Forget toys and collectibles, cryptocurrencies could be a hot item this holiday season.
In the US, 45% of Gen Z adults between the ages of 18 and 28 said they were looking forward to receiving cryptocurrency as a holiday gift this year, according to a global survey of 1,000 adults conducted in October by payments technology company Visa.
How wise it is to gift cryptocurrencies is another matter, and expert advice differs.
Flavio Landiver, a certified financial planner and senior financial advisor at Evensky & Katz/Falls Wealth Management in Coral Gables, Florida, says given how volatile and speculative cryptocurrencies are, it can be risky and it’s unwise to try to gift assets that will grow in value.
Unlike publicly traded stocks or exchange-traded funds, which represent ownership of tangible assets such as companies, cryptocurrencies have no “actual underlying intrinsic value,” Landibar said.
“Exactly what that will be in the future will be determined, but for now it’s basically worth the money that someone is willing to pay for it,” Landibar said. As a result, the value can fluctuate erratically or plummet, and there is little chance of a rebound.
Use gifts as educational opportunities
If you decide to gift cryptocurrencies, “any gift should be positioned as a long-term educational experience rather than a stable investment,” says Ashton Lawrence, CPF, director and senior wealth advisor at Mariner Wealth Advisors in Greenville, South Carolina. If you’re looking for an investment with a good chance of long-term growth, stick to exchange-traded funds that track a broad range of stocks, he says.
Mike Casey, a CFP and early adopter of Bitcoin and president of American Executive Advisors in McLean, Virginia, says a gift of about $50 for a birthday or holiday is “a great place to start” for gifting cryptocurrencies. “We’re not talking thousands of dollars.”
Casey recommends gifting Bitcoin over other cryptocurrencies because it is the most widely used currency worldwide and has a fixed supply. That means Bitcoin’s value could someday behave like physical metal, he says. It’s also the oldest cryptocurrency, and historically every time Bitcoin has fallen from its highs, the currency’s value has rebounded and risen further, Casey said.
Over the past five years, the price of Bitcoin in US dollars has increased by nearly $74,000, an increase of just over 400%. The cryptocurrency was trading at about $86,000 on Monday, down 32% from its all-time high of $126,000 in October.
While many gifts can help promote financial awareness, Casey says Bitcoin’s volatile nature makes it well-suited to teaching the importance of disciplined investing. Tracking the first gift year after year helps young investors become accustomed to the natural ups and downs that come with investing, he says.
“This is what investing is all about,” Casey says. “We want to have long-term goals. They’re learning that some volatility is actually OK.”
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