What is bitcoin and how does it work?

Lee Clarkson shares his views:

Crypto currency bitcoin, ethereum, ripple and others are currencies not backed by any government. Instead, they are used for buying and selling things, so a bitcoin is like the euro, or the dollar or yen etc – it is a currency and, like the pound, when you buy bitcoin you are buying a currency.

When you hear in the news that the pound has gone down against the dollar, that means if you had bought 1 dollar for 90p last week and the pound goes down, it now costs you 99p to buy 1 dollar. However, the dollar you bought last week for 90p you could now sell and get 99p, cool you made 10% profit in a week.

Currencies tend to move against each other on a daily basis, depending if the news is good or bad for the host country, i.e. if Trump says China is great - trades are back on and the dollar will go up and so forth.

Crypto currency has no government host so moves in random patterns.

How and why have people made money on it?

It is really because of the financial grapevine - people heard of other people holding bitcoin and only ever heard stories about it increasing in value so then everyone started talking about it and more people started buying. There is a limited number of coins and people who got them were watching them rise in value and thinking they were going to make tons of money so they weren't selling and then other people jumped on the bandwagon. Eventually people realised that it was a bit of an unreal thing to have a currency not backed by anyone or supported and so they stopped trying to buy and people who were too greedy or stupid to sell then realised that they lost value and people who had bought near the top were really upset.

To put it in a nutshell crypto currency is supposed to be a safe way of buying things like using the dollar or the euro or the pound, it’s not an investment opportunity as you are looking to buy this currency on the hope that someone is going to buy it off you for more money and just because it went up yesterday and last week etc doesn't mean it always will. I don’t have any!