The world of cryptocurrency can be extremely exciting – but at the same time, it can be difficult to understand. If you’re looking to diversify your investment portfolio, the crypto market might seem a compelling way to do it. However, before you get started, it’s worth getting to grips with the fundamentals.
Let’s take a look at how you might approach crypto, and what a sensible investment strategy really looks like.
Get Clear on Your Goals and Risk Tolerance
If the crypto market can be described using a single adjective, then ‘volatile’ would probably be a good choice. The value of a given digital asset can fluctuate enormously over the course of just a few hours – and if you’re trading unwisely, it’s possible to lose everything.
Thus, it’s worth being aware of what the risks are, and how much you’re willing to lose. Then, invest accordingly.
Understand the UK Regulatory Environment
Part of the appeal of cryptocurrency is that it offers freedom from fiat currencies, and more traditional, physical assets. However, global crypto markets are increasingly being targeted by regulators, both in the UK and elsewhere. HMRC recently announced that, from 2026, service providers would be required to report transaction data to the tax authorities. Other changes, like the Financial Authority’s proposed liberalisation of the rules around crypto exchange-traded notes, might actually make investment more compelling.
Choose a Secure Platform and Wallet
One thing that’s dampened the appeal of crypto assets is the fact that scammers often use them. However, it’s perfectly possible to trade in crypto without putting yourself at risk. The trick is to find a secure wallet, so that you control the assets in question, and to use an exchange that’s reputable and based in the UK.
Learn the Basics Before You Leap In
It can often seem that understanding how crypto works requires a degree in computer science and a doctorate in pure maths. But even a little bit of knowledge can help you to trade with confidence – and you might be surprised at how simple the underlying principles of trading actually are, once you understand them.
You can glean a lot from reading articles online, and by looking at free videos. For best results, however, a crypto trading course is ideal.
Avoid Common Mistakes
Of the beginners who run into problems, most are guilty of just a handful of mistakes. If you understand these errors in advance, you might be able to avoid repeating them.
You might fall victim to biases and errors in judgment. It’s easy to feel confident if you win early on, and this can lead to risky behaviour. You should also understand your capital gains tax liability, which kicks in at £3,000.