Bitcoin has seen meteoric growth in recent years. In May 2016, you could buy one Bitcoin for about £400. As of April 2022, a single Bitcoin was worth over £30,160. That’s growth of more than 7,000%.
Some analysts believe the price of Bitcoin could rise even more as cryptocurrency and blockchain technology become a bigger part of people’s daily lives. But buying Bitcoin comes with big risks. Along with impressive gains, Bitcoin has also experienced devastating declines. After almost reaching a value of almost £16,000 in 2017, for example, the value of Bitcoin plummeted to around £2,400 just about a year later.
Bitcoin remains a highly volatile asset. If you want to buy Bitcoin, experts recommend that you invest no more than a small percentage of your net worth in the leading cryptocurrency.
How to buy Bitcoin (BTC) in 4 steps
1. Choose a crypto exchange
To buy Bitcoin (BTC), or any cryptocurrency, you’ll need a crypto exchange where buyers and sellers meet to exchange pounds for coins.
There are hundreds of exchanges out there, but as a beginner, you’ll want to opt for one that balances ease of use with low fees and high security. Be sure to check out our top picks for best crypto exchanges, like eToro, Binance.com, or Coinbase, if you don’t already have an exchange in mind.
Make sure to check if your exchange has a Bitcoin wallet built into its platform; if not, you’ll need to find one of your own. You may also choose to buy your crypto on a platform like Robinhood or Paypal, though buying crypto this way often means you cannot withdraw your coins and move them to another platform. If you want to hold your crypto in a different wallet, you’ll need to sell your holdings and then re-buy them on a different exchange.
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2. Decide on a payment option
After choosing an exchange, you have to fund your account before you can begin investing in Bitcoin. Depending on the exchange, you can fund your account through bank transfers from a current or savings account, PayPal, bank transfers, a cryptocurrency wallet, or even a credit or debit card.
Keep in mind, though, that platforms may charge higher transaction fees for certain funding options. For example, Coinbase doesn’t charge a fee if you do an electronic transfer from a bank account. However, it charges a fee of 3.99% the value of your transaction if you pay by debit card of via PayPal.
Credit card transaction fees on other platforms often run at least this high.
Because fees reduce how much money you can invest (and therefore also how much money you have to grow and compound), it tends to make sense to use electronic transfers from a bank account rather than other methods. In addition, if you use a credit card to buy cryptocurrency, it generally will count as a cash advance and be subject to a higher interest rate than you pay on regular charges. What’s more, taking on debt to buy volatile investments is extremely risky.
3. Place an Order
Once your account is funded, you can place your first order to buy Bitcoin. Depending on the platform you’re using, you may be able to purchase it by tapping a button, or you may have to enter Bitcoin’s ticker symbol (BTC). You’ll then have to input the amount you want to invest.
When the transaction is complete, you will own a portion of a Bitcoin. That’s because it requires a large upfront investment to buy a single Bitcoin now. If Bitcoin’s current price was £30,000, for example, you’d need to invest that much to buy a Bitcoin. If you invested less, say £1,000, you’d get a percentage, in this case 3.33%, of a Bitcoin.
4. Select a safe storage option
Many crypto exchanges have an integrated Bitcoin wallet, or at least a preferred partner where you can safely hold your Bitcoin. Some people, however, do not feel comfortable leaving their crypto connected to the internet, where it may be more easily stolen by hackers.
Most major exchanges have private insurance to reimburse clients if this happens, and increasingly, they’re also storing the majority of customer assets in offline so-called ‘cold storage’.
If you want ultimate security, you can store your Bitcoin in an online or offline Bitcoin wallet of your own choosing. But keep in mind that if you move crypto from an exchange, you may have to pay a small withdrawal fee. In addition, if you use a third-party crypto wallet custodian, you may also be permanently unable to access your coins if you lose the private key that serves as your wallet password.
Selling Bitcoin
When you decide you’re ready to sell your Bitcoin, you can place a sell order through your exchange, much like you did when you originally purchased it. Most exchanges offer multiple order types, so you can decide to sell only when Bitcoin reaches a certain price, or you can place an order that goes through immediately.
You can choose to sell your entire holdings of Bitcoin or only a specified amount. Once the sale goes through, you can transfer the money to your bank account. Your exchange, however, may have a holding period before you can make a transfer back to your bank account. This isn’t cause for concern; it simply takes some time to make sure the transactions clear.
When you sell your Bitcoin, you may make a profit. If your profits exceed a certain threshold, you’ll be on the hook for capital gains taxes so make sure to keep track of your profits.
Should you buy Bitcoin?
When Bitcoin’s price is skyrocketing, investing in the popular cryptocurrency can be tempting. But while it has the potential to be a lucrative investment, you should be cautious. Even if you decide to go ahead, its volatility has led to many experts recommending that you do not allocate a large percentage of your funds to buying it.
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*Cryptoasset investing is unregulated in most EU countries and the UK. No consumer protection. Your capital is at risk. **CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with eToro.
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