Bitcoin’s value has fluctuated dramatically in recent years, with its performance in May 2022 seeing its value drop below $30,000, half of the $60,000 or more it reached in October 2021.
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So if you’re thinking of investing in bitcoin, you should know that there’s no guarantee you’ll see a return or break even.
Reading: How to buy bitcoin with a credit card
Such volatility has prompted the UK’s financial watchdog, the Financial Conduct Authority (FCA), to repeatedly warn that buyers of cryptocurrency should be prepared to lose all of their investments.
However, if you’re aware of the risks and still want to buy bitcoin, this is how you do it with a credit card.
sign up with a cryptocurrency exchange
To buy bitcoin, you will need to exchange some currency for it.
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Regardless of how you want to pay for your bitcoin, you will need to use a crypto exchange. Popular exchanges include the likes of Coinbase and Binance.
Choose an exchange with a bitcoin wallet built into their platform and you won’t have to sign up elsewhere. If you want to hold your cryptocurrency in a wallet outside of your chosen exchange, make sure it allows withdrawals and check what fees apply, if any.
if you intend to buy bitcoins with your credit card, check if the exchange accepts the brand you have (eg american express, visa, mastercard).
credit card payment
Once you’ve signed up for an account with an exchange, you’ll need to add funds to it.
Not all providers allow you to use your credit cards to buy cryptocurrencies, for example, TSB, Virgin Money and Tesco Bank block transactions with cryptocurrency exchanges. Some providers may allow you to use your card to purchase cryptocurrencies, but beware of fees that may add to the cost of the transaction.
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However, it is not advisable to go into debt to buy bitcoin. if you buy bitcoin with a credit card, you should try to pay off your balance as soon as possible to minimize the interest it will attract.
place an order
Within the platform you are using, go to bitcoin and enter the amount you want to invest. Unless you are investing more than £30,000, you will buy a portion of a bitcoin. If the value of bitcoin was £30,000 and you invested £1,000, for example, you would own 3.33% of a bitcoin.
safely store your bitcoin
You can store your bitcoins in your exchange’s built-in wallet or, if you prefer and the exchange allows it, a wallet provided by a third party. but, if you feel uncomfortable keeping your bitcoin in a “live” wallet, i.e. online, you can use a “cold” wallet, which is a storage device that is not connected to the internet.
Keep in mind that there may be fees to pay to withdraw your bitcoin from the exchange, and if you opt for a cold wallet, you’ll need to keep your access codes safe or you risk being locked out of your own holdings.
how to sell your bitcoins
You can also sell your bitcoin through a crypto exchange, either immediately or when it reaches a certain price. once sold, you can transfer the money to your bank account, although in some cases you will have to wait a couple of days before you can withdraw it.
If the profits you make from selling bitcoins are large enough, you will be liable for capital gains tax (cgt). all have an annual tbc allowance of £12,300. If you have earnings above this amount in a given year, you may have to pay taxes.
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