Can You Bank On Bitcoin ?

Can you really get rich with cryptocurrency? We decode the hype of this exciting – but murky – new financial world
Can You Bank On Bitcoin ?

Investing in cryptocurrencies promises life-changing fortunes overnight. But is this digital economy too good to be true? And should you gamble on it?

A long, long time ago, money was just shells. A rare type of shell that people exchanged for goods. Then, it was straw. Slowly, it evolved into notes and coins, and now it seems money is changing once again, with the rise of cryptocurrencies – digital or virtual assets that can be acquired and then used as payment on certain websites. Forbes recently released its first list of crypto billionaires (all men, most of a certain age, most clammy-faced), but women are catching up, with the number of us investing doubling in the first half of this year.* But can you afford to get involved, and will it actually make you rich? We took a crash course in crypto to find out…cryptowhat?


Bitcoin, the world’s first digital currency and still the biggest, was started in 2009 by the ultra-mysterious Satoshi Nakamoto, a person (or persons, no one is quite sure) who has never revealed themselves (though at last count was worth £4.9 billion). Since Bitcoin, other cryptocurrencies (known as “altcoins”) have emerged – there are now over 1,000 – with Ethereum, Litecoin and Ripple a few of the biggest. It’s a currency that only exists electronically – so you can’t hold it, or even see it. But that doesn’t mean it’s made out of thin air. Most cryptocurrencies are created by a process called “mining”. Powerful computers (no, your laptop won’t work) “mine” the digital money by solving incredibly complicated mathematical equations to validate a block of transactions and then receive a reward (ie some currency) – consuming more energy than a small country in the process.


Because, to coin a Silicon Valley saying, it’s the ultimate disruptor. It cuts out the middleman – ie banks, governments and financial institutions – allowing you to transfer your money to someone else with no third party involved. Heard of blockchain? No, not a jewellery line by JLo, but the technology behind cryptocurrency. It’s a network of computers around the world that record transactions and act as a public ledger. There’s also money to be made from crypto, if you’re smart and get lucky: Dr Larisa Yarovaya, a cryptocurrency researcher and lecturer in accounting and finance at the Anglia Ruskin University, says cryptocurrencies offer a much higher growth rate than traditional financial assets such as stocks and shares. But beware: this is because they’re so volatile. Imagine betting money on a horse with a gammy leg and a jaunty eye patch and you’re kinda close. Will it make me a million?

Back in 2011, while most of us were getting to grips with untagging photos on Facebook and avoiding the flashers on Chatroulette, some people were investing in Bitcoin. Those who bought £100 then are now, at the time of going to press,
worth around £1.55million. Regrets… yep, we’ve had a few. Bitcoin’s crazy spike in value has created a legion of unlikely rich kids – like Erik Finman, who invested $1,000 (£750) from his grandmother when he was 12 years old – and is now a 19-year-old millionaire mogul with a smug, private-jet-filled Instagram to boot. But if you’re hoping to join him, you’re probably already several years too late.“All these stories about substantial profits are people who invested in the very, very beginning when the price was very cheap,” says Dr Yarovaya. “I don’t believe we can expect such dramatic growth again.” Most of those who have become incredibly wealthy with it cashed theirs out at the right time, and invested that money in less risky ventures, such as business and property.



In a word? Very. The value of Bitcoin and other cryptos has plummeted by 80% since January, with their decline now steeper than the burst of the 2000 dotcom bubble.† Many people who got caught up in the hype and bought at its peak have seen their savings disappear. Then there’s the other early adoptersof crypto – the criminals. The anonymity of cryptocurrency makes
it a prime target for cyber crime, including hacking, fraud and money laundering. Earlier this year, Europol estimated that £4 billion of illegal money is being funnelled through cryptocurrencies. Because crypto is unregulated, if things do go tits up, department of your local bank, either. “As an investor you do not have any protection to get your money back,” says Dr Yarovaya.



You’ve come into money/have decided to invest in more than just ASOS hauls, but where do you start? Like any investment, do your research, says Dr Yarovaya. Read up on the company – look at the historical price to see if there’s been an upwards growth. Keep an eye on the news for positive stories that could affect the price – or any cyber crime or scandal that could send it plummeting. No cryptocurrency is “safe”, though, so it’s probably less risky to stick to the better-known currencies. The first step is to download a “wallet” – a piece of software that lets you keep track of your virtual cash. You can do this at an online cryptocurrency exchange like Coinbase, Coinfloor or Bitstamp (again, look at reviews and swot up first). Once you’ve done that, you can add digital currency to it. Some sites require a lengthy process to verify your ID. Then you give them cash – by bank transfer, debit or credit card – to get digital currency in return. As with most currency exchanges they’ll take a transaction fee. When you want to cash in, you can sell your digital coins via the exchange, too. If you’re lucky enough to make any profit, remember you’ll have to pay tax on it. There are also a handful of Bitcoin ATMs in the UK that let you buy and sell the currency.


Clue: not at your local Tesco Express. Businesses that accept crypto are still in the minority, but they are out there. Microsoft lets users buy games and apps with it and there’s a rumour that McDonald’s is going to start accepting it by the end of the year ( has a comprehensive list of places that accept it). If you’ve really made a killing, you can use it to book a flight to space with Virgin Galactic. In fact, the luxury world has jumped on the Bitcoin bandwagon in a big way. In New York, a cryptocurrency concierge service called The White Company helps Bitcoin billionaires (and mere millionaires) spend their virtual cash on real-life luxury goods, while crypto is fast becoming the currency of choice in the art world – with dealer Eleesa Dadiani (dubbed “the queen of crypto”) recently selling shares in an Andy Warhol painting worth £4.2million in Bitcoins.


The crypto craze is dividing the financial sector, with some confident their value will soar again and others viewing them as a dangerous bubble that will inevitably burst. Meanwhile, more niche cryptocurrencies are emerging all the time, like VeganCoin, a virtual currency for, well, vegans, and PotCoin, for buying and selling… you guessed it. But even cynics agree that digital currency is here to stay. In the same way that the first-ever iPhone now looks a bit rubbish, cryptocurrency is likely to evolve into a new, more user-friendly form, becoming the next step on from technology such as contactless payments and Apple Pay. But as for diving in? We’d suggest observing from the sidelines for now. 


Five more cryptocurrencies causing a stir :

Joining the ranks of Grey Goose, Rolex and private jets, Ripple is a celebrity favourite, having been name-dropped by Madonna, Ashton Kutcher and Snoop Dogg. Its aim was to become the mainstream crypto, but it fell in value with the rest of them earlier this year.

Started by Vitalik Buterin, yet another baby-faced computer genius, it’s the second largest cryptocurrency, behind Bitcoin. At the time of going to press, its value was faring better than its rivals.

Created by ex-Google employee Charlie Lee (who has since sold pretty much all of his coins), it’s meant to be an everyday crypto with faster transaction times that make it easier to spend.

Monero’s selling point is that it is anonymous, meaning your transactions can’t be traced. We’re sure it’s just used for buying secret birthday presents. Ahem.

A crypto for influencers. It had to happen, right? Steemit is a blogging and social-media platform that pays contributors in digital tokens – which can then be spent on other things on the site.

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