Bitcoin, the virtual currency launched by an anonymous hacker nearly five years ago, might be more than a fad. In fact, it could be a worthwhile investment, according to a leading hedge fund manager in New York.

Michael Novogratz, co-chief investment officer of macro funds at Fortress Investment, one of Wall Street’s best known hedge fund businesses, made the surprising suggestion at a conference organised by UBS, saying he had put his own money in the currency.

“Put a little money in Bitcoin,” Mr Novogratz said, according to Bloomberg. “Come back in a few years and it’s going to be worth a lot.”

He added that while Fortress had also looked at the digital currency, it had not invested in Bitcoin.

The endorsement follows a recent jump in the value of Bitcoin after the FBI shuttered Silk Road, an online marketplace that accepted the virtual cash and is alleged to have been a platform to buy and sell illegal drugs.

Worth around $182 in late morning trading yesterday, Bitcoin is not issued by any government or overseen by a central bank or regulator. In another departure from conventional currencies, whose volume is theoretically limitless, their stock is finite: there can only be so many Bitcoins in the world, something that critics say makes them more akin to commodities than currencies.

The way to get your hands on one is to acquire a virtual wallet, a piece of software that allows you to store and trade your Bitcoins. The wallet gives the user access to the Bitcoin network which, in the absence of a central authority, acts like a backbone for the currency, working much like a peer-to-peer file sharing service.

Users can either buy new coins from others, or “mine” new Bitcoins by using your computer to crack a code that releases a preset number of coins into your wallet. The amount released by solving the code is adjusted by the network, which ensures that there isn’t a sudden flood of new currency.

Moreover, the total number of Bitcoins is limited to 21 million by 2040. Currently, there are nearly 12 million Bitcoins in circulation.

Mr Novogratz did not elaborate on his personal investment, saying only that: “I have a nice little Bitcoin position. Enough that I’m smiling that it doubled.” Earlier this year, Bitcoin attracted the interest of Tyler and Cameron Winklevoss, the twin brothers best known famous for their feud with Mark Zuckerberg over the origins of Facebook.

Following an $11m investment in the virtual currency, they filed a proposal with the Securities and Exchange Commission, the US market regulator, for a fund that would hold and track the value of Bitcoins.

“People say it’s a Ponzi scheme – it’s a bubble. People really don’t want to take it seriously,” Cameron Winklevoss told the New York Times when the brothers disclosed their investment.

“At some point, that narrative will shift to ‘virtual currencies are here to stay’."

What is bitcoin?

Bitcoins are a made-up currency traded mainly over the internet.

The creators, who remain anonymous, describe it as an experimental currency.

There is no central bank issuing the coins, or standing behind their value.

It is a virtual currency, in theory one that can be used and exchanged anywhere and not just in a single country, or currency union.

Belfast Telegraph