Bitcoin is the first cryptocurrency and its existence continues to provoke extremes of opinion on both sides. It’s surrounded by controversy; from the intention of its still anonymous creator, by way of its black market potential, to its very definition.

Coming in the wake of the global financial crisis, its philosophy was to create a currency that operates outside of “corrupt” traditional global banking systems. A new system in which no-one has overall control, but everyone owns the currency equally.

HMRC defines it, and all other cryptocurrencies, as ‘cryptoassets’. It doesn’t recognise it as a currency but as a financial asset, giving it a different tax treatment.

In terms of financial success, its peak value was in December 2017, when one Bitcoin was worth $20,000. And its quick price increase over the last few months is what’s putting it back in our headlines.

How much is Bitcoin worth today?

The price of Bitcoin has risen by a whopping 160% during this year. And is up 40% during November alone. Currently, one Bitcoin is valued at just over $19,000. That’s around £14, 400.

This dramatic rise almost beats its own previous price record. It’s worth remembering that the previous peak was quickly followed by a huge crash that saw value drop by a quarter in just one day.

Other cryptocurrencies, like Ethereum and Litecoin, have also grown in value during this year. But Bitcoin remains the market leader.

What’s the COVID-19 pandemic connection?

Investors have previously put their money in gold because it’s a stable, finite resource. In other words, it’s an actual thing you can hold in your hand, there’s only so much of it in the world and so the price remains steady.

Situations like a global health pandemic can lead governments and banks to make more money in order to deal with the economic issues it’s created. This weakens those currencies and leaves markets open to the resulting inflation. So investors have been looking for safer places to put their money.

Only 21 million Bitcoins exist in the ledger. They’re not all available now, but are slowly released between its inception and 2140. People trade in parts of these coins.

This makes Bitcoin is a finite resource by definition – one of the reasons investors like gold.

But they also want price stability. And Bitcoin has a history of price fluctuation. Until recently.

‘Institutional investors’ are starting to move towards buying Bitcoin at the moment. That means companies and organisations, rather than independent individuals. They are seeing this as a safer move in the current global climate. With some even moving from gold to Bitcoin. This is a bit of a self-fulfilling prophecy in terms of stability. The more corporations that invest, the more it will appeal to others and, therefore, feel safer.

Another factor encouraging purchases of Bitcoin is that PayPal is launching a cryptocurrency element to its platform in 2021. Particular account holders will be invited to store and spend Bitcoin through PayPal’s systems.

An ideological choice

There are some who feel that governments’ responses to the COVID-19 crisis are an infringement of civil liberties and a step towards more dictatorial leadership. This is summarised by Izabella Kominska in her FT article: “Bitcoin’s anonymous security acts as a hedge against the worst of dystopian realities.”

If you’re afraid of where things can end up politically, Bitcoin can be seen as the ‘just in case’ answer to self-preservation. Although this requires a strong belief in the likelihood of a doomsday scenario becoming a reality.

For those that have previously been interested in taking their money, and its power, out of traditional banks – this could be the final push they need into Bitcoin investment.

There were always those who invested based on philosophy and lifestyle decisions. Recent events all over the world may simply encourage those who hadn’t quite committed to a purchase. For others, it’s a ‘we can see what might happen, so we’re putting our wealth out of reach’ choice.

Does this mean I should be buying Bitcoin?

You need to take independent financial advice about your own investments. This is not advocating investment in Bitcoin. Just a look at why its price has risen so suddenly and how the global health pandemic has contributed to that.

Most advice is to make Bitcoin only a small part of your wider portfolio. This is because it’s mainly used for trading and not yielding investment profits. And its new found stability is not yet proven over time.

AMP Capital’s head of investment strategy and chief economist, Shane Oliver, told the BBC: “Its huge volatility hardly makes it a safe haven as a store of value. I have far more confidence in the $50 note in my wallet retaining its value over time than Bitcoin, which seems to bounce around like a yo-yo.”

Everyone must make their own economic choices, based on their individual positions. Its perhaps unexpected that a consequence of the global health pandemic is an increase in the legitimacy and stability of cryptocurrencies. How far will this go? We just don’t know.