How can I buy bitcoin in the UK?

Bitcoin, the cryptocurrency everyone is talking about, has seen spectacular price rises in recent months, with huge numbers of people keen to make a quick buck off the back of its soaring value.

Google queries for "buy bitcoin" now surpass "buy gold" as the currency's price has surged from under $1,000 (£742) at the start of 2017 to almost $20,000 in December.

But armchair and professional investors have been shaken by sudden drops in the currency's value which began just before Christmas. It now stands at about $11,000. 

Few can predict with any certainty where Bitcoin will go from here and many believe we're coming to the end of a bubble - but one thing's certain: if you'd invested five years ago you'd be doing very well for yourself now.

There are two main ways to get hold of Bitcoin - buying an expensive supercomputer (with a whopping electricity bill to match), and using it to "mine" bitcoins, the process of solving the cryptographic codes that keep the entire network running.

This isn't a realistic scenario for most people, so the alternative is to buy. Buying bitcoins used to be a complicated affair - long waits, massive fees and foreign websites. Now there are a number of consumer-friendly websites for buying and selling not only bitcoin, but ethereum and other cryptocurrencies.

However, the process isn't always entirely straightforward. Legal bitcoin services are heavily regulated, given the currency's association with online black markets, and its cryptographic nature means security protocols can be complicated.

FAQ | Bitcoin

Step 1 - Set up a bitcoin wallet

A bitcoin wallet is where you hold your bitcoins. Alternatively you can download the entire bitcoin program (around 150GB), but you're probably not going to go to those lengths, and there's no reason why your computer is more secure than a popular website, so the best option is to use an online wallet, which is sort of like a digital bank account.

There is no shortage of wallets, but among the biggest and most popular are Blockchain.info and Coinbase, which are backed by millions in venture capital funding and have easy to use websites and mobile apps. It also takes security steps to make sure your Bitcoins are as safe as they can be.

For Blockchain, go to Blockchain.info/wallet to sign up, or download the mobile app. For Coinbase it's Coinbase.com/signup. The sign up process is as easy as doing so for an email or social media account.

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Step 2 - Secure your account

Reputable Bitcoin wallets have a series of security measures that you should take to make sure your Bitcoins are safe once you do get your hands on them. Other wallets are likely to have the same protocols.

Note down your Wallet ID, found in Settings (you'll need it again to log in in future), and use the security centre to verify your email, set up two-factor authentication and so on. After that, you're ready to buy.

Step 3 - Find a broker

Once you've got your wallet, you're ready to add some Bitcoins to it. As of the time of writing, one Bitcoin is worth over £10,000, but fear not - they are infinitely divisible, so you can buy £10 worth (about 0.0008 bitcoins) if you want.

To do this, you have to find a broker. If you're getting confused, think of it like buying a foreign currency from the Bureau de Change: the wallet is your bank account and the broker is the Bureau de Change.

Brokers are the ones handling your real money - you send them cash via a credit card, bank transfer or some other method, and they send bitcoins to your account. Because of this, they often have strict "Know Your Customer" requirements that include identity verification.

Bitcoin price: last 365 days

They vary on exchange rates, fees, method of payment and quality of service. Credit card payments are often quicker, but can incur a fee, for example. The website Bittybot allows you to compare brokers, including trust ratings.

To begin with you might want to stick with something easy to use and reliable. Popular sites include Coinify, which is integrated with Blockchain.info, and Bittylicious, which is a peer-to-peer site. 

Step 4 - Buy buy buy

Once you have found the right broker, buying is simply a case of spending money with your credit card or with a bank transfer. It might be best to stay away from sites that require international bank transfers, since they can hold up the process.

The crucial piece of information you need is a bitcoin address - that's the unique identifier on the Bitcoin network that represents your account. Crucially, this is different from the login details on your Blockchain.info (or other wallet) account - but it can be found there.

On Blockchain.info, it can be found in the Request tab - it will look something like this: 1CdDgoU4QqZPhD8QSXdNjPT7Cbuug9Viy2.

Every Bitcoin broker will ask for your bitcoin address - that's the code you give them. Buying bitcoins can take anywhere from seconds to a few hours depending on who you use, but if you return to your Blockchain.info account you should find the coins there. Voila - now just wait for them to surge in value (or fall dramatically, either way).

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A note on fees

In recent months, the costs of sending Bitcoins has risen dramatically, due to the enormous strain on the network. Some brokers have decided to bear the cost of sending them, while others are passing them on to consumers.

Buying £50 of Bitcoin on one exchange and sending it to your wallet could mean you losing almost half of your cryptocurrency just on fees, so it's worth checking each exchange for fees. This can be mitigated by using one of the exchanges that the wallets partner with. You can do this buy simply buying through your wallet's website or app.

Step 5 - Sell or spend

If you want to sell up, it's much the reverse of a purchase - people are quite happy to trade bitcoins for cash just as the other way around.

You can use the same broker websites to sell your bitcoins back. This will involve the broker giving you an address to send your bitcoins to - which you do from your wallet. Once the transaction has been confirmed, you should receive a bank transfer or some other form of payment back.

Spending is similar - there's a list of places that accept bitcoin here. You simply have to enter the bitcoin address of the place you want to send it to.

I want to invest in Bitcoin without buying

The inefficiences of buying and selling Bitcoin - the high transaction fees, long wait times and lengthy identity checks - could easily put people off buying it directly. If that's you then there are ways to ride the value of Bitcoin without having to actually own it. Since many people simply see Bitcoin as an investment, not the future of money, this may be just as good.

There are a number of ways to invest in Bitcoin without actually buying it. One is Revolut, a popular banking app, which allows people to "buy" Bitcoin without actually accessing the network itself - you can't send your Bitcoin to anyone apart from other Revolut users, for example. It also claims to have lower fees than other ways of buying cryptocurrencies. Go to Revolut.com/cryptocurrency for more.

Alternatively, you can use a trading platform like IG, which allows users to bet on the cryptocurrency rising or falling. There's more information at ig.com/uk/bitcoin-btc.