Crypto for Teenagers [and Kids]

(How to Invest in Crypto Under eighteen)


Teen & Crypto Coins -- Bitcoin and Ethereum

 Bitcoin, Ethereum, and other cryptocurrencies are all the rage these days, fifty-fifty though they can be risky investments. Teen investors are particularly interested in crypto because it is innovative and radically different from how their parents use and invest money.

Whereas older generations saw the stock market as a tried-and-true financial venture, many teens view information technology equally “old school,” and desire to invest in assets that, in their minds, are the moving ridge of the time to come and a more than suitable medium of exchange.

Furthermore, different prior generations, today’s teens no longer come across the need for physical greenbacks, and, considering the convenience of Apple Pay, Venmo, and other electronic payment systems, it’southward clear that digital currencies closely align with how modern teenagers operate and view the earth.

So, if y’all are curious to learn more than, keep reading! In this article, we will explicate:

  • the basics of cryptocurrencies;

  • the blockchain (the platform for investing in cryptocurrencies);

  • various types of cryptocurrencies (mainly discussing the major options, such every bit Bitcoin and Ethereum);

  • how to get started investing in cryptocurrencies; and

  • the risks and benefits of investing in cryptocurrencies

Call up, though, if you are under 18, you lot cannot buy financial assets on your own; adults (typically your parents) accept to establish custodial accounts for yous. They tin can manage the purchasing of the assets on your behalf, but you lot more often than not won’t gain command over the assets until you lot are over xviii years old.

What is Cryptocurrency?

In the most bones of terms, a cryptocurrency is a digital representation of value used to buy and sell goods and services and can also be used every bit an investment. Different centralized currencies (like the U.s.a. dollar), crypto has the potential to capeesh dramatically, depending on the market. Like any other currency, the value of cryptocurrencies regularly fluctuates.

Cryptocurrencies can be used like money in some cases, but they do non all the same have legal tender status in the Usa. Although some websites may accept the payment choice, the federal authorities does not recognize crypto equally a valid or acceptable form of monetary value. For example, if you lot owe taxes to the IRS, y’all cannot utilize cryptocurrency to pay the debt.

This may eventually change, though, as several nations around the world, such as Republic of el salvador and the Primal African Republic, accept already voted to accept crypto as a form of legal tender. Nevertheless, Americans tin still purchase and concord cryptocurrencies through the blockchain, allowing teens and adults alike to invest in the growing market.

How Exercise Cryptocurrencies Work and What is the Blockchain?

Although the concept of a digital currency may be confusing or even intimidating initially, the underlying engineering science is quite simple. Cryptocurrencies are built on a decentralized network of computers, called a blockchain, that keeps runway of all the transactions fabricated using the currency.


Representation of a Block Chain

This system is similar to how a depository financial institution might proceed track of money that flows in and out of its accounts. The main difference, though, is that since cryptocurrencies are decentralized, in that location is no one entity (like a bank) that has control over the network. Instead, the blockchain is maintained by a network of blocks that comprise information and create a network for secure person-to-person transactions.

Therefore, to tamper with the recording of transactions on the blockchain, one would accept to change all the records in the distributed computers simultaneously, which is a nearly impossible task. This makes the transactions on the blockchain extremely secure.

Blockchain applied science was first established in 1991 merely it wasn’t until 2009 that Satoshi Nakamoto put information technology into action to create the first cryptocurrency—Bitcoin. In exchange for their work, individuals who “mined” data through the blockchain would be rewarded a small amount of the currency, understanding that the full corporeality was limited (to merely 21 one thousand thousand bitcoins) and would someday run out. About 19.14 million bitcoins take been mined as of September 2022.

What is a Bitcoin? A Simple Explanation for Teens (and Kids)

Bitcoin is a cryptocurrency created in 2009 past Satoshi Nakamoto. It follows the ideas set up out in a whitepaper past the mysterious and pseudonymous Satoshi Nakamoto, whose truthful identity has withal to be verified. Co-ordinate to his original statements, “A purely peer-to-peer version of electronic cash would allow online payments to exist sent direct from one party to another without going through a financial institution.”

