Will a thousand in Bitcoin grow?

Anyone who jumped on the Bitcoin bandwagon at the start of 2020 will likely be rubbing their hands with glee.

Someone who bought £1,000 worth of the cryptocurrency would have seen that turn into £3,292.16 by the last weekend before Christmas, a return of 229 per cent in less than a year, according to personal finance comparison website Finder.

During the same period, if the sum was invested in real, physical gold it would have turned into £1,214, and £865.66 if it had followed the FTSE 100.

It might be incredibly volatile, it might have no real underlying value and it might still be hard to do anything with, but there's no doubt that bitcoin has had a stellar year.

To exchange Bitcoin, visit:bitcoin to euro

After a quiet two years since the bubble last burst in 2018, the cryptocurrency has been on a surge in the second half of 2020, having initially seen the price fall to as low as $3,800 a coin in mid-March when investors were dumping assets of all kinds in a mass sell-off in response to the coronavirus.

By late December, it had reached a new all-time high of around $23,500, a more than 500 per cent rise from trough to its new peak.

And equally as eye-catching as the raw numbers has been mainstream finances' changing view of the cryptocurrency, which has helped push bitcoin to new heights.

Unlike three years ago, when it peaked at just under $20,000 a coin before collapsing, this year's surge has not been driven by hype-fuelled everyday investors buying up the 21st century equivalent of Dutch tulips.

Instead, 'it finally got the seal of approval as an investment from many of the biggest investors in the world and the biggest Wall Street banks', Glen Goodman, an analyst and author of The Crypto Trader, said.

Having until fairly recently turned their noses up at the cryptocurrency, seeing it something akin to a gambling chip, asset managers and banks are now diversifying their holdings, in some cases selling out of gold and buying into bitcoin.

This has largely been due to three connected 'c's', coronavirus, central banks and currencies. 'Bitcoin's price has tripled since the start of the year and I have to wonder whether any of that would have happened in the absence of coronavirus', Goodman said.

'Before then, the global economy was doing fine, but the virus lockdowns put central banks in panic mode. The US Federal Reserve started printing new money in unprecedented quantities, in the hope of giving their economy a jump-start.

'Diluting the dollar put downward pressure on its value, and as the dollar sank, gold and bitcoin rose. A narrative of bitcoin as a better store of value than the dollar became popular with some of the biggest names in finance.'

Tom Stelzer, a crypto specialist at Finder, added: 'bitcoin has proven to be a valuable hedge, beating out traditional store-of-value assets like gold.'

Certainly, the idea of bitcoin as 'digital gold' certainly appears to have caught on. Grayscale, an asset manager focused on digital currencies, saw a record $1billion

poured into it between July and September, 81 per cent of which came from institutional, rather than everyday, investors.