The cryptocurrency Bitcoin has become increasingly popular, not to mention valuable, in recent years. At the time of writing a single Bitcoin is worth £4,878 which is up from around £1 in 2011. So, how can you get into this exciting, if a little confusing, world of digital currencies? We show you some of the best exchanges that allow you to trade in Bitcoin, Ethereum, and others.
First a warning. Before delving into the various exchanges to use, it’s worth noting that trading in digital currencies is similar to dabbling on the stock exchange. Values fluctuate, sometimes wildly, and your money in never safe unless it’s in your bank account. You could lose money by investing in Bitcoin.
As the old gambling adage goes, never put in more than you can afford to lose. Yes, there are many people who have made large amounts of money from Bitcoin, but you must always keep it in mind that financial speculation of any kind comes with considerable risk to your investments.
What is a Bitcoin exchange?
Essentially, a Bitcoin exchange is a website that lets you buy or sell the digital currency. Most also allow you the opportunity to trade in other cryptocurrencies – with Ethereum being a current favourite – and everything is initially paid for in traditional monetary flavours like pounds, dollars, or euros.
How do I know they are safe?
This is a good question. Just like you would with any financial investment, taking time to research your potential partners is a very wise move. After all, you’ll be handing over your money to these people, and it’s not like you can go to their front door brandishing a flaming torch and pitchfork if they suddenly vanish.
The best way to assure yourself of a site’s veracity is to take note of a few different things. Firstly, has it been around long? While a new, exciting, flashy exchange with a smartly designed website might seem appealing, the truth is that without a proven track record it’s going to be a risk.
Check out that an exchange has a history and that there are no nasty stories online about any suspect behaviour. Also, look to see if it’s busy. A well-used exchange is usually another sign that it’s trustworthy.
Another important factor is where the exchange is based. Financial regulations differ from country to country, so it would be good to make yourself aware of any obvious loopholes or potential risks involved if the site you like is in a wilder part of the globe.
Follow these basic tips and you should certainly minimise the chances of being taken in by a fly-by-night bunch of crypto-traders.
Of course, financial mismanagement and shady practices can happen at any institution. In 2014 the Mount Gox exchange, which at that point was handling around 70 percent of all Bitcoin transactions, suddenly shut down and filed for bankruptcy, citing the theft of 850,000 Bitcoins as the root of the problem.
So, trade wisely, take money out regularly, and generally keep an eye on things.
Which are the best exchanges?
We’ve taken a look at a lot of Bitcoin exchanges over the years. While things can change quite quickly in the digital world, these are the ones that currently seem the best places to start for investors.
Kraken has been around since 2011, and based in San Francisco is one of the largest exchanges based on volume and liquidity.
Kraken has a range of business ties to reputable institutions that add credit to it’s name, including the Tokyo Government and Germany’s BaFin regulated Fidor Bank. While there have been some experiences of capacity issues with a large influx of new members, Kraken has a great reputation and would be a solid option for trading.
Cex.io is a highly versatile platform, giving you a wide array of options with which you can trade. Easily allowing users to trade fiat money for cryptocurrencies, and cryptocurrencies for fiat money too.
Cex.io is very feature complete, and is supported across the world while also offering a number of ways for you to deposit money. Their mobile app is also very solid.
The drawbacks here are that the customer support has been called into question a few times, and their verification process can take a while. Their fees for depositing can also be a little high.
The UK registered eToro is a great place for those new to dabbling in currency trading as it provides a $100,000 dummy account with which you can practice without risking any actual money.
The site also offers something called CopyTrader, which allows new users to automatically copy the investments of other successful traders on the site. With over 6 million users, it certainly seems to have a good pedigree, and the accompanying Android and iOS app allows trading to be done on the move.
Due to its European location, the exchange is also regulated by EU law and the funds are kept in respected European banks, which should make it quite safe.
For those more confident in the workings of financial exchanges, Plus500 is a popular destination for UK investors. The site allows trading in Bitcoin, Bitcoin Cash, Ethereum, Zcash, Litecoin, and several other cryptocurrencies, as well as foreign currencies, shares, and commodities.
Like eToro, Plus500 offers a demo account so users can familiarise themselves with the interface before putting their own cash at risk. The site, and its Android/iOS apps, offer instant trading and a number of tools to help investors minimise loses and capitalise on potential gains.
These involve setting trading price limits to avoid any runs on your currencies or shares, plus a few other useful facilities. It can be a bit to get your head around at first, but if you have a financial mind then no doubt these would be a welcome feature.
Fees are claimed to be mostly covered by profiting from the small differences in exchange rates, plus there are a few specialised charges listed on the site.
One of the most popular exchanges in the world is the US-based Coinbase. This site boasts over £30 billion in digital currency exchanges, 12 million customers, and services available in 32 different countries.
Security is a big feature on Coinbase, with 98 percent of customer funds stored in secure offline servers, plus paper records distributed to vaults around the world. The mobile app also features 2-step authentication by default.
The service has insurance for all funds too, so in the event of a security breach your funds would be covered.
So there are a few different ways to invest in Bitcoin from the comfort of your PC, tablet, or smartphone. If things go well then you may be able to upgrade all three in no time at all!