5 crucial things you need to understand before considering crypto

Please note: Cryptoassets may not regulated so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws and are not suitable for the majority of investors.

Research suggests awareness of cryptoassets is on the rise. As they continue to feature in headlines and be discussed on social media, this could lead to the fear of missing out (FOMO) pushing more people to invest.

According to a survey conducted by the Financial Conduct Authority (FCA), 91% of people are aware of cryptoassets, with many first hearing about the asset through traditional media, social media, online news, and friends or family (16 December 2025).

With crypto becoming a common topic of conversation, it might feel like everyone around you is invested and that you’re missing an opportunity. However, only 8% of people held cryptoassets in 2025. So, if you’re experiencing FOMO, it could be misplaced.

Before you contemplate investing in crypto, here are some important things you need to know.

1. Cryptoassets are a high-risk investment

Compared to traditional assets, such as stocks, shares, or bonds, cryptoassets are higher risk. As a result, they may not be suitable for most investors.

There is a greater chance that you could lose money when investing in cryptoassets, so it’s often recommended that you only invest what you can afford to lose.

2. Investors could be exposed to extreme volatility

Investment markets experience volatility all the time – it is part of investing. Often, volatility is caused by factors that are difficult to predict. This is particularly true for cryptoassets.

Cryptoassets are more likely to experience extreme volatility, and it’s not uncommon for asset values to experience double-digit changes in a single day. This volatility may make it difficult to incorporate cryptoassets into a long-term plan.

In addition, seeing the value of your asset sharply rise or fall can cause emotional decision-making. For example, during a period of downturn, you might be more likely to panic sell due to a fear that the value will continue to fall.

3. Cryptoassets don’t afford you the same level of protection

While some crypto activities are regulated in the UK, with the framework set to strengthen in 2027, you aren’t as protected as you would be if you invested in traditional assets.

For example, if your stocks and shares are held with a regulated provider that collapses, the Financial Services Compensation Scheme may cover up to £85,000 per eligible firm. This would not be the case if a crypto platform were to collapse.

In addition, if you hold unregulated cryptoassets, you cannot usually escalate a complaint to the Financial Ombudsman Service.

4. Misinformation provides an opportunity for scammers

Cryptoassets are a relatively new asset and there’s a lot of misinformation online. This makes them attractive to scammers. Indeed, the FCA notes that reports of crypto investment scams doubled between 2020 and 2025 (16 February 2026).

Fraudsters tend to advertise on social media and may use images of celebrities to promote fake investments. Professional-looking websites might also show fake prices and investment returns to encourage you to invest.

You should always be alert to potential scams when investing, including in cryptoassets. Remember, if it sounds too good to be true, it probably is. If you’re unsure about an opportunity or if something doesn’t feel right, don’t be afraid to take a step back.

5. Gains made on cryptoassets may be liable for tax

If you purchase and dispose of cryptoassets and make a gain, you may be liable for Capital Gains Tax. It’s essential to be aware of your tax liability to avoid an unexpected bill and a potential fine if you don’t disclose your gains to HMRC.

Cryptoassets could also become liable for Income Tax and Inheritance Tax.

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Your investment strategy should consider your circumstances, risk profile, and goals to assess which opportunities might be right for you. Please contact us to talk about how investments could fit into your wider financial plan.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Cryptoassets may not regulated so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws and are not suitable for the majority of investors.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.