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If you’re looking for a cryptocurrency to invest in, we’ve spoken to various experts about the important things to consider and places to focus your research.
Be warned – crypto markets are volatile and unpredictable. If you invest in cryptocurrency, you should be prepared to lose all the money you put in. Cryptocurrencies are also largely unregulated in the UK, so there’s little help available if you fall victim to scammers.
You might think that the best way to choose which crypto to buy is to look at the past performance of various tokens, and to see what people are saying about them.
But while price history and sentiment may be useful for assessing when to buy, it’s important to accept that past performance is no guarantee of future returns. Put simply, there are better ways to decide what to buy.
First and foremost, the factors to consider when investing in crypto are the utility and ‘tokenomics’ of the asset you’re thinking of investing in.
A coin’s utility is its effectiveness in tackling the problem it is designed to solve. For example, with Bitcoin, the world’s first and largest cryptocurrency, its utility is enabling peer-to-peer payments without intermediaries, making transactions faster and cheaper.
Varun Kabra, chief growth officer of the Concordium cryptocurrency, says: “Understanding the size of the problem the project is genuinely trying to solve, and how its technical design enables that, is a faster, cheaper, reliable and scalable way to drive long-term value in any asset.”
As with any product, it’s those that fill a genuine gap in the market that prove themselves valuable.
‘Tokenomics’ refers to the way in which the supply of and demand for a cryptocurrency are managed.
Cryptocurrencies that are designed to become scarcer over time – either by way of a total supply cap or by burning tokens – have price inflation naturally built in. This might make them attractive to investors who believe the increasing scarcity will drive up prices.
Alena Afanaseva, founder and CEO of BeInCrypto, says: “Examine supply schedule, inflation, token unlock calendars, and whether users need the token for fees, governance, staking, or collateral.”
The next important factor is adoption and network usage, which Afanaseva says is akin to a crypto asset’s ‘revenue’. This includes metrics like daily active addresses, transaction volumes and developer activity.
She adds: “If usage and developer participation are growing independently of price, that’s usually a stronger signal than sentiment.”
There are a lot of websites you can use to check these metrics, including the likes of CoinMarketCap, CoinGecko and CoinDesk.
The third factor concerns market liquidity, security and regulation. Afanaseva says would-be investors should consider the following questions:
Protocols are the rules for how a blockchain works. Those that haven’t been independently audited are a red flag, according to Afanaseva: “Audits don’t guarantee safety, but they significantly reduce the likelihood of critical failures.”
Cryptocurrencies in which a small number of wallets or validators control high percentages (40% or more) of the network are vulnerable to:
Regulatory status is also something to consider, as the decisions of regulators can have big impacts on the prospects of crypto assets – as was the case with the long-running legal wrangling between the United States Securities and Exchange Commission (SEC) and XRP.
Price history and movements shouldn’t be ignored completely though, as Nic Puckrin, crypto analyst and co-founder of The Coin Bureau, explains: “If a cryptocurrency repeatedly struggles to defend a key support level, that’s a red flag. Equally, tokens that are trading well below their previous all-time highs during a bull market cycle are less likely to deliver strong gains than those that are in price discovery mode, that is, above their previous all-time highs.
“When there is a big price move, it’s also important to see if it’s happening on low volume, which could indicate that it will be short-lived.”
Nobody can predict with any degree of accuracy how cryptocurrencies will perform in the future.
Andrew Latham, a financial planner at SuperMoney, says investors should be sceptical of recommendations for particular coins or tokens: “Pick assets with clear utility, strong fundamentals, and active development. Let hype guide your curiosity, not your investment decisions.”
There are many risks associated with putting your money into cryptocurrency, including volatility, security failures, fraud, lack of consumer protection and environmental impacts.
The volatility of crypto markets is easily illustrated. If you invested £1,000 in Bitcoin on 1 January this year and still held your investment, you’d be up by around 8%, giving you £80 of unrealised gains.
In April, however, your investment would have fallen in value by roughly 20% to around £800. Had you held on until October when Bitcoin reached its 2025 peak, your investment would have gained 24%, giving you £240 worth of unrealised gains. These swings are typical of crypto assets.
Ethereum, the world’s second largest cryptocurrency by market capitalisation, has had an even more tumultuous year. At its lowest point, Ether had fallen in value by around 56% compared to its 1 January price. Had you started the year with £1,000 worth of Ether, you’d have potentially lost £560 of it by April.
