A guide to Bitcoin: what is it for and how do you spend it? | bestbrokers.co.uk

A guide to Bitcoin: what is it for and how do you spend it?

Bitcoin and other cryptocurrencies are notoriously volatile. However, smart management and good timing can mean serious return on investment. For instance, the price of Bitcoin hit all-time high of $20,000 in mid-December 2020, before rising even further at $34,000 at the beginning of January 2021.

This is a companion discussion topic for the original entry at https://www.bestbrokers.co.uk/blog/2021/01/26/a-guide-to-bitcoin-what-is-it-for-and-how-do-you-spend-it/

Well for a start you could always buy a Tesla!


Tesla announced in an SEC filing released on Monday that the company had invested $1.5 billion in Bitcoin in January. Tesla added that it would soon start accepting the cryptocurrency as a form of payment on a limited basis. Bitcoin’s stock price increased to a record high of more than $44,000 on Monday, according to multiple news outlets.

This latest news helped push bitcoin up 17% through the $44,000 mark and hitting $44,868.98.

One of the reasons for Bitcoin’s value is demand, like any other market.

The big difference between cryptocurrency, such as Bitcoin, and fiat currencies (such as Sterling, Dollar or Euro) is that with cryptocurrencies there is an absolute limit to the amount. With Bitcoin, this is just short of 21 million. There can never be more than that. It’s rather like gold in that respect, although we haven’t got all of the gold out of the ground yet, it is a finite commodity.

Compare that with the fiat currencies. Theoretically, there is no limit. Governments are printing money like it’s going out of fashion. Short of money? Print some more. Fiat currencies are not backed by anything. The UK left the gold standard in 1931 and the US in 1933.

Fiat currencies have a value because people believe it. The same is true with cryptocurrencies.

Interesting Musk wants to save the world with electric cars but buys $1.5billion of Bitcoin; all a bit hypocritical, but like most probably just happy to make money anyway he can. The creation of BTC uses more energy than industrialised countries in a year - Austria, Belgium Switzerland and the like - and has a carbon foot print of 37 million tons of CO2 per year - it has produced more carbon dioxide than New Zealand.

Just a thought, will anyone be charged for the carbon tax on Bitcoin?

Ok so you’ve got your Bitcoin - where and how can you spend it? The ‘how’ has been quite extensively elaborated on in the main article, I won’t bore you with repetition, so that just leaves the where. In the UK there are an increasing number of locations that you can actually spend your BTC; this handy comparison website now actually pinpoints the crypto-friendly stores, retailers, locations and companies in the UK and you can refine your search by ‘type’ whether your desire to spend be on sport, groceries, travel, accommodation, nightlife and soon and so forth.

With an increase in acceptance by quite a few of the major international companies, many of which are themselves becoming heavily invested in cryptocurrency development, the breadth of usage for us all is slowly widening.

Moving on - I have done a little bit more local research, and found that pretty well all UK banks will block payments to cryptocurrency exchanges, and quite a number won’t even accept payments from an exchange which is quite worrying. Primarily this seems to be just a case of banks being protectionist as they see cryptocurrency as a very real and viable threat to their future businesses; this will no doubt all change in the very near future.

Such is the push by the ‘big movers’ in the market, I’m pretty sure the reality is that within less than 10 years the acceptance and usage of cryptocurrencies will be as normal as credit cards are today.

I recently read an interesting observation on the Tesla comment above, when in December 2020 Tesla raised a further $5b from share dilution supposedly to increase capacity and fund construction of new factories. Did they really need to invest that much in Bitcoin to accept BTC as a payment method? If not then surely they are effectively saying that BTC is a better investment than growing their own business. What does anyone else think about this?

So by now we all know that cryptocurrencies are known for being secure and providing a level of anonymity. To which the obvious question is who seriously spends their days worrying about the security of their conventional transactions? Apart from tax avoiders, fraudsters and gangsters, who is anonymity supposed to help?

Transactions in them cannot be faked or reversed and there tend to be low fees. Their decentralised nature means they are available to everyone, although they can be complicated to set up and few stores accept them for spending.

One high profile banker I know recently offered me the following comment on BTC (I won’t embarrass him/her in case they have to eat their words in the very near future!) "…I’m sure some useful mainstream applications and services will eventually be developed but at the moment cryptocurrencies look like a wonderful solution without a problem….”

In his view, a view still held by many, perhaps the most popular use of cryptocurrency is only as a speculative investment, with users buying up the coins in the hope they will go up in value, or that one day might be useful as an alternative to traditional currencies.

When it comes to spending Bitcoin some of the high rollers might consider taking a lead from Twitter CEO Jack Dorsey and rapper Jay-Z who have announced a new BTC fund that will focus on the cryptocurrency’s adoption in India and Africa. The pair intends to invest 500 Bitcoin, which is currently worth around £18.87m (19/02/21 value) in the endowment fund named ₿trust.

Meanwhile across the pond in the USA, and elsewhere across the globe, there’s been a bit of a Bitcoin ATM boom with them being installed in shops, petrol stations and even strip clubs. These ATM machines swap cash for cryptocurrencies and vice versa. According to ATM Radar, a website that monitors and shows you the nearest locations for your handy ATM by cryptocurrency type, there are currently 15,622 machines available in 71 different countries.

As with many finance related offerings there is a sting in the tale for users of these ATMs as the commission charge be anything from 15% upwards - so, as always, caveat emptor!