To that end, Bitcoin was designed to offer lower transaction fees without the restrictions imposed by a centralized say-so (bank). Nonetheless, dissimilar other forms of currency, in that location are no concrete Bitcoins. Instead, balances are kept in a public ledger within the Bitcoin blockchain, which anyone can admission and verify.


Boy on a Portable Trading Bitcoin

And although Bitcoin is not considered legal tender in the The states, it’south the almost pop crypto choice. Since 2009, it has ushered in a massive influx of other cryptocurrencies, which today are referred to as altcoins. Nevertheless, it is yet the nearly successful and highest-valued cryptocurrency in globally, reaching new records in Nov 2021, when a unmarried Bitcoin was valued at over $68,000.

Ethereum and the Blockchain

At present that you understand the blockchain and cryptocurrencies, let’s take a look at Ethereum. Ethereum is a programmable blockchain that allows developers to build and deploy decentralized applications. Decentralized applications or “dApps” are open up-source software that no one person controls.

Ethereum’s smart contracts are based on dissimilar calculator programming languages, which developers employ to programme their own decentralized applications. Smart contracts are cocky-executing contracts with the terms of the understanding between buyer and seller existence straight written into lines of code.

Ethereum also provides a cryptocurrency token called “Ether”, which can be transferred between accounts and used to recoup participants for any computations they performed. Today, Ether is the 2nd most valuable and popular cryptocurrency later on Bitcoin.

Crypto Wallets – Hot and Cold

Now that we’ve explained how the blockchain and Ethereum work, it’s time to talk about wallets. A cryptocurrency wallet is a digital wallet that stores your public and private keys and interacts with different blockchains then you tin view your balance, send transactions, and more than.

There are two types of wallets:


Hardware Wallet for Storing Crypto Codes

  • Hot Wallets: Hot wallets are online wallets connected to the internet, making them more than convenient to use but besides more vulnerable to hacks. The most pop hot wallet is associated with the Coinbase crypto exchange, which allows you lot to purchase, sell, and store cryptocurrencies on their platform (if you choose).

  • Cold Wallets: Cold wallets are offline wallets that are non connected to the internet, making them less convenient to use and more secure. The nigh popular common cold wallet is the Ledger Nano South, a hardware wallet that stores your private keys offline. A common cold wallet can too be private and public keys written down on paper. More on common cold wallets afterwards.

Regardless of which wallet type you cull, the blockchain is incredibly difficult to hack, making information technology one of the safest investment options. Exterior of limited government-backed attacks, cryptocurrencies accept never been stolen past a hacker.

Varieties of Cryptocurrencies

Although Bitcoin and Ethereum are two of the largest and most pop cryptocurrencies, dozens of smaller, lesser-known options are available through exchanges worldwide. The website, Coinmarketcap.com has a list of the meridian currencies by a mensurate chosen market value, which is the value of a coin times the number of coins outstanding in the marketplace. Below, you’ll find a list of some of the largest and most popular cryptos, their currency symbols, and a brief description of each 1:


A List of Crypto on a Screen

  • Bitcoin (BTC-USD): Every bit mentioned in a higher place, Bitcoin was beginning launched in 2009 and has grown to become the most valuable cryptocurrency in the world.

  • Ether (ETH-USD): After Bitcoin, Ether, or the cryptocurrency offered through the Ethereum blockchain, is the second most valuable cryptocurrency, which launched in 2015.

  • Tether (USDT-USD): Tether is a cryptocurrency pegged to the US dollar, meaning its value is ever equal to $1. This makes it a safety pick for commencement-time investors but it’s non a wise long-term investment since information technology only grows with the USD. These currencies pegged to the dollar are sometimes called “stablecoins”.

  • Binance Coin (BNB-USD): Binance Money was originally marketed as a loftier-performing cryptocurrency for avant-garde traders. Since it was first launched in 2017, it’south grown by nearly six,000%, placing it within the acme crypto options.

