More than a fad or just a Ponzi scheme? How the world is getting used to Bitcoin

The virtual currency is being touted as a good long-term investment, as its value doubles

New York

Bitcoin, the virtual currency launched by an anonymous hacker nearly five years ago, might be more than a fad. In fact, it could be a worthwhile investment, according to a leading hedge fund manager in New York.

Bitcoin, the virtual currency launched by an anonymous hacker nearly five years ago, might be more than a fad. In fact, it could be a worthwhile investment, according to a leading hedge fund manager in New York.

Michael Novogratz, co-chief investment officer of macro funds at Fortress Investment, one of Wall Street’s best known hedge fund businesses, made the surprising suggestion at a conference organised by UBS, saying he had put his own money in the currency.

“Put a little money in Bitcoin,” Mr Novogratz said, according to Bloomberg. “Come back in a few years and it’s going to be worth a lot.”

He added that while Fortress had also looked at the digital currency, it had not invested in Bitcoin.

The endorsement follows a recent jump in the value of Bitcoin after the FBI shuttered Silk Road, an online marketplace that accepted the virtual cash and is alleged to have been a platform to buy and sell illegal drugs.

Worth around $182 in late morning trading yesterday, Bitcoin is not issued by any government or overseen by a central bank or regulator. In another departure from conventional currencies, whose volume is theoretically limitless, their stock is finite: there can only be so many Bitcoins in the world, something that critics say makes them more akin to commodities than currencies.

The way to get your hands on one is to acquire a virtual wallet, a piece of software that allows you to store and trade your Bitcoins. The wallet gives the user access to the Bitcoin network which, in the absence of a central authority, acts like a backbone for the currency, working much like a peer-to-peer file sharing service.

Users can either buy new coins from others, or “mine” new Bitcoins by using your computer to crack a code that releases a preset number of coins into your wallet. The amount released by solving the code is adjusted by the network, which ensures that there isn’t a sudden flood of new currency.

Moreover, the total number of Bitcoins is limited to 21 million by 2040. Currently, there are nearly 12 million Bitcoins in circulation.

Mr Novogratz did not elaborate on his personal investment, saying only that: “I have a nice little Bitcoin position. Enough that I’m smiling that it doubled.” Earlier this year, Bitcoin attracted the interest of Tyler and Cameron Winklevoss, the twin brothers best known famous for their feud with Mark Zuckerberg over the origins of Facebook.

Following an $11m investment in the virtual currency, they filed a proposal with the Securities and Exchange Commission, the US market regulator, for a fund that would hold and track the value of Bitcoins.

“People say it’s a Ponzi scheme – it’s a bubble. People really don’t want to take it seriously,” Cameron Winklevoss told the New York Times when the brothers disclosed their investment.

“At some point, that narrative will shift to ‘virtual currencies are here to stay’.”

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Books should be for everyone, says Els, 8. Publisher Scholastic now agrees
booksAn eight-year-old saw a pirate book was ‘for boys’ and took on the publishers
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
tech
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
life
News
i100
Life and Style
tech
Voices
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions