Making millionaires out of millenials
There’s a hot property taking the stock market by storm and it seems that young investors want in on the action.
Traders are skipping over material markets like housing in favour of the more lucrative and attractive digital currency, bitcoin.
An increasingly relevant currency, its recent growth spurt has come under much media scrutiny, so much so that now the UK government want to crackdown on a system that could be used for tax evasion and money laundering.
But what is bitcoin, will governments ever have control of its impacts and why is it so attractive to young investors making their first voyage into the murky world of the stock market?
Bitcoin is what is known as a cryptocurrency. Created in 2009 by an unknown user, it is a digital currency which can be used without the use of middle men, details or transaction fees. Bitcoin users house this phantom money in websites that they then operate like a bank storing and spending the currency.
However, unlike most payment networks it is not attached to a physical currency so therefore it is decentralized, with the value fluctuating like any stock, in accordance with supply and demand.
It’s not just simply online banking — someone with bitcoin stock cannot simply withdraw an amount of money. Instead, a process coined ‘mining’ is used, whereby a computer solves a mathematical problem with a 64 digit problem creating one bitcoin. There are currently 16 million in existence.
To put it into context, one bitcoin equals £8,435, three months ago one cost £3,270 and this time last year one cost in comparison a measly £449.
Christian Newman, 21, is a student from the University of Portsmouth and is one such student who is interested in the use of Bitcoin:
“I have though tabout buying some kind of cryptocurrency but not Bitcoin. To be honest Bitcoin’s value is so high at the moment its near on impossible to invest on but I am thinking about buying Lightcoin [a similar currency].”
The attraction on the face of it is pretty obvious; quick money with minimal effort which has led many experts to compare it to betting. Newman’s reasons are very typical for a young investor: “For the whole of University all I’ve done is loose money, so to make a quick buck from something so simple seems perfect. I think you can rush into it though and that’s why I’m going to wait a bit until the media storm dies down.”
Oliver Morris, 21, a physics student from the Unviersity of Birmingham has similar worries: “The thing about any stock is there are always bubbles and crashes, history tells us that. I used to have some cryptocurrency a few years ago because it was easy to use for transactions o the internet but I sold it. I don’t regret that even though the stocks have risen, I have a butterfly effect mentality with things like that.”
A currency with no transaction footprint, allowing its owner have complete anonymity, bitcoin was the backbone of the notorious drugs trafficking website Silk Road and the UK government is keen to crackdown on it potentially being used for tax evasion.
The Treasury is planning to implement a system whereby bitcoin owners and transactors have to disclose their information, giving up the anonymity the currency currently grants investors. These regulations would bring it in line with anti-money laundering and counter-teroism legislation.
However, these threats have done nothing to stop investors getting involved. The rise in stocks are mainly thanks to media attention, hype, the digital nature of the currency and a youthful investment base increasingly more interested in getting quick money from a non-material investment.
People like Erik Finman, a 19-year-old high school dropout who began investing in bitcoin in 2011, when it was just $12 per token. He nows owns 403 bitcoins worth more than $1 million. A self-made teen millionaire.
