Having quadrupled in value during 2020, Bitcoin soared over the weekend although it has since fallen back to about $31,000 (£22,750).

Last year wasn’t the first time Bitcoin’s value has risen so quickly. During 2017, it leapt from about $1,000 to more than $19,000. But by the end of 2018 it had fallen to below $4,000.

Other cryptocurrencies also gained in 2020, with Ethereum up 465% last year.

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Adrian Lowcock, head of personal investing at Willis Owen, said: “The year has started with a bang as far as markets are concerned, with Bitcoin in the headlines after it reached record new highs, and equities racing higher initially.

“Bitcoin made progress in 2020, with some financial institutions now taking the asset more seriously, buying in at these levels and pushing up the price.

However, today’s sell-off is a reminder this is a relatively new asset, highly volatile, and still yet to find its place in the market. There are many (major) hurdles for it to overcome for it to be a useful mainstream asset.

“Meanwhile, the UK stockmarket has rallied following the resolution to Brexit, an agreement in the US on Covid-19 relief, and the rollout of vaccines.

Investors also expect oil production to be cut as Russia and OPEC meet, which is boosting the oil majors.”

Bitcoin gained credibility last year after PayPal announced plans for users to be able to buy, hold and sell the cryptocurrency directly from their PayPal accounts.

On the downside, in October 2020 the Financial Conduct Authority banned the sale of derivatives and exchange traded notes (ETNs) that reference certain types of crypto-assets to retail consumers.