Currency

Bitcoin Is Risky But Worth It, Says Fund Manager

Controversial virtual currency Bitcoin has won the backing of a leading multi-billion pound fund manager who argues investors willing to take a risk are likely to make a profit.

Michael Novogratz, a manager of the £34 billion Fortress Investment Group has confessed he has sunk his own cash into Bitcoin over the past three months.

He explained that Bitcoin was an alternative foreign exchange mechanism in nations with weak banking networks.

“Even if developing countries don’t take the opportunity, Bitcoin has enough supporters who support libertarian views and who are anti-government to make an investment bubble.” he said.

Bitcoin is a financial enigma.

Controversial currency

The currency only exists in an electronic format and trades at £128 against the pound, with the value increasing.

US lawmakers have accused Bitcoin of a means to traffic drugs and as offering financial support to organised crime.

Nevertheless, the German government will exchange Bitcoin for euros and an investment fund has announced taking a position on the currency despite an investigation underway by the New York banking regulator.

Some investors who bought into Bitcoin when the currency first became available are making hefty returns on their outlay.

Student Kristoffer Koch, who lives in Norway, bought £16.54 worth of Bitcoin when writing a thesis about online encryption in 2009.

Bitcoin fortune for student

In 2009, that bought 5,000 Bitcoins which are now worth £640,000 at the current exchange rate.

Kock can exchange those Bitcoins into hard cash in a German bank – which he did with 1,000 to buy an apartment in an upmarket Oslo neighbourhood.

“I forgot all about them and suddenly realised I was sitting on a big investment with all the recent publicity about Bitcoins,” he said. “I had forgotten the password to unlock the cash, but after a few hours managed to work it out.”

“Everyone told me I was a mug and was buying into a scam, but I’m very happy with the results.”

As Bitcoin is a virtual currency, they can only be bought and traded online or ‘mined’ by solving a complex online equation.

The number of Bitcoins is supposed to be finite, with 11 million in circulation and a cap of 21 million when the mining equation is solved by enough online users.

Bitcoin values are not tied to any other currency and no central banks have control over the number in circulation or exchange rates.

Although Bitcoin rates are trading high after publicity following action by the US government, the price at the start of the year was just £8.

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