  • Cardano (ADA-USD): Although smaller than the other options on this list, Cardano is still within the pinnacle ten largest cryptocurrencies in the world with a market cap of over $15 billion. It was originally designed to exist used by governments and financial institutions, adding legitimacy to the brand.

  • Dogecoin (DOGE-USD): Dogecoin is an open-source meme cryptocurrency that Jackson Palmer and Billy Markus created as a joke in 2013. Despite its humble ancestry, it has since grown to have a market capitalization of over $8.4 billion.

 Forth with these top options, at that place is an overabundance of altcoins, such as XRP, USD Coin, Polkadot, Uniswap, and more. As a teen investor, however, you should probably stick to the top 3 coins on the listing higher up in club to stay out of harm’s mode as much as possible when information technology comes to crypto investing.

The Risks of Investing in Cryptocurrency

Cryptocurrency is only like any other investment. Whether the investment is stock or cryptocurrency, kids and teenagers should be cautious about where they put their money. A immature investor should even exist more than cautious when it comes to crypto because of how wildly its value can swing.

Although it is probably the almost well-known option, Bitcoin (symbol: BTC)  has significantly declined. The value of Bitcoin hitting its high betoken of $68,000 in Nov 2021. In September 2022, its value declined to nearly $20,000—about a lxx% loss of value.

What’south worse, there accept been several instances where leading crypto platforms and investors, such every bit Voyager Digital, Celsius, and Three-Arrows Capital filed for bankruptcy. These companies left millions of customers stranded without admission or hope of always seeing their crypto deposits again. (Another reason why common cold wallets are the best choice for investor).

And so, while crypto investing may seem rebellious and exciting, it’s more than of a gamble at this point unless you know what you’re doing and you have money yous can lose without putting yourself in financial jeopardy.

How Much Teens Should Invest in Crypto?

Chances are that you don’t accept much coin to invest, and then the electric current size of your savings can probably answer this question. Nevertheless, if you want to become your foot into the crypto world, yous may consider just buying a tiny fraction of Bitcoin or Ethereum – an investment in the order of no more than $300-$500 if you have information technology.

Who Accepts Cryptocurrency as a Payment Option?

Although the United states of america government does not accept cryptocurrency as legal tender, there many online and brick-and-mortar businesses that do. For case, Overstock.com, a pop online retailer, began accepting Bitcoin as a payment method in early 2021.

Other companies that accept Bitcoin include Microsoft, Home Depot, Virgin Airlines, and Whole Foods. In addition, there are a number of restaurants, bars, and cafes that accept crypto as payment, although the number of locations is even so quite limited.

How to Buy and Sell Crypto Through a Cryptocurrency Exchange

If you’re interested in investing directly in cryptocurrency, it is easiest to go through a cryptocurrency commutation. These exchanges act as middlemen between buyers and sellers and usually charge a small fee for each transaction. The most pop exchanges are Coinbase, Binance, and Kraken. However, these services do not take members nether the historic period of xviii. And they don’t offer custodial accounts, so parents tin purchase crypto for their kids through them. You tin can observe a complete list of the pinnacle crypto exchanges on the Coinmarketcap.com website.

Proceed reading below to observe alternative options for getting your hands on crypto, including having your parent buy crypto on your behalf.

We will assume that your parents will buy the crypto since you lot can’t exercise it on your own.

Once they’ve selected a crypto exchange, they will demand to create an account and deposit money into it. Later on that, they can commencement ownership crypto directly from a vendor.

When buying through these exchanges, information technology’south all-time to employ a common cold wallet to store the information they would need to transact with the crypto – namely the public and individual keys. We recommend they choose a crypto hardware wallet for the purchase, which is the safest way to secure cryptos so no one tin can hack it and steal it.

With a hardware wallet,
your parents tin can easily transfer the cryptocurrency straight to you when you are no longer a minor. In the meantime, yous can buy and sell more crypto with their permission and supervision using the established hardware wallet.

