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Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest.
- The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets.
- The cryptoasset market is generally unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.
- You should not expect to be protected if something goes wrong.
- The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
- You may not be able to sell your investment when you want to.
- There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.
- Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.
- Cryptoasset investments can be complex.
- Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.
- You should do your own research before investing. If something sounds too good to be true, it probably is.
- Don’t put all your eggs in one basket.
- Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here
For further information about cryptoassets, visit the FCA’s website here
Table of Contents
Forbes Advisor has provided this content for educational reasons only and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.
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 an investor will make a profit or even recoup their initial 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 an investor is aware of the risks and wants to invest either via PayPal or via another exchange using PayPal as a payment method, here’s some things they might need to know.
Bitcoin prices
Buying Bitcoin via PayPal
Investors can buy Bitcoin through the PayPal website or smartphone app. Once they’ve logged in or created an account, start by selecting Crypto from the navigation bar.
Once they’ve chosen Bitcoin from the list of cryptocurrencies, they’ll be asked to pass an identity check that involves sharing some personal information. After the investor passes the check, they can type in the amount they want to invest or select a preset amount from the list.
Buying Bitcoin from an exchange using PayPal
Some crypto exchanges allow investors to deposit funds into their account from PayPal that they can then use to buy Bitcoin. Some exchanges however might restrict this functionality to the US while others allow UK users to deposit money from PayPal but charge a small fee.
Once the investor has chosen an exchange that accepts PayPal, they should check whether it includes a wallet to securely hold Bitcoin. If it does, but they’d prefer to hold their Bitcoin in a wallet outside the exchange – either hot (online) or cold (offline) – they should check if it allows transfers and whether there are fees to pay if they withdraws their assets.
Place an order
Once the money has been deposited into the account from PayPal, users should navigate to the Bitcoin page within their exchange and enter the amount they’d like to invest. The amount cannot be any greater than the amount that has been deposited from PayPal.
Remember that with the price of Bitcoin hovering around the £30,000 mark, investors are 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 an investor bought £1,000 worth, they’d be purchasing 3% of a Bitcoin.
Securely store Bitcoin
Bitcoin should be held in a secure wallet, whether it is an exchange’s integrated wallet, a third-party provider or an offline storage drive the investor owns.
Hot (online) wallets are less secure because they’re hosted online and vulnerable to hackers, but a user’s assets could be recovered if they forgot their passcodes.
Cold (offline) wallets are more secure because they’re not automatically web-connected, but if an investor lost the access codes there would be nobody to help recover them, which means access to the Bitcoin could be lost.
Selling Bitcoin
If an investor decides to sell their Bitcoin holdings, it’s possible to transfer the Sterling currency back to a PayPal account, but there may be withdrawal fees to pay.
Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.
