Here’s how to talk crypto with your loved ones this Christmas
Our guide to handling curious crypto issues.
One of the least talked about dangers of investing in cryptocurrency is that it begins to dominate your regular conversations. Personally, I find cryptocurrency endlessly fascinating. But that doesn’t necessarily mean that my loved ones feel the same way.
That said, 2021 has been an amazing year for cryptocurrencies, and if you’re a crypto investor, there’s a good chance you’ll find yourself quizzed by crypto-curious parents at some point during the season. holidays.
Here are some tips for managing these conversations.
1. Try not to be a crypto evangelist
Blockchain technology could well transform various industries, from finance to healthcare. And cryptocurrency could change the way we use money. But it may not be. And – more importantly – no one likes to be lectured. As a general rule, it’s best to wait until you ask the question before you start talking about crypto. This way you run much less risk of becoming a boring crypto.
Also, don’t underestimate the problems. It is not your job to convince people to buy their first cryptocurrency. Admit that crypto is not perfect and that it is not the solution to all problems. There is truth in many of the common criticisms of Bitcoin (BTC) – such as its huge carbon footprint and its potential for use in money laundering and financing illicit activities. Be honest about them, but also talk about how the industry is working to resolve them.
2. Keep it simple
One of the things that deters people from investing in cryptocurrency is that it sounds complicated, even scary. If your loved ones ask you to explain Bitcoin, don’t tell them about its proof-of-work mining model or mess with the lingo.
Instead, use accessible language and examples they can relate to. You could tell them that the smart thing about blockchain is that it can take the middleman out of any transaction. For example, an insurance broker might be able to pay automatically without you even needing to make a claim.
At the same time, be prepared to venture into sensitive topics like explaining how non-fungible tokens (NFTs) work and what decentralization means.
Here are some possible answers to common questions:
What is Bitcoin?
Bitcoin is the first decentralized digital currency, which means that it works without the need for support from a bank or government. It’s kind of like digital money – just like I can give you a physical dollar right now, I can transfer Bitcoin directly to you without involving a bank or third party.
What is blockchain technology?
Blockchain is the technology behind Bitcoin and other cryptocurrencies. It’s like a huge database or a spreadsheet. This is exciting because it is secure and cannot be tampered with, so every transaction recorded on the blockchain will be there forever.
What is a TVN?
NFTs are non-fungible tokens. It is essentially a unique type of digital collector’s item with built-in property information. It’s a bit like sewing a name tag into an item of clothing you’ve purchased. You can turn almost anything into NFT, but they have become popular in the art and gaming world.
Why are people paying so much money for content that they can get online for free?
Ownership is important to some people. Just as an original work of art or a signed print is valuable, so too is DTV. NFTs also provide a way to own land or items in the Metaverse (but that’s a whole different topic).
3. Be honest about the risks
Cryptocurrency can be extremely volatile and risky. You don’t want your loved ones to lose money jumping into crypto without understanding the risks and doing their own research. Some cryptocurrency investments can and have produced incredible returns. But there are also a lot of people who have lost money due to crypto scams, speculative investments, or hacking incidents.
Not all cryptocurrencies will make money. In fact, there are many parts on the market today that could fail. Even with this year’s successes, many investors have been panicked by buying high for fear of missing out, then panicking selling low for fear of losing more money.
4. Encourage those you love to invest safely
If your friends and family are interested in buying cryptocurrency, there are several ways you can help them minimize the risk.
- Encourage them to invest only the money they can afford to lose. It’s easy to get caught up in the frenzy and forget about other financial goals, like retiring or filling up your emergency fund.
- Discourage going all out in crypto. Cryptocurrency investments should only be a small fraction of a person’s overall portfolio. It’s still a relatively small and untested industry, and we don’t know what will happen in the years to come. If the crypto market fails, it won’t lead to financial ruin if the crypto is only a small part of a diversified investment portfolio.
- Remind them that investing for the long term comes with less risk and less stress. The crypto market is extremely volatile and prices can drop 20% or more in a single day. A buy and hold investment approach makes it much easier to resist short-term fluctuations.
- Suggest that they use a reputable encryption platform. Reputable cryptocurrency exchanges make it easier and more secure to deposit money and trade crypto for the first time.
If you’ve made money investing in crypto this year and are excited about the future, it’s understandable to want to share your successes with those you care about most. Remember, giving financial advice to friends and relatives is complicated, especially with something as risky as investing in cryptocurrency.
No matter how good your intentions are, if people lose money on the basis of your advice, you could be persona non grata the next holiday season. There is nothing wrong with sharing your passion for crypto, but try to do so with care.