A Guide to Crypto

Cryptocurrency has been around for more than a decade, with the oldest, Bitcoin, making its debut in 2009. Initially dismissed as a fad, it has since gained serious attention from investors, governments, and central banks.

During his presidential campaign, Trump declared his ambition to make America the “crypto capital of the planet.” Since Trump’s election, the cryptocurrency market has experienced significant growth and volatility. Initially, there was a surge in investment and optimism, with Bitcoin and other cryptocurrencies reaching record highs. However, the market has seen fluctuations, with some cryptocurrencies losing up to 45% of their value this year.  

Last year, investments in cryptocurrency index funds in Europe and America surged from $48 billion to $146 billion, according to Morningstar, with most of the increase occurring in the last months of 2024. This surge in investment reflects the heightened interest and optimism in the crypto market driven by Trump’s pro-crypto policies and promises of a clearer regulatory framework. However, such funds are banned in the UK.

The Rise of Crypto Ownership
In the UK, about 7 million people own cryptocurrency, up from around 5 million in 2022, according to the Financial Conduct Authority (FCA). The average holding is worth £1,842. The FCA describes crypto as “high risk and speculative,” warning that investors should be prepared to lose all their money. Despite this, those who have stuck with crypto have seen significant rewards. Since the beginning of 2023, the value of Bitcoin has surged by 515%, compared to a 14.6% rise in the FTSE 100 index of leading UK shares.

What is Cryptocurrency?
Cryptocurrency is digital money not issued by a central bank. It is based on a mathematical formula that creates a finite number of coins, with transactions recorded on a blockchain. Many cryptocurrencies, including Bitcoin, are designed to have a finite supply. New coins enter circulation through “mining,” where computers solve complex mathematical problems. About 19.5 million of the maximum 21 million Bitcoins have already been mined. This limited supply means the value cannot be manipulated like traditional currencies.

Investing in Crypto
To invest in cryptocurrency, you need to go through an intermediary firm such as Etoro, Coinbase, or Crypto.com. These platforms function similarly to investment platforms like Hargreaves Lansdown or 7iM. There are usually fees for buying or selling crypto, and a currency conversion charge since investments are made in dollars. For example, Etoro charges 1% to buy or sell, with a currency conversion fee of 0.75%.

Spending Crypto
To spend crypto in the real world, it typically needs to be converted into cash first, which involves fees. However, digital banking firms like Revolut allow users to buy and spend cryptocurrency directly through their app. By changing the debit card settings, payments can come from your crypto holdings, with Revolut converting it into a currency like sterling.

Should You Invest?
Investing in crypto should not be driven by the fear of missing out. Since September 2025, Bitcoin has been nearly five times as volatile as US stocks, and Ethereum has been nearly ten times as volatile. Andrew Oxlade from Fidelity International warns that potential investors need to consider whether they can handle the volatility.

Tax Implications
Gains from crypto assets are subject to capital gains tax (CGT) at 18% for basic-rate taxpayers and 24% for higher or additional-rate payers. You can make up to £3,000 a year from capital gains before any tax is due. Last year, HM Revenue & Customs sent “nudge letters” to those suspected of failing to pay, warning of penalties on top of any tax due.

Halving Events
Bitcoin undergoes a halving event approximately every four years, which increases scarcity and potentially makes the coins more valuable. The last halving event was in April 2024, with the next expected in the spring of 2028.

Investing Without Buying Crypto
If you’re looking to invest in crypto without directly buying it, consider through funds or companies whose share prices are closely linked to crypto assets.  For example, MicroStrategy and Coinbase. MicroStrategy’s shares have soared by 80.88% over the past year, thanks to its substantial Bitcoin holdings. Coinbase, a major crypto trading platform, has seen its shares rise by 160% in the same period. Another option is the Blockchain ETF, which invests in companies involved in blockchain technology and has shown promising returns. These investments offer exposure to the crypto market without the need to buy and manage digital currencies directly.

Remember, while the potential for high returns is enticing, the crypto market is highly volatile and speculative. Always do thorough research and consider your risk tolerance before diving in.

By Jack Smith |  April 2025