What is cryptocurrency trading and how does it work?
Learn everything you need to begin your cryptocurrency journey today. Discover how to buy and sell crypto in the UK.
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What is cryptocurrency trading?
Cryptocurrency trading is buying and selling digital currencies through a crypto account or relevant exchange. With us, you can buy and own coins directly through our spot crypto account.
When you use this account, you’ll buy the actual cryptocurrencies outright. This gives you the freedom to hold them for as long as you want or sell when you're ready.
Our platform offers a way to buy and sell cryptocurrencies without needing to set up accounts on external exchanges. Our partner Uphold handles the wallets and storage of your cryptocurrencies — so while you do still need to consider the associated risks, our solution is a convenient option.
This straightforward approach makes cryptocurrency trading accessible for beginners while still providing all the features experienced traders need to build their digital asset portfolio.
How do cryptocurrency markets work?
Cryptocurrency markets are decentralised, which means they’re not issued or backed by a central authority such as a government. Instead, they run across a network of computers.
Unlike traditional currencies, cryptocurrencies exist only as a shared digital record of ownership, stored on a blockchain. When a user wants to send cryptocurrency units to another user, they send it to that user’s digital wallet. The transaction isn’t considered final until it has been verified and added to the blockchain through a process called mining. This is also how new cryptocurrency tokens are usually created.
What is blockchain?
A blockchain is a shared digital register of recorded data. For cryptocurrencies, this is the transaction history for every unit of the cryptocurrency, which shows how ownership has changed over time. Blockchain works by recording transactions in ‘blocks’, with new blocks added at the front of the chain.
Blockchain technology has unique security features that normal computer files don’t have.
Network consensus
A blockchain file is always stored on multiple computers across a network – rather than in a single location – and is usually readable by everyone within the network. This makes it both transparent and very difficult to alter, with no one weak point vulnerable to hacks, or human or software error.
Cryptography
Blocks are linked together by cryptography – complex mathematics and computer science. Any attempt to alter data disrupts the cryptographic links between blocks, and can quickly be identified as fraudulent by computers in the network.
What is cryptocurrency mining?
Cryptocurrency mining is the process by which recent cryptocurrency transactions are checked and new blocks are added to the blockchain.
Checking transactions
Mining computers select pending transactions from a pool and check to ensure that the sender has sufficient funds to complete the transaction. This involves checking the transaction details against the transaction history stored in the blockchain. A second check confirms that the sender authorised the transfer of funds using their private key.
Creating a new block
Mining computers compile valid transactions into a new block and attempt to generate the cryptographic link to the previous block by finding a solution to a complex algorithm. When a computer succeeds in generating the link, it adds the block to its version of the blockchain file and broadcasts the update across the network.
What moves crypto markets?
Cryptocurrency markets move according to supply and demand. While they are decentralised and operate independently of central banks, they can still be influenced by broader economic and political developments, particularly as regulatory oversight continues to develop amid more widespread adoption.
Although there’s still a lot of uncertainty surrounding cryptocurrencies, the following factors can have a significant impact on their prices:
- Supply: the total number of coins and the rate at which they’re released, destroyed or lost
- Market capitalisation: the value of all the coins in existence and how users perceive this to be developing
- Press: the way the cryptocurrency is portrayed in the media and how much coverage it’s getting
- Integration: the extent to which the cryptocurrency easily integrates into existing infrastructure such as e-commerce payment systems
- Key events: major events such as regulatory updates, security breaches and economic setbacks
FAQs
What is the difference between a digital currency and a cryptocurrency?
The difference between a digital currency and a cryptocurrency is that the latter is decentralised, meaning it isn’t issued or backed by a central authority such as a central bank or government.
Instead, cryptocurrencies run across a network of computers. Digital currencies have all the characteristics of traditional currencies but exist only in the digital world. They’re issued by a central authority.
How many different types of cryptocurrency wallets are there?
There are five main types of cryptocurrency wallets, namely desktop wallets, mobile wallets, online wallets, hardware wallets and paper wallets. You don’t need a wallet if you’re trading cryptocurrencies via our spot crypto account.
What was the first cryptocurrency?
The first cryptocurrency was bitcoin. The bitcoin domain was registered in 2008, but the first transaction took place in 2009. It was developed by someone called ‘Satoshi Nakamoto’. However, there is speculation that Nakamoto is a pseudonym as the bitcoin creator is notoriously secretive, and no one knows whether ‘he’ is a person or a group.
Is cryptocurrency real money?
Cryptocurrencies are an alternative to traditional money. Today, some outlets accept cryptocurrencies as a form of payment. However, they bear little resemblance to other asset classes because they’re intangible and extremely volatile.
How many cryptocurrencies are there?
There are over 2,000 cryptocurrencies available to buy and sell, though most have little value. Of these, bitcoin, ether (the token of the Ethereum network), ripple, bitcoin cash (an offshoot of bitcoin) and litecoin are among the most valuable by market capitalisation as of August 2025.
We offer more than 35 of the most traded cryptocurrencies, including: bitcoin, bitcoin cash, bitcoin gold, ether, ripple, litecoin, EOS, stellar (XLM) and NEO.
What is a pip in cryptocurrency trading?
Pips are the units used to measure movement in the price of a cryptocurrency, and refer to a one-digit movement in the price at a specific level. Generally, valuable cryptos are traded at the ‘dollar’ level, so a move from a price of $190.00 to $191.00, for example, would mean that the cryptocurrency has moved a single pip.
However, some lower-value cryptocurrencies are traded at different scales, where a pip can be a cent or even a fraction of a cent. It’s important to read the details on your chosen trading platform to ensure you understand the level at which price movements will be measured before you place a trade.
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Important to know
The footer below includes standard risk disclosures and regulatory information applicable to IG’s broader range of investment services, including regulated financial instruments.
This page relates to unregulated crypto products, which are not covered by the Financial Conduct Authority (FCA) and do not benefit from regulatory protections such as the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS).
Please ensure you understand the specific risks associated with unregulated crypto assets.
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