MENU
 
 Registered users can save articles to their personal articles list. Login here or sign up here

All I want for Christmas is bitcoin

Give your children something to think about.

In the last few weeks before Christmas, parents around the world are searching for the best presents to give their children. Everything from dolls to drones will be on the shopping list.

But how about also giving them some financial education and stuffing a bit of bitcoin into their stockings?

Given the hype around cryptocurrencies, it’s likely that most teenagers have heard of bitcoin. Some more tech-savvy preteens may well be aware of it too. It’s currently sexy and trendy, and while a bit of bitcoin may not be as fun to unwrap as an iPhone, it’s still something to tell their friends about. More than that, it also has potentially much longer-term benefits.

The beauty of it is that it works as an investment lesson, regardless of what happens to its value. Whether bitcoin is a bubble that bursts or it turns out to be the basis of the digital economy of the future, there’s something to be learnt.

The upside scenario

With bitcoin up more than 600% in dollars this year, there’s a lot of excitement about its potential. Its gain in rands has been ever bigger. It’s currently trading at over R150 000, having started the year at a little under R14 000.

This has been an incredible period, but bitcoin bulls argue that 2018 is going to be an even better year for cryptocurrencies. They believe that as these instruments become more mainstream, the demand for them will continue to grow.

They also think that the potential for increased oversight and regulation will not hurt prices. On the contrary, they say that this will actually encourage big institutional investors who have thus far stayed out of an unregulated instrument. If, as expected, cryptocurrency-tracking exchange-traded funds (ETFs) are launched in the new year, major financial institutions could join the party.

In this scenario, the price of bitcoin just continues to rise, and if you hold it for the long term you could make a lot of money. If that’s the case, it’s a great investment lesson for any child to learn, particularly when the asset in question is as volatile as bitcoin.

Being able to hold onto something and see it appreciate over time despite short-term price fluctuations is a key attribute for any successful investor. In the digital age, anyone can watch the price of bitcoin day by day, even hour by hour, but if they commit to holding onto it through the turbulence and are rewarded for that stance in the long term, you could make a steely investor out of your child.

The downside scenario

To be honest, however, there are few serious financial commentators who believe that bitcoin is not in some sort of bubble. The price rise is driven almost entirely by sentiment, with very little fundamental underpin, and history tells us to expect this to end in tears.

Just in the last week two Nobel prize winners have added their voices to the chorus of concern about cryptocurrencies. Joseph Stiglitz and Robert Shiller both expect a crash, although it’s impossible to say when it will occur.

So if you do buy some bitcoin for your children, be prepared for this possibility. If it happens, however, the investment lesson is no less valuable.

It’s quite possible that bitcoin will continue to climb. Prices could go much higher in the short term, and the enthusiasm for cryptocurrencies could continue. It could be an exciting ride for a few more months or even years.

If the bubble bursts, however, reality will set in very quickly. This can be very sobering, but losing money is often a better teacher than making it. There are a number of good financial lessons worth learning early in life: nothing appreciates rapidly forever; don’t invest in something you don’t understand; sentiment can be horribly misplaced; and diversify your risk. A bitcoin crash would bring all of those to the fore.

One can be sure that in the decades to come there will be other bitcoin-type fads. It’s therefore a good idea to be prepared for them.

Losing money now might not be much fun for either you or your children, but it will be remembered, and making an intelligent investor out of your child in the long term is probably worth losing a few hundred rand this Christmas.

AUTHOR PROFILE

COMMENTS   25

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Forget children, there are way to many adults that don’t understand the first thing about bitcoin or cryptocurrencies, buying yourself some crypto and getting to understand how it all works will go a long way in educating people.

put a tulip in the stocking as well πŸ˜‰

As long as it reads something like this : lol- Tulips yeah people thought these where going to boom, but they can wither and die, BTC will never die.

Lovies : Mom and Dad πŸ˜›

BTC is competition for central banks and governments. They will kill it when it gets too strong.

@MoneyChief

They can’t “kill” it necessarily, they can however shutdown exchanges and make it much more difficult to obtain, but this has been done before, exchanges where all shut down in China a few months ago after it was outlawed, and since then BTC has gone up 400% because there is still Chinese buyers, everything just went underground and trades are done OTC style, so yes the value can tank dramatically, and I also think it will correct sometime in the near future, however, it will never die, it will be worth a few hundred dollar maybe, but never die.

A tulip you say? well, lets see. I got my bitcoin debit card in Jan 2015. Since then I have moved of the financial grid and buys everything with my bitcoin debit card including filling up my car. On 4 Feb 2015 the price of petrol was R10,05 and bitcoin was R3929.20. By Wednesday petrol will be R14,76. With 1 Bitcoin and your R3929.20 we could both buy 390,96 liters of petrol with 1 bitcoin on 4 Feb 2015. Today you’ll buy only 266,20 liters with your pathetic Rand and I can buy 11,598.91 liters with my tulip. Wonder who is the bigger fool

We’ll watch the space. Maybe you should sell your house and buy bitcoin then Deon? Then you can buy 20 houses in 12 months time at this rate. Bitcoin is just like Dotcom(and tulip) craze and crash.Enjoy the ride while you can.

