Everything Teenagers need to know about cryptocurrencies

What Is A Cryptocurrency?

Cryptocurrency is a sort of digital currency that is traded on the blockchain, an encrypted and publicly verifiable network. According to one recent study, the majority of Americans feel that cryptocurrency represents the future of money, making it ideal for young people learning about investment.

Cryptocurrency is classified as a decentralized currency since it is issued by no governing entity or central bank.

Cryptocurrencies are meant to be ultra-safe, with cryptographic techniques and encryption algorithms used to secure the blockchain networks on which they are traded, but crypto traders remain vulnerable to hacks and fraud. This is due in part to the fact that the blockchain is administered by autonomous computers that exist independently of any government or regulatory authority.

Key Points

-Cryptocurrency is a digital money that is traded on the blockchain, an encrypted and publicly verifiable network.

- There are around 20,000 cryptocurrencies in circulation, but only a few have considerable market value.

- People of any age, including teenagers, can invest in cryptocurrencies, however several crypto exchanges in the United States require consumers to be at least 18 years old.

Because cryptocurrency investment is high-risk, unregulated, and speculative, minors should not invest more than they—or their parents—are willing to lose.

Can Teens Invest in Cryptocurrency?

Teenagers can, in fact, invest in cryptocurrencies. While many assets in the United States are not open to minors, anybody can invest in cryptocurrency. There are currently no rules prohibiting adolescents from purchasing or trading cryptocurrency, however there are several barriers to investing.

The most common method of purchasing bitcoin is through a controlled exchange such as Coinbase or Binance.US. These exchanges make it simple to deposit US money and buy cryptocurrency. However, most exchanges demand that you be at least 18 years old to open an account.

So, if you're a teen looking to invest in cryptocurrencies, there are just a few options, which will be covered later in this article.

Can a minor have a crypto wallet?

Yes, for self-controlled crypto wallets with no age restrictions. However, wallets that are part of a licensed crypto exchange are only available to customers over the age of 18.

At what age should you get into crypto?

You should start studying cryptocurrency as a preteen or adolescent, at the same time you learn about other financial ideas. You don't have to be a cryptocurrency investor to be interested in the sector and how it operates. As a teen, investing a little amount of money in cryptocurrencies might be a terrific way to learn about digital transactions, the blockchain, crypto wallets, and distributed ledger technology.

What Is Investing in Cryptocurrency

Cryptocurrency is valued in the same manner that any other asset is: by the law of supply and demand. Because various cryptocurrencies may be purchased and sold on public and private exchanges, the price of a certain cryptocurrency is set by the market.

This implies you may invest in any crypto asset, and the price will change according to market demand. While cryptocurrencies are considered risky investments, some have a higher value than others because of their popularity, worldwide acceptance, and the value produced for them in the market.

Bitcoin

The first cryptocurrency was Bitcoin (BTC). It was founded in 2009 by Satoshi Nakamoto, a programmer who went under the moniker Satoshi Nakamoto. Users were rewarded with bitcoin for processing and confirming transactions on the first blockchain network.

As it gained popularity, more individuals began mining Bitcoin, and soon exchanges were formed just for the purpose of purchasing and exchanging Bitcoin.

Bitcoin's value has increased from a few pennies in 2010 to more than $20,000 in 2017. The price then fell for a while before rising to a record high of more than $68,000 in 2021. Bitcoin values plummeted drastically from those levels, dipping below $20,000 before surpassing that mark again in 2023.

Ethereum

Ethereum (whose native token is called Ether, or ETH) is today's second-most popular cryptocurrency, and it pioneered blockchain smart contract technology. Ethereum's blockchain features hundreds of apps that employ smart contracts, and it boasts faster transaction rates than the normal Bitcoin network.

Because Ethereum is programmable, it is regarded as the operating system on which many decentralized crypto programs are now constructed.

Ethereum may be purchased or sold on the majority of major cryptocurrency exchanges, select brokerages, and finance applications.

