How to Start Investing in Crypto

This lesson sets out the order to do things in when you start investing in crypto, from the money you should sort out first to the records you will need when you eventually sell. Each step is small. Skipping one is how beginners end up with losses they did not need to take.

Investing is a different game from trading

Investing in crypto means buying coins you intend to hold for years and checking on them rarely. Trading means opening positions for days or hours and closing them when the idea works or fails. The Degen Desk is a trading desk: each morning the daily issue reads derivatives positioning and makes one call or passes, and degencoder trades every call with real money. That takes different skills and a different temperament. The trading track sets out the difference between trading and investing in full. This lesson is about holding.

Sort out debt and emergency cash first

Two things come before any coin. The first is expensive debt. Say a credit card charges you 25% a year. Paying off £1,000 of that balance saves you £250 a year with certainty, and no coin can promise you anything at all.

The second is cash for emergencies: a few months of essential spending in an ordinary savings account. Without it, a bad month in crypto can turn into a forced sale. If the boiler breaks in the same week bitcoin falls 40%, you sell at the low because you need the money, which is the worst reason there is to sell.

Decide your number

Your number is the amount you could lose entirely without it changing your life. If losing it would mean missing rent or giving up a plan you care about, it is too much. Pick it before you look at prices, because a rising chart makes every number feel too small.

Say you have £12,000 in savings. You keep £6,000 as your emergency fund and earmark £3,000 for a car next year. That leaves £3,000 you will not need for at least five years. You decide that losing £1,500 would sting but would not change anything, so £1,500 is your number.

Now test it against history. Bitcoin has fallen more than 75% from a peak more than once. A 75% fall would turn £1,500 into £375, a loss of £1,125, and it would take a 300% gain just to get back to £1,500. If you could live with that, the number is right. If you could not, make it smaller.

You do not have to put the whole amount in at once. £1,500 spread over six months is £250 a month, which takes away the pressure of picking the right day. Dollar-Cost Averaging into Crypto covers that approach in detail.

Pick an exchange and buy the cheap way

An exchange is where you swap pounds for crypto, and while your coins sit there, it holds them for you. Check these before you send it any money:

• Registration. Crypto firms serving UK customers must be registered with the FCA for anti-money-laundering purposes, and the FCA publishes a register you can check. Registration is not a guarantee that a firm is safe, but a firm you cannot find on it should not get your money.
• Track record. Prefer a large, long-running exchange to a new one offering unusual rewards. Celsius, a crypto lender that promised high yields, froze withdrawals and went bankrupt in 2022.
• Withdrawals that work. Deposit a small amount, buy a little and withdraw it back to your bank before you commit more. An exchange that makes leaving slow or expensive is telling you something.

Start with bitcoin, and ether if you want a second coin. They are the largest and most traded, and they have come through cycles in which many smaller coins never recovered. Anything smaller can wait until you have held through a fall and seen how you react.

Most exchanges offer two ways to buy. The big buy button is quick, but its fee is often built into the price as a spread you never see itemised. The order book, often labelled advanced trading, lets you place a limit order at a price you choose and usually costs far less. As an example, an instant buy with a 1.5% spread costs £15 on £1,000, while a limit order with a 0.1% fee costs £1. Crypto Exchanges and Fees Explained walks through every layer of fees.

Choose who holds your coins

Leave coins on the exchange and it holds them for you. That is simple, but you depend on the exchange staying solvent and honest, and in the UK the FSCS does not cover crypto if it fails. Move them to a wallet you control and nobody can freeze them, but the responsibility becomes yours.

A self-custody wallet is backed by a seed phrase, usually 12 or 24 words. Anyone who has it controls the coins, and if you lose it, nobody can restore your access. No legitimate exchange, wallet maker or support team will ever ask for it. A common path is to keep small amounts on a large exchange while you learn, then move larger holdings to a hardware wallet once you are comfortable. Crypto Wallets and Self-Custody Explained takes you through the steps.

Write down when you would sell

It is easy to plan the buy and improvise the sell, and that is how a large paper gain drifts back to nothing. Before you buy, write down what would make you sell or trim. It can be as simple as this:

• If crypto grows to more than 10% of everything I own, I sell back down to 10%.
• I will not sell in a fall unless my reason for owning the coin has changed.

Keep the note somewhere you will see it when prices move sharply. Rules written on a calm day are better than rules invented at the top of a rally or the bottom of a crash. Crypto Risk and Diversification shows how trimming back to a target works with numbers.

Keep records from day one

In the UK, HMRC can treat selling crypto, swapping one coin for another and spending crypto as disposals for Capital Gains Tax. Swaps catch people out, because swapping ether for another coin can count as a disposal even though no pounds reached your bank account. Keep a record of every buy, sell and swap with the date, the amount, the value in pounds and the fee. Download your history from each exchange every few months, because you cannot count on an exchange still being there when you need it. Rules change and differ by country, so check HMRC guidance or a tax adviser for your own position.

Key takeaways

• Clear expensive debt and hold emergency cash before you buy any crypto.
• Size your number for a 75% fall: £1,500 would become £375.
• Use an FCA-registered, long-running exchange, start with bitcoin and ether, and buy through the order book rather than the instant-buy button.
• Write your selling rules down before you buy, and keep a record of every transaction from the start.