You’re wrong again. You see, I don’t buy bitcoin, I mine them. I recouped the cost of my Antminer S9 within 69 days and am mining Bitcoin. Its a ride I am enjoying thoroughly. But perhaps you should consider selling your house before this bubble economy crash and your house becomes worthless. Thanks to Bitcoin it took me less than 2 years to become completely debtfree and to move completely off the financial grid. The only ones having a ride is the banks and their ride is on you.

Umm I’m a tad lost here, the S9 costs around R45,000 and gets 14 TH/s which with electricity costs and pool fees added in and at todays difficulty should net around R3500pm. How on earth are you debt free and living the dream making R3500pm? What am I missing…can you elaborate and let us mere mortals know how much you net from your S9, please don’t forget electricity and all those other charges

One needs to remember that any investment has a finite window of opportunity that allows one to make money by investing in it.Once you are outside that window, it is over! There is no company on the JSE today that will be here 100 years from now. They will all cease to exist. Even NASPERS will collapse (and imagine the effect thereof on the JSE!!!). My point being, that just like SOME shares on the JSE, bitcoins today is offering you a window of opportunity to make money.
So I guess the real question is…has that window passed us yet?

Why not buy an Ethereum virtual cat? The worlds gone potty! Too much QE/low interest rates and this is what you get.

>>> Too much QE/low interest rates and this is what you get.

+1000 This is the root of all this ‘financial innovation’ – basically your stolen interest is being used as venture capital by select insiders.

All I want for xmas is the crypto bubble to burst.

To me this Bitcoin thing looks like a pyramid scheme

If you understand what a crypto currency is, and you understand the textbook definition of a pyramid scheme they couldn’t be further apart.

Actually there is not much difference speculating with bitcoin vs shares on the JSE. The vast number of stocks on JSE do not pay out dividends…thus the only way an investor can make money is by speculating that the price will go up.

Actually I will rather take my chances with bitcoins, given SA’s tremendous successful policies regarding businesses (BEE), mining laws and government interference in these entities :(.

The point is that the crypto currency mechanism is being used as a pyramid scheme and not as the currency its founder intended.

Cryto today simply provides a single, global, anonymous, outside-of-tax betting arena where punters around the world feel comfortable making long term bets because there is no central organisation that to steal their bets and private key encryption means hacking from outsiders is very difficult.

@Timmo

My response was more to address the assertion that its a “pyramid scheme” which it isn’t, however like you point out, yes, it is a “asset class” if you will, that is used for speculating, personally I hold a bunch of crypto’s and it has severed me tremendously well, if you think Bitcoin being 1300% up for the year is impressive then you should have seen what the other smaller coins have been doing ETH is up 4600% DASH is up 7500%

I invested a very small amount into ETH and DASH and I was rewarded VERY handsomely in the process.

@Timmo

I disagree that speculating in bitcoin is the same as the share market.

Just because a company is not paying dividends doesnt mean their cash reserves or underlying assets are not going up which should usually explain a rising valuation. If a company has lots of opportunities to invest or expand they often will not pay dividends.

The key thing is that EVERY stock has the potential to pay dividends at some point or else its value would be zero. A share price is the markets view today of the sum of all the discounted future dividends.

Crypto currencies have no possible way to ever pay a dividend. The only way to make money is to have someone buy one off you at a higher price. With shares you actually own something that makes money.

Which exchanges do you use for the smaller cryptos PJJ?

Dear Patrick –

I am absolutely convinced you would never, ever advise one of your clients to invest in a company whose stock price has increased by over 600% in a year, would you? Even the esteemed Naspers with its vast Tencent client base and other actual physical assets has been viewed with scepticism by many fund managers over the last year.

Yet responsible fund managers are considering BC?

The only reason I would buy BC – R1000 – to give to a child would be simply as an example of the term “animal spirits” and the “greater fool theory”.

The more the critics lash out at bitcoin, the more the holders benefit. So i wonder who really is the fool here.

For those that are serious about bitcoin and want to learn how to start, how to buy, how to safely store it and ofcourse make money with it…You get a certificate for each module completed. Knowledge is power! click here and register for free to take the zero obligation tour http://iCoinProSuccess.com/MarinaFriedman2

I see the biggest advantage of bitcoin and the like is that robertinsydney doesn’t understand them so won’t comment on Moneyweb articles about them! I fear however that this comment might spark him into action. I hope not.

I’m sure RobertinSydney will pitch soon. I think bitcoin is probably replacing his justification for emigrating to Australia…

Load All 25 Comments
No more Comments, leave a reply.

LATEST CURRENCIES  

ZAR / USD
ZAR / GBP
ZAR / Euro

Podcasts

GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2