When selling crypto, you can practice so (under parental supervision) through the same commutation used to buy the crypto or, if you lot’d prefer, find an exchange with better rates. Once yous’ve found a buyer and agreed on a price, you’ll need to transport the crypto to the heir-apparent’s digital wallet and, once they’ve accepted it, the funds volition exist deposited into your account.

It’southward of import to emphasize that if your parent purchases crypto through a crypto exchange and then stores it on a cold wallet, they don’t e’er have to collaborate with that exchange again if they choose not to do so. The cold wallet carries all the information necessary to buy or sell cryptocurrency at whatever platform that handles the blockchain associated with the purchased crypto.

Custodial Accounts Necessary for Teen Investors Under xviii

US investors under 18 (minors) tin can only invest through custodial accounts – regardless of whether we are talking about stocks, mutual funds, or crypto. An adult manages these accounts as the custodian—typically a parent or guardian—but the avails technically belong to the child.

That being said, though, the minor gains control of the account—and the assets within it—once they reach eighteen or 21, depending on the state.

A parent would have to
open a custodial account
past providing the following information:  their name, address, Social Security number, and date of birth, as well equally your name, address, and Social Security number. Your parent would also be asked to provide a government-issued ID, such as a commuter’s license, passport, or state ID.

For a full explanation of custodial accounts and how your parents tin can open them, please run across the following article: Custodial Brokerage Account for Your Kids.

In one case the account is open, you lot can start funding it with cash, stocks, or other avails. Remember, though, that the account director will have control over the business relationship until you reach the age of majority.

How Teens Tin can Invest in Crypto Through Special Custodial Accounts

Some other way to invest directly in cryptocurrency is to buy the asset through special online brokers set upward to make it easier for parents to help their kids invest in crypto through custodial accounts.


Asian Teen Trading on Cell Phone

Your parents (or other adults) have to establish a custodial account on your behalf. You would be the beneficiary of the business relationship, but you won’t get control of it until you are either eighteen or 21 depending on the country in which you reside.

In the prior section, nosotros discussed that crypto exchanges do not offering custodial accounts so parents tin’t buy cryptocurrency directly from them with their kids every bit the designated owners. Parents would have to purchase the cryptos for themselves, store them in a cold wallet, so physically transfer them to their kids when they turn 18.

Merely now you have some other option for owning crypto!

Over the past few years, a pocket-size group of companies that offer online custodial accounts for direct investment in cryptocurrency has arrived on the scene. These companies provide a platform for parents (as custodians) to buy crypto for their kids. When their kids turn 18 (or 21 in some states), the assets in the crypto account would be fully controlled by their young adults to do whatever they please with information technology.

New Crypto-Enabled Custodial Accounts

Listed below are four companies that offer apps through which parents can constitute crypto custodial accounts for their kids under 18.

  • Flyte (formerly Loved Investing, founded in 2017) – this online brokerage app was built specially to permit minors to invest in the stock market through custodial accounts parents can easily ready upward. Information technology also allows the purchasing of cryptocurrency.

  • EarlyBird (founded in 2020) – this platform, like Flyte, simplifies the process for parents to open up custodial accounts to help their kids learn about investing. It has appear that it will innovate crypto to its platform and then check its site from fourth dimension to time.

  • Stack (founded in 2021) – this platform (currently in beta and hasn’t quite been fully launched) volition offer teens the opportunity to invest in cryptocurrency through custodial accounts. https://www.trystack.io/

  • Onu (founded in 2022) – this is the latest visitor that provides a platform to help parents teach their kids to invest. Merely like the other companies on this list, its app makes information technology easy for parents to establish and monitor their minors’ custodial accounts. Onu, too, allows for crypto investments in custodial accounts established by parents.

Cheque-in on these websites from time-to-time to see the state of their venture and to determine if or when it’south right for your parents to establish custodial accounts through their apps for you.

