bitcoin instantly from the site. However, in most cases, the provider might need to provide a crypto wallet for storing your public and private keys. On the other hand, crypto exchanges usually offer free wallets and trading facilities.

Q4: How much does it cost to buy a cryptocurrency?

A: The cost of buying a cryptocurrency varies, and you can spend as much or as little as you prefer. Some crypto exchanges may set a minimum deposit amount before allowing you to start trading. While buying a single token for a fraction of a penny is possible, you might need to deposit a minimum amount, like £10, to fund your account.

Q5: How much crypto should I buy as a beginner?

A: Cryptocurrency is highly volatile and unpredictable. The Financial Conduct Authority (FCA) emphasizes the risk of potential loss in cryptocurrency investments. Experts may suggest investing a percentage of your liquid assets. But the key is only to support what you can afford to lose. Understand that the value of your investment may decrease as much as, if not more than, it could increase. Always be prepared for the inherent risks associated with crypto investments.

Also Read: The Best Crypto Wallets in the UK for 2024

Dr. of Crypto
Dr. of Crypto//cryptous.co.uk
Hello, I am a doctor of crypto, and I bring over five years of experience in cryptocurrency. My expertise spans various aspects of the crypto space, including blockchain technology, digital currencies, and the ever-evolving trends in this exciting field. Through my articles and insights, I aim to provide valuable information, analysis, and updates that will help you navigate and make informed decisions in the dynamic world of cryptocurrency.
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