Norwegian's forgotten US$25 bitcoins enough to buy luxury flat

Norwegian's US$25 virtual currency purchase in 2009 becomes US$847,000 windfall; he cashes in part of it for an apartment in Oslo

PUBLISHED : Wednesday, 30 October, 2013, 9:14pm
UPDATED : Thursday, 31 October, 2013, 11:24am

The meteoric rise in the bitcoin virtual currency has meant that within the space of four years, one Norwegian man's forgotten US$25 investment has turned into an US$847,000 windfall.

Kristoffer Koch invested 150 kroner (US$25) in 5,000 bitcoins in 2009, after discovering them during the course of writing a thesis on encryption.

He promptly forgot about them until widespread media coverage of the anonymous, decentralised, peer-to-peer digital currency in April this year jogged his memory.

Bitcoins are stored in encrypted wallets secured with a private key, something Koch had forgotten. It took a full day, but eventually Koch worked out what the password was.

It was then that he got a pleasant surprise.

"It said I had 5,000 bitcoins in there. Measuring that in today's rates it's about NOK5 million (US$847,000)," Koch said.

In April, the value of bitcoin peaked at US$266 before crashing to a low of US$50 soon after.

Since then, bitcoin has seen large fluctuations in its value, most recently following the seizure of online drugs marketplace Silk Road, plummeting before jumping US$30 in one day to a high of US$197 in October.

Widespread speculation on the currency helps explain the bitcoin's roller-coaster volatility.

Koch exchanged one fifth of his 5,000 bitcoins.

Even after deducting 28 per cent tax on his windfall, he had enough kroner to buy an apartment in Toyen, one of the Norwegian capital's wealthier areas.

"Not in my wildest dreams could I have imagined that they would have soared like this," Koch said.

"It's bizarre, these psychological reflexes that make us attach a value to something that doesn't have any in itself."

Typically bitcoins are bought using traditional currency from a bitcoin "exchanger", although due to strict anti-money-laundering controls, the process can be tricky. A user can then withdraw those bitcoins by sending them back to an exchanger like Mt Gox, the best known bitcoin exchange, in return for cash.

However, bitcoin is gaining more and more traction within the physical world too. It is now possible to spend bitcoins without exchanging them for traditional currency first in a few British pubs, including the Pembury Tavern in Hackney, London, for instance. Last month the world's first bitcoin ATM also went online in Vancouver, Canada.

In August, Germany recognised bitcoin as a "unit of account", allowing the country to tax users of the digital currency.

A small group of hardcore users also generate extra bitcoins by "mining" for them - a process that requires computers to perform the calculations needed to make the digital currency work, in exchange for a share of the built-in inflation.

Additional reporting by Agence France-Presse