How to Buy Bitcoin (BTC)

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itcoin – the largest and most well-known cryptocurrency – was born out of growing distrust of government and institutions after the 2008 global financial crisis.

By using Bitcoin, people can send money directly to someone without using intermediaries such as banks or Paypal.

In recent years, Bitcoin has been a roller coaster ride for investors. It reached a record high of over £54,000 in November 2021 before plunging to around £14,000 earlier this year. Now it is trading around the £19,000 mark, although the number could change like this from day to day.

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It can also be very volatile in the short term, with intraday fluctuations of 20-40% over the past few years, according to data from Cointelegraph.

Each bitcoin is “mined” through the use of high-tech computer hardware to solve complex mathematical problems. However, Satoshi Nakamoto, often cited as the original creator of Bitcoin, capped the total number of Bitcoins at 21 million to preserve their value by limiting supply.

Around 19 million Bitcoins have already been mined, with experts predicting that the remaining two million could be mined by 2140.

Bitcoin remains the most popular global cryptocurrency and is gaining acceptance. El Salvador was the first country to adopt Bitcoin as legal tender in 2021, followed by ProShares launching the first Bitcoin-based exchange-traded fund (ticker: BITO).

Several major US retailers now accept payment in Bitcoin, including Microsoft, Home Depot and Starbucks, although to date few UK retailers have followed suit.

Investment giant Fidelity plans to allow employees in the United States to include Bitcoin in their retirement plans.

However, investing in Bitcoin is inherently risky. As with traditional so-called “fiat” currencies (such as the British pound), bitcoin has no intrinsic value other than the trust of other parties to accept it as a form of supply.

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Crypto-assets are highly volatile and unregulated in the UK. No consumer protection. Income tax may apply.

The price of bitcoin is therefore a function of supply and demand and, as such, could fall if it is no longer accepted as a means of payment. As a result, Elon Musk’s announcement that Tesla would stop accepting bitcoin as a form of payment for its cars led to a 17% drop in the price of bitcoin in May 2021.

Here we look at the process of buying Bitcoin, as well as other ways to invest in cryptocurrency.

Please note that investing in cryptocurrencies is a high risk proposition and you may lose some or all of your money. There is no guarantee that you will make a profit.

The Financial Conduct Authority (FCA), the UK’s financial regulator, regularly issues warnings about the risks associated with the crypto sector.

Crypto-assets are unregulated. The FCA says those who buy cryptocurrency are “highly unlikely to have protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them.”

1. Find a Fellowship or Courtier

The first step is to choose a broker or a crypto exchange.

A cryptocurrency broker provides an online mechanism to facilitate your contact with a cryptocurrency exchange.

A cryptocurrency exchange is an online platform that brings buyers and sellers together to trade cryptocurrencies.

With some exchanges, you can buy crypto using normal currency, such as British Pounds. Others require you to use one form of crypto to purchase another. Here you will need to find a second exchange to buy coins that your chosen exchange is using, before you can start trading.

With courtiers, follow the rules regarding keeping your cryptocurrencies away from a given platform. Some courtiers prevent clients from transferring crypto holdings out of their account. This could become a problem if you decide to house your cryptocurrencies in a crypto wallet.

The FCA a UK list ofregistered crypto asset companies.

2. Choose a payment option

After choosing a stock exchange or broker, you will need to add funds to your account before you can start trading. Depending on the provider you have chosen, you can add money from your checking account, via an electronic transfer, a payment service or from a cryptocurrency wallet.

Remember that going into debt to buy highly volatile assets is not recommended.

3. Place an order

Once you have transferred money to your account, you can buy Bitcoins. You need to enter the stock symbol for the currency (BTC), select the appropriate button from your trading menu and enter the amount you want to invest.

4. Choose a safe storage option

It is important to note that cryptocurrency exchanges are not covered by regulatory protection such as the Financial Services Compensation Scheme United Kingdom. Despite investments in cybersecurity measures, suppliers remain exposed to the risk of theft or hacking.

You risk losing your Bitcoin investment if you misplace or forget your account access codes. It is also essential to ensure that your Bitcoins are kept in a secure storage location.

You may have little choice in the storage mechanism if you buy Bitcoins through a broker. However, if you’re using a crypto exchange and trading top-tier devices, you’ll likely have access to an in-app wallet (or preferred partner) where you can keep your Bitcoins safe.

If you prefer not to use the provider your exchange is associated with, you can transfer your Bitcoins from one exchange to a separate “hot” or “cold” wallet:

  • Hot Wallets: Online-stored crypto wallets that work on internet-connected devices, such as tablets, computers, and phones. They are convenient but may pose a greater risk of theft due to their internet connection.
  • Cold Wallets: External devices such as USB sticks or hard drives that are not connected to the internet and therefore potentially more secure. However, you lose access to your Bitcoins if you lose or misplace the codes.

Transferring Bitcoins to a hot or cold wallet may incur fees, depending on the exchange.

Alternative ways to buy cryptocurrency

If you don’t prefer to buy Bitcoin through an exchange or broker, there are two indirect ways to gain exposure to Bitcoin assets.

1) Invest in cryptocurrency-connected businesses

One option is to buy shares in companies that use or offer Bitcoins and the blockchain that powers them. These may allow you to gain some exposure to Bitcoins through tangible products or services subject to regulatory oversight.

Here are some indicative examples of companies, although they are not recommendations:

  • Nvidia (NVDA): a technology company that has designed and sells processing units required for mining currencies such as Bitcoin.
  • PayPal (PYPL): The global payments platform has expanded its offering to allow customers to buy and sell select cryptocurrencies, including Bitcoin, with their PayPal and Venmo accounts.
  • Square (SQ): The small business payment service provider that has purchased millions of dollars worth of Bitcoin since October 2020.

You will need aonline investment platform wetrading app buy shares in listed companies. Please note that the usual investment disclaimers apply and there is no guarantee that stock market investments will return any money.

2) Invest in crypto exchange-traded funds

Another option is to invest in funds based on holding cryptocurrencies such as Bitcoins. Exchange-traded funds (ETFs) are “passive” investments that typically track traditional stock market indices such as the FTSE 100 or S&P 500.

Crypto ETFs are relatively new products that are currently only available in certain jurisdictions such as the United States. They are not yet available in the UK.

eToro – a crypto brand trusted by millions

Buy over 70 crypto assets with a flat and transparent 1% fee on a highly secure platform.

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Crypto-assets are highly volatile and unregulated in the UK. No consumer protection. Income tax may apply.

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