Your Crypto Investments are Non Protected

It is essential to note the difference between investing in stocks and crypto from a regulatory betoken of view. If you invest in stocks and the online banker you use goes broke, your investment is protected by the Securities Investor Protection Corporation (SIPC) for up to $500,000. It does not encompass the stock investor from making a bad investment. According to the SIPC’s website:

“SIPC does not protect against the decline in value of your securities. SIPC does not protect individuals who are sold worthless stocks and other securities. SIPC does non protect against losses due to a broker’s bad investment advice, or for recommending inappropriate investments.”

Cryptocurrency, on the other hand, is non protected past whatsoever of the regulatory bodies such as the SIPC or the Federal Deposit Insurance Corporation (FDIC) which covers depository financial institution deposits.

To protect yourself, you should always notice out whether SIPC or FDIC covers your investment on any platform yous cull. For example, through our research, we found the following passage on the Onu website, under the FAQ, How are my accounts and investments protected?

“For all crypto holdings: Onu offers Crypto investing for your kid’s custodial account through Alpaca Crypto LLC (“Alpaca Crypto”). Alpaca Crypto is non a member of SIPC or FINRA. Cryptocurrencies are non stocks and cryptocurrency investments are not protected by either FDIC or SIPC.”

Restrictions on Transferring the Crypto off the Platform

When you (under your parents’ supervision) purchase crypto through a custodial brokerage business relationship, it is probable that the platform will not allow you to movement that investment elsewhere such as to a cold wallet of your pick or to another platform entirely. This information is often non posted upfront on the websites of these online brokerage firms offering crypto custodial accounts.

You should ask specific questions about whether you lot can move the crypto off the platform or transfer it to some other platform entirely.

How Teens Can Invest in Crypto-Exposed Exchange-Traded Funds

One manner for teens to invest indirectly in crypto is through Commutation-Traded Funds (ETFs).

ETFs are investments that represent a diversified group of company stocks. They are like common funds, except y’all can purchase them the same mode y’all can buy stocks through an online broker.

In that location are then-chosen crypto-exposed ETFs that indirectly track the crypto market through the Us and international corporations that do business related to blockchain engineering science. For example, an ETF may include the stock of Coinbase (the biggest crypto exchange), Marathon Digital Holdings (a Bitcoin miner) and PayPal. 1 such ETF created past individual disinterestedness investor Blackrock is iShares and Tech ETF (symbol: IBLC).

U.s.a. News and World Report provides a listing of cryptocurrency ETFs in an article titled 7 Best Cryptocurrency ETFs to Buy.

By ownership a crypto ETF (through a custodial business relationship) you are indirectly investing in a batch of crypto-exposed companies whose price movements volition non precisely match the price motility of any one item cryptocurrency such as Bitcoin or Ether. Merely you are getting some exposure to the crypto marketplace in perhaps a less risky investment.

Crypto ETFs tin be purchased through custodial accounts set up by your parents (or other adults) with y’all as the owner merely your parents (or other adults) every bit the custodian.

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How Teens Can Invest in Crypto Through Crypto-Related Stocks

As a teen investor, y’all may not want to invest directly in cryptocurrency because of the risks of the avails. However, y’all tin can indirectly invest in crypto by investing in private companies (as opposed to an affiliation of companies in an ETF) related to blockchain technology or directly to cryptocurrency.

For example, Coinbase Global Inc. (stock symbol: Coin) is one of the biggest crypto exchanges and then its value would be indirectly tied to the crypto marketplace (although not to any particular coin). US News and World Study provides a listing of crypto-related companies titled 7 Best Cryptocurrency Stocks to Buy.

Crypto-related stocks can be purchased through custodial accounts set up by your parents (or other adults) with you equally the beneficiary.

The Futurity of Cryptocurrency

Although cryptocurrency is still in its infancy, its potential for growth is undeniable. In the past decade, nosotros’ve seen crypto grow from a niche interest to a booming industry with a global reach. And, as more than and more businesses begin to take crypto as a form of payment, we can expect its use to get more than widespread. Finally, we expect the uses of blockchain technology to expand the use of cryptocurrency, especially through the use of smart contracts, gaming, NFTs, etc.