Best Cryptocurrency Brokers for UK traders [Updated for 2020]

Home » Best Cryptocurrency Brokers for UK traders [Updated for 2020]

Cryptocurrencies represent a new type of digital asset, secured by advanced encryption technologies that ensure they cannot be duplicated or forged. The majority of cryptocurrencies are powered by a decentralized network that is based on a distributed ledger, also known as a blockchain.

Read on to learn more about cryptocurrencies, how to acquire them, and what is the best cryptocurrency to invest in.

blockchain

What sets cryptocurrencies apart from traditional commodities is the fact that they are not controlled and issued by a single authority. Instead, they are generated by miners, which use their processing power to process transactions within the network. Therefore, cryptocurrencies are immune to interference from the government and other central authorities.

Cryptocurrency trading for beginners

Cryptocurrency trading is a highly controversial topic because of its tremendous market volatility. Historically, the market went through cycles which many financial experts referred to as bubbles. Essentially, the value would increase by a large percentage over a short period and then ‘burst’ like a bubble, dropping significantly to a level slightly above previous prices. 

woman investing

Such a cycle would then be followed by a long period of stagnation, spanning over multiple years before the next ‘bubble’ would arise. Stagnation, however, has a slightly different definition in the crypto world – movements of more than 10% per day are very common.

A common strategy for beginners looking to invest in Bitcoin is to buy and forget. As the market is open 24/7, monitoring investments is very time-consuming. On top of that, financial news and events do not affect the price of cryptocurrencies, so it is quite difficult to predict movements.

How to Choose the Best Cryptocurrency to Invest In

With over 5000 digital coins on the market, choosing the best crypto to invest in 2020 can seem like a daunting task. However, investors should keep in mind that very few digital coins truly stand out from the crowd in terms of technology and benefits. 

cryptocurrencies

As a rule of thumb, we recommend sticking to the popular ones, which come with a larger market cap. Investing in smaller, lesser-known cryptocurrencies is risky, as price manipulation is a very common practice. Let’s go over some of the most significant cryptos available at the moment.

Bitcoin (BTC)

Bitcoin is the single largest cryptocurrency in terms of market capitalization. Widely regarded as “digital gold”, this asset first surfaced in 2009. The creator of Bitcoin is, to this day, anonymous, known only by the alias “Satoshi Namakato”. 

Financial analysts criticize Bitcoin, as it was initially used for black market transactions. Its popularity has since risen dramatically and the digital currency is widely used in both online and offline transactions.

The first and best-known use of Bitcoin to purchase a tangible good is the 10 000 BTC pizza. In 2010, a programmer bought two large Papa John’s pizzas for 10000 BTC, which were worth 30 dollars at the time. This was a formative event in the history of Bitcoin because it proved its usability as a form of payment. From that moment on, many influential people in the financial sector have mentioned Bitcoin as an investment idea.

Bitcoin Cash (BCH)

Created in 2017, Bitcoin Cash is a hard fork of Bitcoin. It is the product of a disagreement within the mining community, regarding a proposed change in the algorithm. The update would enable the network to process more transactions, however, it would have also diluted the value of the coins. 

Ethereum (ETH)

Ethereum is a blockchain platform with a wide variety of uses in the development and financial markets. ETH’s key selling point is that it’s the world’s programmable blockchain. For example, transactions can be programmed to execute when certain conditions are met, in the form of smart contracts, eliminating the need for escrow services.

Ripple (XRP)

XRP is a token used by Ripple to provide liquidity to its technology, which aims to revolutionize the way international bank transfers are processed. It is worth mentioning that this cryptocurrency is similar to a traditional asset, as it’s centralized. Transactions are still secured and confirmed by a decentralized network of computers called nodes, however, the supply is controlled by Ripple.

One of the advantages of investing in Ripple is the fact that it is being used by an increasing number of financial institutions to optimize interbank transfers. Their end goal is to replace SWIFT as the most used technology by banks to settle transactions. 

Initial Coin Offerings (ICOs)

An Initial Coin Offering (ICO) represents the initial time that a new cryptocurrency is listed on the market. It is used by developers as a method to raise funds for their coins. At the moment, there is no reputable online broker that offers the possibility to invest in ICOs. The reason is that ICOs usually imply purchasing a token rather than an actual digital asset and they come with a high risk of losing the invested capital.

