The value of Bitcoin has surged in recent weeks from £600 per bitcoin to over a whopping £2000.
This has generated a lot of headlines and stirred up the still-raging debate over the cryptocurrency. What is it? Is it legal tender? How do you get them, and where can you trade them?
Bitcoin is like nothing most traders have seen before. To get Bitcoin, people need to create a bitcoin wallet, with the money stored in an online, secure, digital vault. Even though it has now been around for 8 years, it is still considered a speculative, high-risk investment.
In the early days you needed to actually “mine” bitcoin by running an app that did complex mathematical sums to generate the currency before the first exchanges arrived which allowed trading of the cryptocurrency.
It’s not really feasible or economical to mine these days, it is much simpler to buy Bitcoin from a known exchange. The digital currency can be acquired in fractions down to 0.00000001 of a coin, so you don’t need large sums to invest through the many digital exchanges which now service the UK.
But, investors will still need a secure wallet to transfer their purchases to, which requires some technical understanding to create and maintain securely, although their a number of popular apps for use on mobile.
In the UK, Bitcoin is currently an unregulated currency. It is handled as a foreign currency, so you can buy and trade it, but profits or losses remain subject to capital gains taxes. However, many nations, including the US, most Western European countries and Australia, have given it legal status, so the UK could follow suit in the near future.
Certainly, Bitcoin has seen some spectacular returns on investment recently. However, the volatility and uncertainty about this and other cryptocurrencies in general, plus its use in cybercrime and the lack of security that has seen some Bitcoin vaults robbed in the past, makes it a high-risk strategy.
Anyone who is not very clear of the risks and has a solid understanding of the technology underlying it should proceed with caution in this market.
The big winners from Bitcoin are those who mined the currency in its early days, when the young currency was a digital curio worth just a few pence per coin. Some investors have made millions, but that boat has now passed.
However, new digital currencies and tokens are coming online all of the time to compete in the future. One of the hottest alternative tokens being traded currently is Ethereum’s Ether, which has recently hit it’s all-time price peak.
Any one of these could be big in the future if acquired by a major bank or technology services company, so some see it as worth the gamble of acquiring a small quantity of any currency, just in case.
For everyone else though, it is recommended to stick to high yield savings accounts and safer ways of investing money.