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How to Invest in Cryptocurrency UK

Last updated 23rd Nov 2022
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Investing in cryptocurrencies in the UK is fairly straightforward as many platforms feature easy-to-use trading software and beginner-friendly features. The biggest challenge is selecting what type of platform you want to use and which crypto brand to sign up for. This is because cryptocurrency services will vary with the features they provide to customers.

Fortunately, this guide will cover how to invest in cryptocurrencies in the UK and where to store your coins afterward. We’ll also include what factors to consider when selecting a crypto provider.

Different Ways to Invest in Cryptocurrency in the UK

This section highlights the different ways to invest and buy cryptocurrencies in the United Kingdom.

Buying Crypto

The preferred way to invest in crypto is by buying it from exchanges and DEXs. These services offer various useful features for investors, like staking, spot trading, and leverage trading. Also, you can withdraw coins to a cryptocurrency wallet for better storage.

CFDs

Cryptocurrency brokers issue CFDs (contracts for differences), a derivative product. This lets you speculate on the future value of the underlying cryptocurrency without conveying ownership. This does mean you won’t have the option to withdraw to a wallet or stake. eToro is the only exception that offers these services.

ETPs

ETPs (exchange-traded products) are securities you’d find on a stock exchange. The ETP provider will state how it's backed, usually with the same crypto. For example, Bitcoin ETPs are backed with BTC. VanEck and 21shares are great platforms for this investment style.

Crypto Companies

Moreover, you can indirectly invest in cryptocurrencies by buying stocks associated with the market. Below are a few companies you can invest in now with eToro.

  • PayPal

  • Nvidia

  • Coinbase

How to Choose a Cryptocurrency Platform in the UK

The main aspects to look into when selecting a cryptocurrency platform are

  • Coin variety: Ensure the platform has all the coins you want to buy because you won’t have to use multiple crypto providers.

  • Trading pairs: Having multiple trading pairs for each coin makes it easier to swap coins you already hold. Also, having swap pairs with GBP is ideal since you’ll likely deposit fiat currency if it’s your first time investing in crypto.

  • Staking options: Staking is great if you plan to hold long-term because you can earn interest on your crypto. Therefore, you should scan each platform to find the best APYs for the coins you want to stake.

  • Other investment options: Crypto platforms offer various ways to make money besides buying coins. Lending, mining, and leverage are alternative methods you can use to potentially make money, so consider if these are a requirement of the platform.

  • Deposit and withdrawal methods: Make sure that the payment methods you want to use are accepted by the crypto brand.

  • Reputation: Check who the platform is regulated and licensed by to ensure they are trustworthy. Also, you should look at reviews to see how other investors rate the service.

  • Security: Most platforms will have a dedicated page disclosing their top security features, making it easier to see how well you’re protected. Also, the crypto brand should allow you to boost your security by providing 2FA and crypto address whitelisting.

Where to Buy Cryptocurrency in the UK

Centralized Exchanges

Centralized exchanges (CEXs) are the preferred way of investing because of the convenient services provided. Platforms like Coinbase and Binance connect traders together using an order book system, which is displayed in the trading software. CEXs ensure that investors of all calibers are welcome by providing specific buying methods. Beginners will find the instant buy or convert feature easy to understand, while experts can use spot trading with indicators and trading tools.

Furthermore, exchanges provide many investment activities once you have bought crypto. Staking is the most popular since it doesn’t require much effort to get started, and the rewards are great depending on the crypto. Alternatively, you can lend or mine crypto using the exchange.

Best Centralized Exchanges in the UK

ProviderFees🥇 CoinbaseStarts from 0.6%; varies based on trading volume.🥈 Crypto.comStarts from 0.075%; varies based on trading volume.🥉 KrakenStarts from 0.26%; varies based on trading volume.

Cryptocurrency Brokers

Cryptocurrency brokers are perhaps easier to get started with since they feature simplistic trading interfaces and fast sign-up times. However, brokers issue CFDs (contracts for differences), a derivative product, instead of selling real crypto. This means you’ll be able to invest in your desired cryptocurrency without actually owning it. Also, crypto brokers don’t offer many features you’d find on other platforms, like staking and cryptocurrency withdrawals. eToro is the only exception, offering these services.

A huge advantage of brokers is they specialize in multiple markets. Therefore, you can diversify your portfolio with crypto, stocks, and commodities.

