What is Bitcoin? What is the price? And how can I buy it?

Mr Musk has previously heralded the potential of Bitcoin in social media posts and claimed last week it was “on the verge” of being more widely accepted among investors.

Monday’s announcement prompted a surge in the value of Bitcoin as traders rushed to buy it.

But what is Bitcoin? And how can you buy it?

What is Bitcoin and how does it work?

Bitcoin, often described as a cryptocurrency, a virtual currency or a digital currency - is a type of money that is completely virtual.

It's like an online version of cash.

You can use it to buy products and services, but not many shops accept Bitcoin yet and some countries have banned it altogether.

The physical Bitcoins you see in photos are a novelty.

They would be worthless without the private codes printed inside them.

Bitcoin, often described as a cryptocurrency, is a virtual currency or a digital currency

Each Bitcoin is basically a computer file which is stored in a "digital wallet" app on a smartphone or computer.

People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other people.

Every single transaction is recorded in a public list called the blockchain.

This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undo-ing transactions.

What is the current Bitcoin price?

Tesla’s revelation caused the price of Bitcoin to jump 17 per cent to a record high of £32,210 by Monday afternoon, according to trading platform Coindesk.

There are three main ways people get Bitcoins:  

• You can buy Bitcoins using "real" money
• You can sell things and let people pay you with Bitcoins
• Or they can be created using a computer

What happened with Tesla?

Tesla has acquired around 1.5 billion dollars (£1.09 billion) in Bitcoin under an investment policy at the electric car maker headed by Elon Musk.

It said it plans to begin accepting the digital currency as payment for vehicles soon.

• SEE ALSO: Seller wants Bitcoin payment for flat

The California company revealed the new strategy in a filing with the US Securities and Exchange Commission on Monday, saying its investment in digital currency and other “alternative reserve assets” may grow.

Bitcoin spiked 14 per cent and appeared to briefly hit a new all-time high.

Shares of Tesla moved higher as well.

Can I make money investing in Bitcoin?

While Bitcoin's value has recently soared, its value is extremely volatile and it has dropped to as low as around £300 in the past – so you shouldn't invest if you can't afford to lose the cash.

What are the dangers?

Money Saving Expert Martin Lewis previously urged the public to be cautious, as Bitcoin is an extremely volatile form of investment.

He also warned people to watch out for Bitcoin scams. 

Speaking on the The Martin Lewis Money Show, he said: "Bitcoin is set up as a currency – a non-governmental currency – so you're meant to be able to spend it, but I'm presuming you're thinking of this not to spend but more as an investment, which is what most people are looking at.

"First of all, is it safe? Well, some people have lost money in their wallets.

"Like gold it can be stolen, and cryptocurrency is a bit like an equivalent to gold as it's a store of value of what people are putting in.

"You have to be very careful."

Martin added: "As to whether it's any good – I don't talk about investing.

"The thing about investing – and Bitcoin is an investment – is that prices go up and prices go down. With Bitcoin, they go up massively and they go down massively.

"And the reason for stressing that so much is that you can make a fortune, but you may lose a fortune.

"So if you can't afford to lose the money that you put in, then do not invest in it.

"It's a gamble, like all forms of stocks and shares, and all forms of investment and putting money in gold.

"That's your choice, but if you do it the right way the investment should work for you, but it doesn't mean you won't lose money though."