Cryptocurrency is a form of digital currency that uses cryptography for security (where it gets its name) and operates on decentralised networks, typically built on blockchain technology. Unlike traditional currencies issued by governments and central banks, cryptocurrencies are not controlled by any single authority. This decentralisation makes them resistant to censorship and manipulation, while also introducing volatility and regulatory challenges.
Bitcoin, one of many cryptocurrencies, was created in 2009 and is the first and most well-known cryptocurrency. It operates on a network where transactions are verified by network participants (called miners) and recorded on a public ledger known as the blockchain. Imagine a list of all transactions that everyone can see (and make sure it’s not changed) with people checking the list to make sure its accurate.
Bitcoin’s supply is capped at 21 million coins that will ever exist, and coins are introduced through a process called mining, which involves solving complex mathematical problems.
What drives the price of Bitcoin?
Bitcoin’s price is influenced by a variety of factors, both internal to the crypto ecosystem and external in the broader financial world.
1. Supply and demand
Bitcoin’s fixed supply creates scarcity, especially as more coins are mined (meaning less coins available to miners in the future) and halving events reduce how often coins are issued. When demand increases - whether due to investor interest, economic instability, or technological adoption in platforms such as Paypal - prices tend to rise.
2. Institutional and retail adoption
The entry of institutional investors, such as hedge funds, pension managers, and asset managers, has significantly impacted Bitcoin’s price. Products like Bitcoin Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs) have made it easier for both institutions and retail investors to gain exposure.
3. Regulatory news
Government policies and regulatory decisions can cause sharp price swings. Positive developments, such as ETF approvals or legal recognition, often boost prices. Conversely, bans such as China’s crypto crackdown or tax changes can lead to selloffs.
4. Macroeconomic factors
Bitcoin is increasingly viewed as a hedge against inflation and currency devaluation. When interest rates are low, Bitcoin may attract more investment. Economic instability or geopolitical tensions can drive investors toward Bitcoin as a “safe haven” asset.
5. Market Sentiment
Crypto markets are highly sensitive to sentiment. News coverage, social media trends, and influential figures can cause rapid price changes. Fear, uncertainty, and doubt can lead to panic selling, while hype and optimism can trigger buying frenzies.
Investing in cryptocurrency: opportunities and risks
In October 2025, the FCA lifted a previous ban on the purchase of crypto currency ETNs to retail investors in the UK. An ETN is an investable product that tracks the price of Bitcoin but does not involve direct ownership of the asset. They can also be held in ISAs and SIPPs.
As well as ETNs, investors have several ways to invest in cryptocurrency:
- Direct purchase: Buying Bitcoin or other cryptocurrencies via exchanges.
- Indirect Bitcoin ETFs: While Bitcoin ETFs are still not permitted in the UK for retail investors, investors can access crypto-themed ETFs that hold shares in companies involved in the blockchain and crypto space.
Risks to consider
Trading in cryptocurrencies involves risk:
1. Volatility
Cryptocurrencies are known for their extreme price swings. Bitcoin, for example, can gain or lose thousands of dollars in value within hours. This volatility can lead to significant gains—but also steep losses - making crypto unsuitable for investors with low risk tolerance or short-term financial goals.
2. Regulatory uncertainty
Crypto regulation is still evolving globally. Governments may introduce new laws that restrict trading, impose taxes, or ban certain platforms. For example, while the UK recently allowed Bitcoin ETNs for retail investors, other countries like China have banned crypto trading altogether. Regulatory shifts can dramatically affect market access and asset values.
3. Security risks
Crypto assets are stored in digital wallets secured by private keys. If a key is lost or stolen, the funds are unrecoverable. Additionally, exchanges and wallets can be hacked, and scams are common in the crypto space. Investors must take extra precautions with cybersecurity and avoid unverified platforms.
4. Lack of intrinsic value
Unlike stocks, which represent ownership in a company and may pay dividends, or bonds, which generate interest, cryptocurrencies do not produce income or have underlying assets. Their value is driven largely by speculation, sentiment, and perceived utility, which can make them more vulnerable to bubbles and crashes.
Lower risk investing
For many retail investors, a diversified portfolio that includes equities, bonds, real estate may be more appropriate. By spreading your money across these different asset types, you can reduce risk whilst maintaining potential for attractive returns. Trading or holding Crypto offers a high-risk, high-reward alternative, and we would suggest should be balanced with more stable assets. The Virgin Money fund range does not invest in cryptocurrencies directly or indirectly, instead choosing a globally diversified mixed of bonds and equities. Take a closer look on each fund's webpage.