Size positions sensibly
Put in only what you can afford to lose, and spread it over several assets rather than one.
Crypto basics, and why people invest
A plain-English guide for UK beginners who have heard about cryptoassets and want to understand them before putting any money in. It covers what they are, why their prices move, what volatility means and how to manage risk. It is education, not advice.
Information only. Nothing on this page is investment advice or a personal recommendation, and nothing here promises a return. Cryptoassets are high risk, can fall sharply in value and are not protected by the Financial Services Compensation Scheme.
What are cryptoassets?
A cryptoasset is a digital token whose ownership is recorded on a shared digital ledger instead of in a bank's private database. Bitcoin and Ether are the best-known examples.
That shared ledger is a blockchain: a list of records, grouped into blocks, with each block linked to the one before it. Thousands of computers around the world hold copies and check new entries against one another, which makes it very hard to alter past records without everyone noticing.
Like anything else that is traded, the price of a cryptoasset comes from supply and demand. When more people want to buy than sell, the price tends to rise. When more want to sell, it tends to fall. There is no central bank or company standing behind the price.
Not every cryptoasset works the same way. Some, like Bitcoin, are designed mainly as a store or transfer of value. Others, like Ether, also power applications that run on their network. Thousands of smaller tokens exist too, many with very little trading, which is one reason we only track a short list of major assets.
| Term | What it means |
|---|---|
| Cryptoasset | A digital token that can be held, sent and traded, such as Bitcoin. |
| Blockchain | The shared ledger of linked blocks that records who owns what. |
| Wallet | The software or device that stores the keys used to access your tokens. |
| Exchange | A marketplace where cryptoassets are bought and sold for pounds or other assets. |
| Supply and demand | How many tokens exist and are on offer, against how many people want them. |
Owning a cryptoasset really means controlling the private key that lets you move it. A wallet is simply the tool that keeps that key. If the key is lost or stolen, the tokens go with it, and nobody can reverse the transfer, which is a very different situation from a bank card where a bank can step in.
How a transaction moves, in four steps
- 1. RequestYou ask to send tokens from your wallet.
- 2. BroadcastThe request is shared with the network.
- 3. VerifyComputers on the network check it is valid.
- 4. RecordIt is added to a new block and the transfer is complete.
Why do prices change?
No single reason explains a price move. Several forces usually act at once, and they can pull in opposite directions.
| Factor | How it can move the price |
|---|---|
| Trading volume | Heavy trading means more buyers and sellers, so prices can move quickly in either direction. Thin trading makes a few large orders count for more. |
| News | A new regulation, a company announcement or a security incident can change expectations within minutes. |
| Investor mood | Optimism pulls in new buyers, while fear can trigger a rush to sell, and both can feed on themselves. |
| The wider economy | Interest rate decisions, inflation figures and the value of the pound or dollar affect how willing people are to hold riskier assets. |
| Technology and supply changes | Network upgrades, security flaws, or changes to how many new tokens are created can alter how people value an asset. |
| Global events | Conflicts, banking stress or changes in other markets can spill over into crypto. |
Imagine a regulator announces a new rule on a Friday evening. Within minutes some holders sell in case the rule hurts the price, which pushes it down, which makes others nervous, and the price falls further. A day later, when the details turn out to be milder than feared, buyers return and the price recovers. The rule has not changed, but the mood has, and so has the price.
- TriggerNews or data arrives.
- ReactionTraders change their views.
- OrdersBuying or selling increases.
- New priceSupply and demand settle at a new level.
What is volatility?
Volatility describes how much and how fast a price moves. A calm asset drifts slowly. A volatile one can rise or fall by double-digit percentages in a day. Cryptoassets tend to be much more volatile than currencies or large company shares, which is exactly why they can offer larger gains and larger losses.
| Low volatility | High volatility | |
|---|---|---|
| Price swings | Small and gradual | Large and sudden |
| Potential gain | Smaller | Larger |
| Potential loss | Smaller | Larger |
| What to watch | Slow trends and fees | Position size and stop levels |
What matters is that you can live with the swings. If a 20% fall in a week would keep you awake, the amount invested is too large.
A worked example shows why losses are harder than they look. If £1,000 falls by 20% it becomes £800, and to get back to £1,000 it then has to rise by 25%, not 20%. The bigger the fall, the steeper the climb back, which is why limiting losses matters more than chasing gains.
What is risk management?
Risk management means deciding in advance how much you can lose and building rules to keep it there. It is far less exciting than picking winners, and far more important.
Set limits first
Decide a daily and monthly loss limit before the market tests you, not during.
Review regularly
Look at results every week, and change or stop what is not working.
Five habits that most risk plans share
- Know your number. Write down the amount you could lose without it changing your plans, and treat it as a ceiling.
- Start small. A first deposit at the lowest level tells you how the platform feels before you commit more.
- Use limits, not hope. A daily loss limit works whether or not you are watching. Hope does not.
- Keep records. Reports and exports help you see what is working and make tax time easier.
- Take breaks. After a big win or loss, step away for a day before changing anything.
Aureo Flowdex gives you tools for this: per-trade and daily loss limits, a market-pause setting for very volatile periods, a simulator and readable reports. They help you follow your own plan, but the platform does not make investment decisions for you and cannot guarantee any outcome.
Beginner questions
Do I need to buy a whole Bitcoin?
No. Cryptoassets can be bought in small fractions, so £50 buys a fraction of a coin. The price you see is for one whole unit.
Is cryptoasset trading regulated like a bank account?
No. In the UK, firms must meet money laundering rules and the FCA controls how cryptoassets are promoted, but your holdings are not covered by the Financial Services Compensation Scheme and you have little protection if a price falls.
Why do prices change at weekends?
Cryptoasset markets run 24 hours a day, seven days a week, unlike the London Stock Exchange. Prices can therefore move at night and on bank holidays.
How much should I start with?
Only an amount you could lose without it affecting your daily life. Our plans start at £200, and many beginners begin at that level to see how the platform behaves before deciding whether to add more. There is no prize for starting big.
Will I pay tax on gains?
You may need to pay Capital Gains Tax when you sell or swap cryptoassets at a profit above your annual allowance. We do not give tax advice, so check HMRC guidance or ask an adviser.