While there is no correct answer to the question of which is the best cryptocurrency to invest in, we have drawn some conclusions. Those that want to dip their toes in the idea of crypto can invest in Ripple, as it’s the most similar to a traditional asset. Ethereum is for tech enthusiasts, who believe in the future of blockchain technology. The most popular of them all, Bitcoin, dictates the course of the crypto market and its name often makes headlines.  

How to Buy Bitcoin and Other Cryptos

Buying cryptocurrencies is quite an easy affair. There are two main methods through which investors can acquire these digital assets – using a digital wallet or investing in cryptocurrency ETFs or CFDs. Read on to discover the advantages and disadvantages of each and decide where to buy cryptocurrency.

bitcoin for usd

Digital Wallet and Specialized Exchanges

In order to be able to transfer Bitcoins and other cryptocurrencies on the blockchain, users need to download a specialized piece of software, called a digital wallet. Each digital wallet comes with its own set of keys – a public key, which can be disclosed and is used to receive funds; and a private key, which should be protected as it allows access to the coins held in the wallet. Basically, whoever holds the private keys to a wallet owns the coins contained within it.

Downloading and setting up a digital wallet is just the first step towards owning cryptocurrencies. In order to fund it, investors have to exchange their money to digital currencies. There are a variety of specialized exchanges which allow their clients to buy bitcoins with credit card and many other banking options. 

The main advantage of specialized cryptocurrency exchanges is the fact that they allow users to withdraw their digital coins into their wallets – which means that investors who choose this method gain full control of their virtual assets.

However, these exchanges are usually not regulated. This means that traders’ funds are not protected from cybernetic attacks or if the company goes bankrupt. The most prominent example of things going wrong is the story of Mt. Gox, the most popular cryptocurrency exchange in the early days of crypto. 

In early 2014, Mt. Gox suspended withdrawals, reporting that 850,000 bitcoins were stolen from its wallets. To this day, many of the investors that lost their funds in this incident still have not recovered them. There are ongoing debates regarding what exactly happened to the coins – it is unclear if they were stolen by hackers, if mismanagement was behind the incident or if the owner simply ran away with the encryption keys. 

Cryptocurrency ETFs, CFDs and Traditional Forex Brokers

Traders that are only interested in investing in bitcoin or other cryptocurrencies might find that the best option for them is joining a forex trading platform that offers bitcoin ETFs or CFDs. A list of the best online brokers UK that offer crypto ETFs can be found below. 

The main difference between investing in cryptocurrency using a regulated trading platform and owning a digital wallet is the fact that online brokers are licensed by top financial authorities, such as the FCA or CySec. The advantage provided by these regulatory authorities is a high level of fund protection for UK traders.

Another advantage of investing in cryptocurrency ETFs is that traders can buy Ethereum UK by using leverage, which makes the potential profits exponentially larger, as well as the risks. Due to the high volatility of the market, most forex brokers only allow cryptocurrency trading with leverages up to 5:1.

Online forex brokers allow crypto investors to buy bitcoin with PayPal and many other payment methods. The variety is much larger than that offered by specialized crypto exchanges.

What can you do with cryptocurrency

Over the past decade, cryptocurrency has evolved beyond a simple commodity with no real-life use. Currently, there are a lot of merchants that accept cryptocurrency payments, both online, such as casinos and forex brokers as well as brick-and-mortar locations, such as bars and 

restaurants.

For the moment, Bitcoin is the most commonly accepted cryptocurrency. Other digital assets, such as Ethereum, Ripple, and Litecoin are quickly being adopted across a large number of industries, for a plethora of purposes.

Let’s have a look at the main uses cryptocurrencies have today:

Invest

Many beginner investors believe that cryptocurrency trading is the hottest market of the decade. While it’s true that many people became millionaires overnight thanks to cryptocurrencies during the unusually strong bullish periods this market has seen, the reality is quite different. These digital assets are highly volatile and come with a significantly increased level of risk compared to traditional investment opportunities.

The leading example of the returns that can be obtained from cryptocurrency, as well as the volatility of the market, can be seen in the field of bitcoin investing. Between July and December 2017, Bitcoin’s price has risen by more than 900%, going from $2000 per coin to over $18 000 per unit. However, the price has subsequently fallen to a low of $3400 within the following year – a drop of over 80%.

