Bitcoin is closing in on 13,000 (£9,725), in what is set to be another milestone in the cryptocurrency’s meteoric rise.

The price of Bitcoin pushed past 12,000 (£8,977) overnight, and was trading upwards of 12,700 (£9,503) by midday, according to CoinDesk’s Bitcoin Price Index, prompting further concerns over potentially volatile price movements.

A number of institutional investors say they are still avoiding Bitcoin, after seeing it rise around 1,100% since the start of the year.

Bitcoin is the world’s leading virtual currency, operating independently of any bank or central authority.

It was created in 2009 by an unknown person using the alias Satoshi Nakamoto, resulting in a so-called cryptocurrency that has its own value and is not tied to any physical currency.

Coins are transferred directly between users, and are kept in a digital wallet that can be accessed on a computer or mobile device.

A number of retailers now accept Bitcoin.

But aside from trading them for goods and services, or buying them on an exchange from existing users, new coins can be generated through a process called “mining” – where software and in some cases specialised computer hardware is used to to verify others’ Bitcoin transactions.

Bitcoin relies on this kind of decentralised technology – called the blockchain – for secure payments.

With companies keen to jump on the bandwagon and entice the public to spend their hard-earned cash on investments in Bitcoins, MoneySavingExpert Maritin Lewis has taken to his blog to brief consumers on the advantages and pitfalls of the currency.

“At this point I should say I’ve no expertise on the technology behind Bitcoin or other cryptocurrencies and assets,” the financial journalist warns.

So here are his four tips to avoid being caught out by the craze:

Don’t invest in something you do not understand

Martin’s advice is that, while you might not need to be an expert in the technical details, you need a thorough understanding of what you’re getting into.

He writes: “You need to understand how it works as an investment, how liquid it is (ie, can you get out when you want to), the level of risk and what can drive the price up and down.”

His advice is not to invest “just because a friend told you to”, but to do your own research and make the decision that’s right for you.

Where is the demand for Bitcoin coming from?

“To be created Bitcoins have to be mined and there are meant to be only a limited possible number to be found,” writes Martin.

“The fact it’s a scarce resource leads to the assumption that if demand rises so will the price.”

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