Crypto basics and why people invest
A plain-English guide for people who are new to cryptoassets. It explains the ideas, not what to do with your money.
For information only. This page is not investment advice or a recommendation, and it does not promise any return. Cryptoassets are high risk and you can lose all of the money you invest.
1. Who this page is for
It is for anyone who has heard about Bitcoin or Ethereum, wonders how the market works and would like to understand the vocabulary before deciding whether it is for them. You do not need any prior knowledge. Read it slowly and use the tables as a quick reference.
2. What are cryptoassets?
A cryptoasset, often called a cryptocurrency, is a digital asset recorded on a shared, tamper-resistant ledger called a blockchain. Instead of a bank keeping the records, thousands of computers keep identical copies and agree on every update. Bitcoin, the first and best known, was created in 2009. Others, such as Ethereum, use the same idea for different purposes.
Like anything else that is traded, the price depends on supply and demand. If more people want to buy than sell, the price tends to rise, and the reverse is also true. Many cryptoassets have a fixed or slowly growing supply, which affects how they behave.
| Term | What it means |
|---|---|
| Blockchain | A shared record of transactions held by many computers at once. |
| Wallet | Software or hardware that holds the keys needed to move your assets. |
| Exchange | A marketplace where cryptoassets are bought and sold. |
| Token / coin | A unit of a cryptoasset that can be sent and received. |
| Supply | How many units exist or can ever exist. |
1 You start a payment
Your wallet signs a message saying how much to send and where.
2 The network checks it
Computers confirm that you own the funds and have not already spent them.
3 It is added to the ledger
The transaction joins a block and the recipient sees the balance change.
3. Why does the price change?
Cryptoasset prices move for many reasons at the same time, and nobody can predict them reliably. The main ones are trading volume, news, investor mood, and wider economic and global events. The table shows how each factor works and the chart of steps beside it shows how a price move builds.
1 Something happens
A news story, a rate decision or a large trade.
2 Investors react
Some buy, some sell, and many wait.
3 Volume shifts
The balance between buyers and sellers moves the price.
| Factor | How it can affect price |
|---|---|
| Trading volume | Higher volume usually means smoother price discovery. Low volume can make prices jump. |
| News | Announcements about regulation, big companies or security incidents can move prices quickly. |
| Investor sentiment | Optimism and fear can push prices well beyond what fundamentals suggest. |
| Economic factors | Interest rates, inflation and the strength of currencies such as the pound influence risk appetite. |
| Global events | Conflicts, elections and crises can change how much risk investors are willing to take. |
4. What is volatility?
Volatility describes how much and how fast a price moves. High volatility means large swings up and down, low volatility means smaller, steadier changes. Cryptoassets are usually more volatile than shares or currencies.
High volatility creates the possibility of gains and of losses in equal measure. When you look at a strategy, ask how big its worst falls have been, not just its best rises, and whether you could live with them.
| High volatility | Low volatility | |
|---|---|---|
| Price moves | Large and fast | Small and gradual |
| Possible gain | Bigger | Smaller |
| Possible loss | Bigger and quicker | Smaller |
| Predictability | Low | Higher, though never certain |
| What to consider | Position size and a firm loss limit | Whether returns justify the fees |
5. What is risk management?
Risk management is a set of habits that stops one bad outcome from doing serious damage. The core ideas are simple: only invest money you can afford to lose, spread your money rather than putting it all in one place, decide in advance how much loss is acceptable, and review your position regularly rather than reacting to every headline.
On Forge Capmoor, the tools that support this include strategy pauses during unusually volatile markets, alerts, a limit on how much a strategy may use, and scoped API keys. They help you stay in control. They do not make investment decisions for you and they do not guarantee any result. See the risk disclosure.
Why do people invest in cryptoassets?
People come to the market for different reasons, and it helps to be honest about which one is yours. Some are drawn to the fact that it is open around the clock, seven days a week, unlike traditional stock markets. Others like the range of assets and the fact that trading volumes are high in the largest ones. Some want a small part of their savings in something that may not move in step with shares or property, although in stressed markets that link can disappear. And some are simply curious about the technology behind it.
What none of these reasons can promise is a return. The same volatility that attracts people can produce steep falls, and many people who bought at a peak have waited years to see a recovery, or never seen one. If you are considering it, treat it as a high-risk part of a wider plan, never as a substitute for savings.
What to think about before you invest
- Your goal. Are you learning, saving for the long term or trying to make money quickly? The last of these is the one most likely to end badly.
- Your time horizon. Money you may need within a year does not suit an asset that can fall by half in a few weeks.
- Your emergency fund. Build savings for surprises first, so you are never forced to sell in a downturn.
- Your tax position. Gains may be taxable, and records matter. Speak to an adviser if you are unsure.
- Who you are dealing with. Check regulators, addresses and reviews, and beware of anyone promising guaranteed returns. Our fraud warning lists the signs.
How automation fits in
An automated platform such as ours watches prices and volumes continuously and places trades according to rules. That can save a great deal of screen time and remove some emotional decisions, but it does not change the nature of the market. The strategy is only as good as the rules behind it, and the rules are built from the past. Think of automation as a way to carry out a plan, not as a substitute for having one, and read about its limits on our artificial intelligence page.
6. Quick questions from beginners
Is it too late to invest in cryptoassets?
Nobody knows. Prices can fall as well as rise, and buying at any point carries risk. Timing the market is very hard, even for professionals.
How much do I need to start?
You can begin from £250 on our Basic plan. Choose an amount you could lose without hardship rather than the most you can scrape together.
Are cryptoassets protected like a bank account?
No. Cryptoassets are not covered by the Financial Services Compensation Scheme, and you may not be able to complain to the Financial Ombudsman Service about trading losses.
Do I have to watch the market all day?
Not with an automated platform, but you should still check your account regularly and keep alerts on.