Purchase goods and services

At the moment, cryptocurrencies can buy almost any goods and services available on the market, including hotel rooms, flights, cars, jewelry, computer parts, or even college degrees. While the majority of merchants only accept Bitcoin, certain platforms allow users to exchange different types of cryptocurrencies to BTC. However, there is an increasing number of merchants that started accepting alternative coins, such as Ethereum (ETH) or Ripple (XRP). 

Even Apple accepts payments in over 10 different types of cryptocurrencies on the App Store. Soon, we can expect cryptocurrency to become more and more relevant, eventually becoming the main medium of payment for online transactions. 

Mine

Mining represents using processing power in order to process transactions within a cryptocurrencies network. Miners are the single most important part of blockchain technology – when a transaction is processed, it is then subsequently confirmed by every other computer on the network, thus ensuring that transactions cannot be altered after they are made.

bitcoin ledger

Mining works by having a computer or specialized device solve complicated cryptographic problems, which increase in difficulty based on the network’s total amount of processing power (e.g. how many people are mining a particular cryptocurrency). Miners are rewarded with a set amount of coins every time they solve a set of problems.  

Back in the day, mining was very profitable for individuals, as the difficulty was relatively low and consumer hardware was sufficient. Nowadays, mining efficiently requires industrial-grade hardware, and profitability is quite low due to high electricity costs.

Accept as a form of payment

There is an increasing number of business owners that are looking for cryptocurrency payment solutions. The demand for Bitcoin payments is at an all-time high and we expect consumer interest to keep increasing over the next years.

At the moment, there are over 1800 crypto ATMs around the world, across 58 countries. In the US, digital coins are considered convertible virtual currencies, which essentially represents a form of payment similar to cash, gift cards, or gold. 

Final Thoughts

Cryptocurrency trading UK is a controversial investment opportunity. While the massive gains that appear on the news can seem very attractive for a new investor, the reality is that the crypto market is highly volatile and comes with great risk. Regular trading strategies, such as following economic news or conducting technical analysis do not apply to cryptos. Therefore, cryptocurrencies should be treated as a secondary asset in an investment portfolio.

In the list below, investors can browse and find the best cryptocurrency trading platform for them.

 

4.8 rating
75% of retail investor accounts lose money when trading CFDs
4.3 rating
Plus500 is a CFD broker. 76.4% of retail CFD accounts lose money
4.0 rating
80% of retail CFD accounts lose money
4.0 rating
75% of retail CFD accounts lose money
3.8 rating
81% of retail CFD accounts lose money
4.0 rating
75% of retail investor accounts lose money

Crypto Market Overview

Frequently Asked Questions

Cryptocurrency is a digital asset that uses decentralized blockchain technology to allow its users to securely transfer and store funds in the form of digital currencies, without using their identity or a central institution, such as a bank. In simple terms, cryptocurrencies work by storing data about users’ holdings and transactions in a public ledger. There is a plethora of cryptos available, such as Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and Litecoin (LTC), each coming with a separate set of advantages and disadvantages.
Investing in cryptocurrencies is most commonly done on specialized crypto exchanges. These platforms allow the purchase of cryptos using common payment methods, such as debit cards. Cryptographic currencies can also be purchased as CFDs from traditional forex brokers. Buyers should be aware that, in most cases, they would not have control over the assets themselves if they choose this method. Nevertheless, it offers traders the possibility of trading with leverage, as well as the benefit of having their funds protected by a regulated financial institution.
Unlike credit and debit cards, a cryptocurrency is decentralized. This essentially means that it’s controlled entirely by users and computer algorithms. This differs from traditional currencies, which are controlled by a singular, central bank or government. Transactions made using this type of asset are made using cryptocurrency wallets. When a transaction is made, it is first confirmed by a part of the computers on the network, and then it is written to a permanent block, which can no longer be altered.
All investments carry a certain level of risk. Cryptocurrencies stand out by their high volatility, which comes with significantly increased risks, but with larger potential profits. Moreover, these assets rely on unregulated organizations, which do not provide the same level of protection as traditional financial institutions. However, blockchain, the technology behind cryptocurrencies, uses advanced encryption techniques. This provides the benefit of unparalleled security, from a technical standpoint.
Cryptocurrencies are highly volatile assets and carry a high level of risk. Making money from cryptocurrencies is not a guaranteed affair, as the market is completely unregulated. Another risk carried with trading cryptocurrencies is the fact that the market never closes – meaning that monitoring investments is very time-consuming. On the other hand, potential profits are exponentially higher than traditional markets, but so are the risks.
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