Security is another big risk. Crypto is inherently lucrative to criminals who can take advantage of vulnerabilities in the technology used for transactions and storage – especially given the relative anonymity of crypto itself.
Exchanges work hard to keep their platforms secure, but hackers are working hard too, which means we’re still seeing breaches,
In February 2025, North Korean hackers stole £1.1 billion worth of Ether (ETH) from the Dubai-based crypto exchange ByBit, with £121 million of the loot thought to have been laundered within 48 hours.
Often it’s investors themselves who are targeted by scammers using social engineering tricks to dupe them into willingly handing over their login details for their exchange accounts and crypto wallets.
Fraud is rife too, as there’s basically no oversight with regards to who can create and run a cryptocurrency.
‘Pump and dump’ schemes enrich those who artificially engineer hype for a crypto project to boost the asset’s value before dumping their holdings for maximum profit, leaving smaller investors with losses when prices plummet.
If a new crypto asset shoots up in value for no logical reason, trading volumes are spiking and there’s little information available about the asset’s inner workings, you may be looking at a pump and dump scheme.
Finally, cryptocurrencies generally pose a risk to the environment. Proof of work cryptocurrencies such as Bitcoin consume tremendous amounts of energy in the process of validating new blocks of transactions so that they can be added to the blockchain.
Bitcoin alone consumes approximately 63 terawatt-hours (TWh) of energy per year, which is roughly equivalent to the annual energy consumption of Poland.
Fraud and security lapses are a particular problem with crypto because the market is largely unregulated, which means there are very few protections for consumers if they become victims.
The Financial Services Compensation Scheme (FSCS), which protects people in the UK if a registered financial services provider goes bust (for up to £85,000 worth of losses, per institution), does not apply to crypto exchanges or wallet providers.
The UK’s financial watchdog, the Financial Conduct Authority (FCA), also doesn’t fully regulate crypto markets. The FCA has jurisdiction over anti-money-laundering rules and financial promotions, but most cryptocurrencies are unregulated.
This isn’t to say that investing in crypto is inherently dangerous from a security point of view.
Crypto exchanges work hard to keep their customers’ accounts secure, and many have insurance funds set up to compensate customers in the event of a security breach in which funds are stolen.
Binance, for example, has a Secure Asset Fund for Users (SAFU). It holds more than $US1 billion of stablecoins in reserve to reimburse customers, should they incur losses as a result of a security breach.
And plans to bring crypto into regulation are working their way through the UK Parliament, with a legislative framework expected to be in place by the end of 2026. Once implemented, crypto firms will have to be registered with the FCA and comply with its conduct and consumer rules, giving investors more support if things go wrong.
There are basic principles to follow to avoid becoming a victim of scams, hackers or other bad actors looking to take advantage of crypto investors.
If you’re already investing, practise good security hygiene. Basic crypto security tips include using complex passwords that aren’t easy to guess, and enabling two-factor authentication on your exchange and/or wallet accounts.
Our How To Choose A Crypto Wallet guide has more advice on keeping your crypto encryption keys safe from thieves.
If you’re yet to begin trading, choose an exchange that is registered with the FCA. You’ll then at least know it is a legitimate outfit that complies with anti money-laundering rules. Our guide on How To Choose A Crypto Exchange can help.
No legitimate person or company would ask you to share account login details for your exchange or wallet, nor would they ask you to share your private keys.
Be wary of texts and emails that present themselves as being from a trusted sender. Check the email address or phone number of the sender and cross reference it with the official websites they claim to belong to.
Never follow a link to a crypto-related web page without first hovering your mouse over the URL and previewing the destination.
Be extremely cautious about crypto tips claiming to be ‘the next big thing’ or the ‘best cheap crypto to buy now’, and never be pressured into making an investment decision before a supposed deadline. Remember: things that seem too good to be true usually are.
There are solid arguments for crypto investment strategies that involve diversifying your crypto portfolio so that volatility in one area can be counteracted by relative stability elsewhere. Remember to also think about crypto investments in the medium to long-term rather than the short-term, because crypto is not a way to get rich quick.
Remember that, even if a crypto asset appears to be on a bull run, it could easily crash without warning. Never invest more than you can afford to lose, and try to base your investment decisions on the fundamentals of an asset, rather than hype.
Serious investors keep abreast of the latest market developments via reputable crypto news sites publishing crypto market updates based on credible sources. Cointelegraph and Coindesk are worth looking at.