Best Cryptocurrency Brokers in the UK

ProviderFees🥇 eToro1% fee for buying or selling crypto.🥈 Plus500Fees vary based on spreads🥉 EightcapFees vary based on spreads

Decentralized Exchanges

Decentralized exchanges (DEXs) are perfect for buying cryptocurrency in the UK anonymously. DEXs have no sign-up process, nor do they require user identification to trade. They function autonomously using smart contracts and community support, which is done by utilizing liquidity pools. Also, this means DEXs are not regulated, so you should only use popular platforms that have been verified to be trustworthy.

Swapping tokens is straightforward with a DEX since many provide a simple conversion service. Moreover, like CEXs, decentralized exchanges allow staking and crypto lending, so you can earn interest on your crypto.

Best Decentralized Exchanges in the UK

ProviderFees🥇 PancakeSwap0.25% trading fee🥈 UniSwap0.30% trading fee🥉 dYdXStarting at 0%; varies based on trading volume.

P2P Services

Peer-to-peer services let you buy crypto directly from the seller and avoid third-party platforms like exchanges. The seller will list the coins they’re selling and at which price. Also, you will see the minimum and maximum amount you can buy with that seller. You can accept the terms or continue searching for a better deal. To ensure trustworthiness, the seller will have a profile disclosing their past trades. Alternatively, some P2P services will verify sellers.

Best P2P Services in the UK

ProviderFees🥇 LocalCryptos0.75% buying fee🥈 HODL HODL0.30% trading fee🥉 Bisq0.88% buying fee

Where to Store Cryptocurrency After Investing?

Leaving coins on an exchange is not recommended since they can get hacked, or your account can get compromised. Therefore, it’s advised to move your tokens to a cryptocurrency wallet, which offers much better security. Once you create or buy a crypto wallet, you’ll receive a public and private key. The private key is the only way to access your crypto, making it extremely secure. Not your keys, not your crypto.

Best Cryptocurrency Wallets in the UK

WalletType of Wallet🥇 Ledger Nano XHardware.🥈 Trezor Model THardware🥉 Atomic WalletSoftware

Tips Before Investing in Cryptocurrencies in the UK

This section contains insightful tips that you should know before making your first crypto investment.

Never Buy More Than You Should

More often than not, investors see a coin rise quickly and invest huge amounts because they want to get a quick buck or FOMO (fear of missing out) into buying. However, this is too risky because the coin can lose value at any moment. You should never invest more than you can afford to lose. There will always be opportunities in the crypto space and your livelihood is more important. Determine beforehand what you can put into crypto, and do not go over your predetermined budget.

Cryptocurrencies Are Taxed in the UK

Cryptocurrencies are taxed in the UK as income or capital gains. All brits have a capital gain tax allowance of up to £12,300, so if you trade you won’t have to pay taxes until profits exceed this number. Unfortunately, tracking crypto trades and transactions is frustrating, but it is required by HMRC (Her Majesty’s Revenue & Customs). Therefore, we recommend using a coin-tracking service that can integrate with your selected exchanges.

Stick to a Strategy

Many beginner investors will face volatility at some point as the crypto market is highly unstable. This is where the term “panic selling” comes in. Newbies will see the coin falling and sell their stack to prevent more “losses”. However, note that you do not lose money until you sell your coins.

To prevent panic selling, create an investment plan or use one of the many popular strategies like DCA or HODL. This prevents emotional trading and often results in better returns.

Never Disclose Your Private Keys

Although this tip is obvious, some beginners may confuse private and public keys. Public keys are like your IBAN or routing number that tells the money sender where to transfer funds, while private keys give access to your money. Hence you should never give out your private keys because your cryptocurrencies will get stolen. You should write down your private key and store it in a safe location that nobody else can access.

Is It Worth Investing in Cryptocurrencies in the UK?

In my opinion, it's definitely worth investing in cryptocurrencies because they help diversify your portfolio. Also, the UK is implementing crypto-friendly laws, so we’ll likely see some coins becoming legal tender.

The easiest way to buy crypto in the UK is through a cryptocurrency exchange or broker. These platforms make crypto accessible and offer many useful features like staking, analytics, and leverage.

However, cryptocurrencies are volatile, so going all in is not recommended. You should keep to an investing strategy and never buy more than you can afford to lose. Note: Not Financial Advice (NFA).

FAQs

Is It Safe to Trade Cryptocurrencies?
What Are the Top Providers for Buying Cryptocurrencies in the UK?
What Is the Difference Between a Cryptocurrency Broker and Exchange?
Can I Buy Crypto Anonymously in the UK?
Can I Leave My Coins on an Exchange?

Dominikas Pupkevicius