It’s  very  much a ‘Millennial’ phenomenon – the idea of owning space in the digital ether, rather than building up a lifetime’s-worth of things you can touch, feel and hold.  

 Many of the things we own these days – from our books to our music and even our scrap books of our daily lives – are really  just  space we subscribe  to or rent, on the internet or in an app.   

Who would have thought this intangible, ‘subscription economy’ would have manifested itself in  Jack Dorsey, Founder of Twitter,  selling  his first-ever tweet for £2.1million, for example?  

 And then you have ordinary people flogging so-called GIFs of hysterical family moments as NFTs or ‘non-fungible tokens’, for enough coinage to fund their kids’ college educations or more. In fact, a NFT digital art piece based on a drawing of Paris Hilton, sold earlier in 2021 for $1.1million.

And money  appears to be  following the same course, with the emergence of cryptocurrencies,  a type of digital currency that uses cryptography for security.   

 By now, it’s safe to say the likes of bitcoin, ethereum, dogecoin and ZCash are definitely more than a craze, having been established now for over a decade. However, they are still widely misunderstood by many individuals, who have reservations about their true worth and practical application – what some might describe as a healthy scepticism. 

The  values  of cryptocurrencies  are dependent on supply and demand, as well as other variables, such an activity known as  ’mining’, which sets the values of different digital currencies at any given time. Unlike traditional currencies, cryptocurrencies are unregulated by the Financial Conduct Authority, which has warned consumers of the risks potentially associated with investing in cryptoassets – read more here.

To put it simply,  bitcoin and its peers, in contrast to traditional money,  which is typically linked to physical assets like paper and gold,  are created digitally by number-crunching computers and exist only in the form of a unique identifier code.  

Rather than relying on centralised government guarantees, blockchain technology, a vehicle for recording complex information like cryptocurrency identifier codes, securely, underpins the operation of cryptocurrencies, and so decentralises the whole process.  

 All transactions involving a buying or selling a virtual currency are stored in an encrypted format on this  digital ledger.  

Another vital difference between virtual currencies and  the  so-called ‘fiat’  variants  with which we’re all much more familiar, is that the former  are  usually controlled by  central banks and governments. As we’ve seen since the global financial crisis of 2008, they  can use them to manipulate the market – for example, by flooding it with additional money to prop things up when their economy is struggling.  Because this same control doesn’t apply to ‘crypto’, many  believe it to be the future, effectively putting the power over money  and how they spend it, back in the hands of the population.  

Why has it become so popular?  

Using cryptocurrency is getting easier all the time, thanks to more online companies adopting it. You’ll notice that more  and more  websites are beginning to accept cryptocurrency as payment, and this trend  could  continue. It’s also worth noting that cryptocurrency debit cards are becoming  available in some places. This may not be widespread  at the moment, but it is a real possibility.  

 Tesla owner Elon Musk created a worldwide stir when he announced his decision to let buyers purchase his Tesla electric cars using bitcoin, then promptly changed his mind a few weeks later, but only after his actions caused the value of bitcoin to reach reached its then all-time high price of $58,000.  

Ironically, when The Fintech Magazine ran its annual ‘Payments Race’ in 2019, it set four competitors on a round-the-world race armed with different forms of currency: gold, cash, wearables for contactless payments, and cards. Guess which won? Yes, unbelievably it was bitcoin, not necessarily because the contestant, Amelie Arras, found it easy to pay for everything from train tickets to food and accommodation with it, but because its cult following around the world meant she was never alone. All she had to do when desperate was put a call out on social media channels in a particular area, and supporters would appear out of nowhere and offer to swap some of her ‘coin’ for usable currency!  

 When first launched, in 2009, one Bitcoin was worth £0.00059, and today one Coin would cost you £40,508.39 – with lots of ups and downs along the route from A to B. 

People get involved with cryptocurrencies for a variety of reasons, including the possibility for profit. For example, If you purchase Bitcoin during a dip in its price, you may be able to profit as the value rises. Many people who invested in cryptocurrencies before they became extremely popular profited handsomely – in some cased reaping up to $520million in profit.

However, as Musk’s dabble with Bitcoin demonstrated, its value can fall just as astronomically as it can rise. His u-turn on people using it for Tesla purchases prompted a 22.2 per cent drop in its value, from $55,000 to $45,000.  

So, should you dabble?  

It seems that, thanks to some of the dramatic  developments of recent years, almost everyone is talking about cryptocurrency,  from kitchen fitter to  the lady serving you  your  shopping at Tesco.   