Ethereum (whose native token is called Ether, or ETH) is today's second-most popular cryptocurrency, and it pioneered blockchain smart contract technology. Ethereum's blockchain features hundreds of apps that employ smart contracts, and it boasts faster transaction rates than the normal Bitcoin network.

Because Ethereum is programmable, it is regarded as the operating system on which many decentralized crypto programs are now constructed.

Ethereum may be purchased or sold on the majority of major cryptocurrency exchanges, select brokerages, and finance applications.

Types of Cryptocurrency

There are about 20,000 cryptocurrencies in circulation. While many of them are worthless, the overall value of cryptocurrencies today is around $1 trillion. However they all fall into two main categories:

Coins: Crypto coins are native cryptocurrencies that reside within the code of a blockchain. These cryptocurrencies each have their own blockchain network and are intended to be exchanged as currency (similar to US dollars or euros). Bitcoin, Litecoin, and Dogecoin are examples of crypto currencies.

Tokens: Tokens are coins that are developed on top of an existing blockchain network. Tokens may be used in blockchain apps for more than simply trading; they can also be used to regulate access, monitor items, and validate activities inside the service. Tether and Chainlink are two examples.

Each type of cryptocurrency may be used in a variety of ways, with new solutions being invented each year.

Ways That Teens Can Invest in Cryptocurrencies

Teens trading in the cryptocurrency market have the same options as adults when it comes to exchanging digital assets. The following are the primary methods for creating and managing crypto trading accounts.

Crypto Apps: Some cryptocurrency apps allow children to earn cryptocurrency. Apps like Step make it easy to purchase and trade Bitcoin for a fixed cost. Step provides a protected credit card for minors as well as a financial software that allows your children to purchase and trade Bitcoin within the app.

To establish an account for a minor, an adult sponsor is required.

A Custodial Account for Cryptocurrencies: A custodial account is an investment account controlled by adults that allows parents or guardians to create an account on behalf of a kid. They allow parents or families to invest for their minor children, but the assets belong to the child.

EarlyBird, for example, was one of the first custodial accounts to enable crypto investment. You may finance your child's EarlyBird account and opt to invest in Bitcoin or Ethereum from within the account. EarlyBird also encourages the use of exchange-traded funds (ETFs) and other traditional investment options.

Decentralized Exchange: Decentralized cryptocurrency exchanges handle transactions directly on the blockchain. Because these exchanges are still unregulated, there are no age restrictions, and adolescents may use them to link their own digital wallet and trade cryptocurrencies.

However, these trades are extremely dangerous, and there is no method to swap fiat cash (such as US dollars) for crypto. To use them, you must already hold cryptocurrency in a digital wallet.

Risks Of Investing In Cryptocurrencies

Investing in cryptocurrency is dangerous, period. It is a risky investment, and you should never invest more than you are willing to lose.

Here are some of the fundamental hazards of investing in cryptocurrencies, for teens as well as everyone else:

Security

While crypto itself is protected by encryption and cryptography, there have been several scams and hacks that have lost investors billions of dollars since its inception in 2009.

Uncertainty

Cryptocurrency is a largely unregulated asset, and governments throughout the world have various degrees of control over it. Some cryptocurrencies may be outright outlawed, or their use may be restricted by some countries. These occurrences may have a substantial impact on the value of your investment.

Volatility

Cryptocurrency is inherently volatile. As a new asset class, there will continue to be price fluctuations as more investors enter the market. Because of this volatility, you may lose part (or all) of your investment, and you may expect 50% or more reductions in your cryptocurrency value at times.

The Bottom Line

Cryptocurrency is a new and disruptive technology that provides a new method to do business and invest. Over the last decade, Bitcoin and other leading cryptocurrencies have given some amazing profits.

However, investing in cryptocurrency remains highly speculative, with a far higher risk of loss than most conventional assets. If you are still a teenager, your best bet is to keep studying about cryptocurrencies and how it is transforming the financial world. If you wish to put a small amount of money into this new asset, you can do so through a custodial account or an authorized cryptocurrency app.