Bitcoin remains in the headlines as prices continue to crash and rally daily, piquing the interest of those looking into investing for the first time.
But Bitcoin isn’t a guaranteed investment. There’s nothing to say you’ll make a profit or even recoup your investment. While the price of Bitcoin has risen by more than 4,000% since 2016, a crash between 2017 and 2018 saw almost £16,000 wiped off the price of a Bitcoin.
Turmoil in early May saw the price collapse further, taking the price to half the highest point achieved – almost $69,000.
It’s this volatility that has led the UK’s finance watchdog the Financial Conduct Authority (FCA) to issue repeated warnings to would-be investors, advising that they should be prepared to lose everything.
But if you’re aware of the risks and want to invest either via PayPal or via another exchange using PayPal as a payment method, here’s what you need to know.
Buying Bitcoin via PayPal
You can buy Bitcoin through the PayPal website or smartphone app. Once you’ve logged in or created an account, start by selecting Crypto from the navigation bar.
Once you’ve chosen Bitcoin from the list of cryptocurrencies, you’ll be asked to pass an identity check that involves sharing some personal information. After you pass the check, you can type in the amount you want to invest or select a preset amount from the list.
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Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.
Buying Bitcoin from an exchange using PayPal
Some crypto exchanges will allow you to deposit funds into your account from PayPal that you can then use to buy Bitcoin. Some exchanges e.g. Coinbase only allow this feature in the US while others like eToro allow UK users to deposit money from PayPal with no fees.
One you’ve chosen an exchange that accepts PayPal, check whether it includes a wallet to securely hold your Bitcoin. If it does, but you’d prefer to hold your Bitcoin in a wallet outside the exchange – either hot (online) or cold (offline) – check if it allows transfers and whether there are fees to pay if you withdraw your assets.
Place an order
Once you’ve deposited your money into your account from PayPal, navigate to the Bitcoin page within your exchange and enter the amount you’d like to invest. The amount cannot be any greater than what you’ve deposited from PayPal.
Remember that with the price of Bitcoin hovering around the £30,000 mark, you’re probably going to be buying a share of one Bitcoin. If, for example, Bitcoin were priced at £30,000 at the time of exchange and you bought £1,000 worth, you’d be purchasing 3% of a Bitcoin.
Securely store your Bitcoin
Bitcoin should be held in a secure wallet, whether your exchange’s integrated wallet, a third-party provider or an offline storage drive you own.
Hot (online) wallets are less secure because they’re hosted online and vulnerable to hackers, but your assets could be recovered if you forgot your passcodes.
Cold (offline) wallets are more secure because they’re not web-connected, but if you lost your access codes there would be nobody to help you recover them, which means you could lose access to your Bitcoin.
Selling your Bitcoin
If you decide to sell your Bitcoin holdings, it’s possible to transfer the Sterling currency you get back to your PayPal account, but there may be withdrawal fees to pay.