 However, while it’s easy to see  the  ‘get rich quick’ allure, the reality is very different and any thoughts you might have of investing in cryptocurrency should be treated with extreme caution, according to Wayne  Audsley, one of our Directors and Chartered Financial Planners:  

 “There is no doubt that , for  a few  years  now, cryptocurrency has been a hot topic of conversation, fuelled by stories of people who’ve  traded  in  crypto making  a lot of money overnight. So,  it’s not at all surprising that people are curious. But,  as with all such emerging  opportunities, it’s  important to keep in mind that  the  financial returns are not  as assured with bitcoin investments, as they are with other types. 

“In reality, anything which generates astronomical returns in super-quick time is, almost always, too good to be true. The general rule of thumb with all types of investment, is to do it for the long term, to give tried-and-tested assets chance to grow.”  

 And not only is there market risk that comes with trading cryptocurrency, but a greater risk of falling prey to cyber fraud risk as well. 

 Cryptocurrency’s intangibility has attracted a  class  of criminals who’ve made it their business to break into  crypto-exchanges, drain e-wallets, and infect individual computers with cryptocurrency-stealing software. As transactions are handled through the internet, hackers use spoofing/phishing and malware to attack people, service handling, and storage areas. To protect purchased cryptocurrencies, which effectively just exist in the form of pieces of code on the Blockchain, from theft,  investors must rely on the strength of their own computer security systems, as well as security measures provided by third parties.  

 “Although  crypto-trading can  create  the potential for  high reward, with that, there is also a  higher-than-usual level of risk. If you are thinking of getting involved, there are many forums you can use to  find out more or  trade cryptocurrencies,  such as  Coinbase  and  Binance, but I would suggest that you  do thorough research to find out the safest option for you and your device, and make sure that it really is right for you,”  added  Wayne.  

Is the bubble about to burst?  

One of the most crucial elements influencing bitcoin’s price is regulation. The rise of the cryptocurrency has been halted every time a government has slapped a regulatory brake on it, with countries applying a variety of checks and balances. 

 For example, when China stepped up its crackdown on cryptocurrency enterprises in November 2019,  bitcoin  hit an all-time low, replicating what happened when South Korea regulated cryptocurrency trading in 2017.  

 The UK retail bank NatWest has  recently  announced that it will not cooperate with business customers who take bitcoin or other cryptocurrencies as payment. This follows HSBC’s decision  not  to  accept transfers from digital wallets, or to facilitate its customers  purchasing shares in cryptocurrency-related companies such as Coinbase or MicroStrategy.   

 Both institutions believe that cryptocurrencies pose a significant risk and hence warrant caution, while they acknowledge that their positions may change as legislation evolves.  

 Digital currencies are considered dangerous by banks because they can be used for money laundering, are targets for fraud and scams, and their value can be extremely  volatile in the short term. Indeed, the  UK’s  Financial Conduct Authority has warned that anyone who invests  in or deals  in  bitcoin,  risks  losing  all of  their money. It is easier for banks to avoid the danger and not engage with these assets,  than face the increased burden of examining firms and people dealing in them.  

 With this in mind, will  the rise of cryptocurrency in the UK continue?   

Our thoughts  

Whether it does or not, Wayne has this advice for anyone  thinking of dipping their toe into the crypto waters.  “It’s a good idea to think about why you are interested in investing in cryptocurrency;  the hype and excitement around the space are not enough to justify its inclusion in any portfolio.  

 “Crypto-investments should not be used to fund your retirement or overall financial strategy.  Instead, you should make  sure that  the majority of  your investment portfolio consists of reliable assets with long-term growth potential.  

 “Of course, no stock market-linked investment is without risk. However, most other forms of assets have a history we can draw conclusions from, when it comes to assessing potential future trends. We  can also  carefully build portfolios to reflect factors like investors’ individual attitudes to risk, and current and predicted future trends in the market. Most portfolios also include a spread of investments which do the job of balancing our risk.  

 “None of these checks and balances apply to relative unknowns like cryptocurrency.  

 “If you are serious about trying your hand at this kind of investment, then do your own research,  ask a professional,  and make sure you’re thinking about your investment in the right way.  

 “As a rule of thumb,  though,  I would suggest  that, if you do go ahead, you only invest an amount that you are willing to lose, as there is a real possibility that this could be the  ultimate  outcome.   

 “Then, all things considered, if your investment does make you money, you should consider this an unexpected bonus.”  

If you would like to speak to a financial planner to go through your investment options, please get in touch on (01482) 860700 or email us

This blog is not a financial promotion and is intended for educational purposes only. It is intended to provide readers with viewpoints, opinions and inspiration regarding options they might want to consider, and should not be taken as advice.The value of investments can fall as well as rise and we strongly recommend seeking professional financial advice before taking any action.