UK Guide to Entering the Cryptocurrency Market

Entering the cryptocurrency market can be a daunting experience, and if you’re starting with a lesser-used ‘fiat’ (i.e. government-backed) currency such as GBP (£) you can easily incur unnecessary fees if you don’t explore all the options available to you.

So I thought I would write up the process that I used to enter the market, which I hope will be useful to anyone from the UK looking to get involved in cryptocurrency trading or investment.

Digital currency exchanges (DCEs)

“Digital currency exchanges (DCEs) or bitcoin exchanges are businesses that allow customers to trade digital currencies for other assets, such as conventional fiat money, or different digital currencies.” – Wikipedia

In order to convert your fiat money into cryptocurrency, you will need to use a digital currency exchange. There are lots of these exchanges, but many will charge you fees to fund your account, especially if funding the account via a credit or debit card.  For example, the largest UK-based exchange, CEX.IO, will charge you 3.5% + £0.20 to fund your account via a card – which would result in you paying an additional £35.20 to load your account with £1,000 to trade with.

Also, there is a difference between a digital currency exchange and a digital currency trading exchange. The former will generally only allow you to exchange your fiat currency into one of the major cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH), and vice-versa – but not much else. This is fine if you’re just looking to invest in one of these coins for the long term and then withdraw it to a digital wallet for safekeeping, but be aware that these kinds of exchange often offer a less-than optimal exchange rate, and/or charge commission fees.

If you’re looking to get into cryptocurrency trading, or just want to make your initial exchange from fiat at market rates, then you will need to choose (or send your existing BTC/ETH to) an exchange that supports some of the hundreds of so-called ‘altcoins’ that are available for trading. Generally, these altcoins are only traded against Bitcoin, although the larger exchanges will also allow you to trade some of the more well-known ones, such as Litecoin (LTC), against Ethereum also.

Depositing GBP to an exchange

The cheapest way to fund an exchange account is generally via a regular bank transfer directly from your own bank account into the exchange's bank account. However, in order for a bank transfer to be completely free of charges, the exchange account that you are transferring to needs to be in the same currency as the one that you’re transferring from, i.e. if you’re transferring GBP from a UK bank account, then the exchange account must also be a GBP account.

Unfortunately, the choice of cryptocurrency exchanges that support GBP to GBP bank transfers is very limited, however as of August CEX.IO now lets you do this, so if you’re happy to use this exchange then you just need to register an account at https://cex.io and then follow the instructions here to verify your identity and obtain the GBP account details for the transfer.

Update: Kraken also supports GBP to GBP bank transfers, although they are based in Japan so make sure to read their notes on how to make a deposit. Thanks to @trdr for pointing this out.

The majority of other European exchanges however will only support bank transfers in Euros (€), which means that you will first need to convert your GBP into EUR – a process that again can incur unnecessary fees if you don’t research the options available to do this.

Converting GBP to EUR

The easiest and cheapest method I’ve found of converting GBP to EUR is by using the Revolut banking app. Once you’ve installed the app and gone through the in-app verification process, you’ll be able to top-up your Revolut GBP account via debit/credit card, bank transfer, or Apple Pay – all without fees.

Then, once you have funds deposited, you can use the app to exchange them into EUR at the Interbank exchange rate, without any of the additional fees that most banks would charge you.

Ideally, you will now be able to initiate a SEPA bank transfer directly from your new Revolut EUR account straight into the EUR bank account of your chosen exchange. Unfortunately, it transpires that Revolut is blocking SEPA payments to the Coinbase/GDAX and Kraken exchanges, among others, so in order to get around this, I installed another banking app – Fire – and first sent my EUR there before making the final transfer to the exchange account.

Bear in mind that SEPA bank transfers can take 1-3 working days to complete, so don’t panic if the money has left your account but hasn’t appeared in your exchange account immediately. And always make sure to use the correct reference provided to you by the exchange so that the funds can be allocated to your exchange account without delay.

Trading fiat for crypto

Once you’ve finally got your GBP/EUR onto your chosen exchange, you can make your first trade – most likely for either BTC or ETH as the options for GBP or EUR trading pairs will be limited to the major coins. Each exchange will be slightly different, but basically you'll be placing an order to ‘buy’ X amount of BTC (or ETH) using your GBP or EUR funds.

Trading altcoins

If you’re just planning to sit on your newly-acquired Bitcoin or Ethereum and holding it for the long term (aka ‘hodling’), then you'll want to move it from your exchange account (where it could be lost should the exchange disappear for whatever reason) to an offline ‘cold storage’ option such as a hardware or paper wallet.

However, if you’re looking to do some cryptocurrency trading, then you are now ready to start exchanging your BTC/ETH for other altcoins that you think might bring you a profit in the shorter term. A great site for learning about currency trading in generally is BabyPips.com. Also, check out @quickfingersluc here on Steemit for some great advice for those new to the game.

Sending BTC or ETH to other exchanges

As the available trading pair options for each exchange will differ, you may need to trade on multiple exchanges in order to have access to the full range of coins. To send BTC (or ETH) from one exchange to another, you’ll need to obtain a ‘wallet address’ from the destination exchange. Once you have this (they are usually generated instantly for you as and when you need them), you can then ‘send’ your chosen amount of BTC/ETH to this address from the source exchange. It’s important to make sure that you don’t try and send BTC to an ETH wallet address or vice-versa, as it may get ‘lost’ and you would need to contact the exchanges to get it resolved. Also, wallet-to-wallet transactions will need to be confirmed by the blockchain, so will take a short amount of time to complete and may incur a small mining fee.

If trading on multiple exchanges, you may find it useful to use a web app such as Coinigy, which will allow you to view charts and execute trades across all supported exchanges without having to visit each exchange site individually.

Keeping track of your coins

Now that you have a cryptocurrency ‘portfolio’, you’ll want to keep track of which coins you own, and how much they’re currently worth. CoinTracking is a great web app that allows you to do this, and makes it easy to import your trades so that you always have an up-to-the-minute view of your portfolio.

Good luck!