Cryptocurrencies are now far from the niche interest and technological marvel they once were. The creator of the Bitcoin whitepaper has still never been found, but at the same time, the new President of the United States tried to sell his own memecoin within his first days in office.
For this reason, most people, especially people who may not have heard of the technology, know about it. They often see the fluctuating prices that signify the potential for overnight profit, and they become interested.
Now, we’re not at all going to suggest that your family members are incapable of understanding what they’re getting into. But the truth is that like many investments, and especially this one, crypto is volatile. It’s not a get-rich-quick scheme, as anyone with the discipline of personal finance management knows. As there’s a lot of poor information out there, we hope to help your loved one more easily grapple with cryptocurrencies by exploring some of the technology, history and trends that have come along with it:
Explain Different Coins
Bitcoin started it all, but thousands of other cryptocurrencies exist today. Each serves a different purpose for the most part, and a good portion are complete junk. Bitcoin is far and away the most reliable and trusted, and it acts like digital gold, as people store value in it and use it to send money around.
Ethereum works more like a computer network, letting people build apps and smart contracts on top of it, and so it’s considered a reliable alternative that is still worth holding a position in. Then there are “stablecoins” like USDC that stay at one dollar, making them useful for trading and sending money and as time goes on, we’ll see more and more governments adopting this technology. The United Kingdom repeatedly signals its interest in doing o, for example.
There also purposecoins (not an official term at all) which try to solve specific problems. Monero is one you may have heard of as it focuses on privacy, and Solana is another and tries to process transactions very quickly. Just keep in mind and tell your relative that many coins don’t serve a real purpose, as they’re created just to make money for their founders. That’s why it’s important to understand what a coin actually does before buying it, and to stay away from any immediate coin suggested to be the next big thing by people who profit if you fall for that.
Research & Discuss Price Fluctuations
Crypto prices change constantly because the market is still young and unregulated for the most part, even though crypto holdings are counted as savings in some countries. This means that when big investors buy or sell large amounts, prices move significantly, and it can happen without much warning.
As with different currencies or stocks, news about regulations, hacks, or adoption by companies can send prices soaring or crashing within hours, and so you really do have to be prepared to lose everything you have in moments if invested in this field. With that comes the chance to rapidly profit from enhanced value.
Looking at historical charts shows this pattern clearly. Bitcoin has gone through several major cycles in that way, often rising to new highs, crashing hard, then eventually recovering and going higher. Right now it’s on average at the highest it has ever been, even if such swings happen faster and more severely than with stocks or other traditional investments. Make certain your relative understands this.
Show Transparent Ledgers & Payment Platforms
One of the most interesting parts of cryptocurrency, which has gone quite far in legitimizing, is how anyone can see all transactions on the blockchain. This is a ledger from which every transfer gets recorded permanently in a public database. Special websites called block explorers let people search through this history, seeing exactly how money moves around. For example, the Filecoin block explorer is a great example of this.
Some of the most popular platforms like Coinbase and Binance make buying and selling crypto easier now, and are generally considered trustworthy exchanges. They work qutie similarly to your usual banking app even if they’re necessarily as regulated. Still, they’ve made crypto more accessible to people who don’t want to deal with complex wallets and private keys to try and move money around or to purchase.
Now, be aware that not all platforms are reliable. We saw that with FTX, where Sam Bankman-Fried the owner was siphoning money to fund a company dedicated to his own personal lifestyle, and he stole billions in the process. This also means that the man is serving a long jail term, not only damaging the credibility of his own name but many crypto platforms in the process. So, always do your research and vet any platform you pay with ahead of time, and make sure your relative knows how to do that.
Point To Prior Scams/Pump & Dump Schemes
A further word on scams, because it doesn’t end there. The crypto world has seen plenty of these over the years, as we likely see with any perceived gold rush. Some projects promise incredible returns, only to disappear with investors’ money and nothing else to show for it.
You may be aware of social media influencers (or even conventional national celebrities) being used to artificially pump up prices before dumping their own holdings. The BitConnect platform is a good example, as it once promised daily returns but turned out to be a massive Ponzi scheme.
More subtle scams include fake wallet apps that steal people’s coins, or phishing attacks that trick people into giving up their passwords, as we see with scammers who do all they can to get access to your banking app and aren’t above targeting vulnerable people to do it. Learning about these helps spot red flags, as does keeping abreast of the news when a scandal occurs (and unfortunately, there are likely to be many more in the future) If you hear promises of guaranteed returns or pressure to invest quickly before a “rare opportunity” disappears, it’s usually wise to steer well clear. We’ll go into that with NFT’s later on.
Showcase The Philosophy
Now, at the core of crypto is an interesting and even compelling idea, depending on how much of a libertarian streak you have. Bitcoin was known in some circles after the 2008 financial crisis, when many people lost trust in banks and governments handling money completely. It’s hard to say this wasn’t an understandable reaction. The main concept, then, is about creating a financial system that doesn’t need central authorities, for better or worse. How this will remain in the future is yet to be seen.
However, because most transactions are visible and open, and each token cannot be replicated, this philosophy attracts people who value privacy, independence, and technological innovation, and like the idea of holding their own value in a digital asset that can be used with convenience. Some see crypto as a way to “bank the unbanked” or protect against inflation in unstable economies, and even some companies are on board with being paid through those channels now. The original white paper laid out these ideals, and it’s a compelling read even if there’s some tech jargon to go through.
Discuss NFT’s & Parallel Tech
You may have heard of NFTs a while ago, but not much anymore. They’re a good example of how this tech works and how the promise of a brand-new ideal doesn’t always bear fruit.
Put simply, NFTs (non-fungible tokens) expanded what blockchain technology could do beyond money. They’re basically digital tokens that can represent art, music, game items, or even real estate. While expensive NFT art made headlines, especially because of the “Bored Ape” phenomenon, the technology has practical uses, like concert tickets that can’t be counterfeited or digital proof of ownership for real items.
The same technology has helped contribute to other pursuits like decentralized finance (DeFi) applications. However, for many, it’s an example of how the tech has mostly been about selling an idea or principle rather than anything of substance.
Secure Their Wallet
To hold crypto, you need a wallet. If your relative insists on opening one, setting up their crypto wallet is important, and demands careful attention to security. Unlike a bank account, there’s usually no way to recover lost coins if something goes wrong, as one British guy found out the hard way. Hardware wallets, like this guy used, and are special devices that store crypto offline, generally offer the best protection but require learning how to use them properly.
The basic rules include: never sharing private keys, using strong passwords, enabling two-factor authentication, and backup recovery phrases somewhere safe. You might save your relative a headache by doing so.
With this advice, we hope you can help your relative learn more about crypto, understand the philosophical and historical underpinnings to it, and come out the other side with more security and capability. Also, they will feel more shrewd about making investments, which is perhaps the real victory here.