Meet The Mil­len­ni­als Sav­ing For Re­tire­ment Us­ing Bit­coin

ForbesWeekly - - NEWS - BY DIANA CRAN­DALL, FORBES CON­TRIB­U­TOR

From bil­lion­aire in­vestor Mike Novo­gratz to celebri­ties like Ash­ton Kutcher and Paris Hil­ton, bit­coin is in­creas­ingly be­com­ing part of a main­stream in­vestor’s wal­let. It made bonafide mil­lion­aires out of those who took a bite early, and while dis­cus­sions about the con­cept of an un­reg­u­lated digital pay­ment sys­tem rage on, there are a group of mil­len­ni­als who are think­ing about a cash­less fu­ture— and putting their money where their thumbs are.

They’re part of a dif­fer­ent 1%, the small num­ber of Amer­i­cans who’ve not only heard of bit­coin, but are buy­ing, sell­ing, and trad­ing it on their smart phones and lap­tops. What’s more, some mil­len­ni­als are us­ing bit­coin as the ba­sis for their long-term sav­ings. And ex­perts say that could shake the foun­da­tion that this coun­try’s fi­nan­cial in­sti­tu­tions have built their em­pires on.

Roshaan Khan, a 20-year-old se­nior at Vir­ginia Com­mon­wealth Univer­sity, is one of those mil­len­ni­als. Khan re­cently in­vested in bit­coin and ethereum—an­other form of cryp­tocur­rency— and is en­cour­ag­ing his friends to do the same.

“All of my net worth is in cryp­tocur­ren­cies, be­cause I see them as the best way to es­ca­late my abil­ity to be fi­nan­cially se­cure and pay off my stu­dent loans,” Khan said. “I like the idea of de­cen­tral­iza­tion, the fact that there’s a lot less cor­rup­tion and po­lit­i­cal ties. That idea ap­peals to me … Not hav­ing to go through banks. Hav­ing fi­nan­cial con­trol over our lives again.”

An­dreas M. Antonopou­los, the au­thor of Mas­ter­ing Bit­coin and The In­ter­net of Money, is fa­mil­iar with this mis­trust. He says that the con­cept of money on the in­ter­net isn’t only ob­vi­ous and ap­peal­ing to mil­len­ni­als—it’s the one sys­tem, he ar­gues, that hasn’t be­trayed them.

“When you talk to mil­len­ni­als who have been thor­oughly dis­ap­pointed by every sin­gle so­cial in­sti­tu­tion—the govern­ment, the church, the pol­i­tics, the par­ties—they can’t trust any­one any­more,” Antonopou­los said. “They re­mem­ber 2008, be­cause it was the first big crash they’ve had, and many mil­len­ni­als have been un­able to find work. They watched no bankers go to jail.”

Now that it’s time for them to start

push­ing around coins, mil­len­ni­als are choos­ing to do it dig­i­tally -and on their own terms.

“It feels bet­ter to run my own sav­ings plan by in­vest­ing and rein­vest­ing in new tech­nol­ogy,” said Emil Thor­splass, a 24-year-old mu­si­cian from Norway. “I still have my reg­u­lar pen­sion fund and my bills still have to be paid through a bank ac­count, but cryp­tocur­rency in­vest­ments have be­come a cen­tral part of sav­ing for me.” But with great pos­si­bil­ity comes stag­ger­ing crit­i­cism. Some tra­di­tional in­vestors ar­gue that bit­coin, while not in­her­ently flawed as a digital form of pay­ment, is not worth in­vest­ing in be­cause it’s too

volatile, and not backed by a cen­tral in­sti­tu­tion or govern­ment. Antonopou­los calls this ar­gu­ment a “lame” one, not­ing that so­phis­ti­cated in­vestors in­cor­po­rate tur­bu­lent in­vest­ments as part of a di­verse port­fo­lio.

“You can level crit­i­cisms on bit­coin. It’s ob­vi­ously risky in that it is a 9-year-old tech­nol­ogy that is still be­ing ex­per­i­mented on to a great de­gree,” Antonopou­los said. “For a small part of a port­fo­lio, it gives you that low like­li­hood, high return mix, where there is a small chance that it does spec­tac­u­larly well, and there is a non-neg­li­gi­ble chance that it crashes com­pletely. And if you’re will­ing to take that chance, and young peo­ple can be­cause they have years to make up for it, it could be lifechang­ing. Peo­ple have had their lives changed.”

It’s a pos­si­bil­ity that young peo­ple like Khan and Thor­splass are will­ing to strive for.

“I don’t get very ner­vous about the volatil­ity any­more,” Thor­splass, who’s made close to $5,000 since in­vest­ing in 2015, said. “I think that when you are in your twen­ties, with limited re­spon­si­bil­ity, in­vest­ing most of what you have into some­thing isn’t that dra­matic com­pared to what it might be for more es­tab­lished adults. I’m used to tak­ing risks, so when I have a gut feel­ing I like to pull the trig­ger.”

Khan, who has seen a 40% return on his in­vest­ments since he started two months ago, echoed sim­i­lar sen­ti­ments.

“Maybe it’s be­cause I’m just get­ting my feet wet, but it ex­cites me more than any­thing else. The stock mar­ket is in­cred­i­bly bor­ing. There’s not enough ac­tion go­ing on in the big stocks for a col­lege stu­dent who doesn’t have a lot of money.”

But it’s im­por­tant that any­one buy­ing or sell­ing bit­coin—mil­len­nial or not—un­der­stand that, while the cur­rency it­self may be un­reg­u­lated, any money made from it is not.

“There’s noth­ing il­le­gal about own­ing bit­coin or us­ing bit­coin or other cryp­tocur­ren­cies, you just need to ed­u­cate your­self be­fore in­vest­ing or own­ing th­ese or us­ing th­ese,” said Tyson Cross, an at­tor­ney who spe­cial­izes in cryp­tocur­rency. “You could very eas­ily ac­ci­den­tally get your­self into some trou­ble on the tax side, be­cause you were ac­cru­ing cap­i­tal gains with­out even re­al­iz­ing that they were taxable.” He con­tin­ued, say­ing: “I think the IRS has caught on to this whole space. There’s been a lot of money made in cryp­tos and prob­a­bly not a lot of taxes paid. I think those days are be­hind us now, and if any­one’s plan­ning to in­vest in bit­coin or cryp­tos, I would cau­tion them against think­ing they can skirt taxes, be­cause the IRS has a lot of tools at their dis­posal right now.”

One thing is for cer­tain: the con­cept of cryp­tocur­rency is un­likely to go any­where any­time soon. Even if bit­coin were oblit­er­ated to­mor­row, Antonopou­los says, a new, bet­ter digital cur­rency would take its place.

“What bit­coin has shown is that tech­nol­ogy can be used to cre­ate a com­pet­ing prod­uct that is at least as good, and in some ways bet­ter, than a na­tional cur­rency,” Antonopou­los said. “It opens the door for com­pe­ti­tion, and that’s go­ing to de­fine how we go for­ward. What hap­pens to mar­kets when a new prod­uct en­ters? Havoc.

“Now there’s choice in the mar­ket, and mil­len­ni­als are ex­er­cis­ing that choice.”

An im­age of Bit­coin and US cur­ren­cies is dis­played on a screen as del­e­gates lis­ten to a panel of speak­ers dur­ing the In­ter­pol World Congress in Sin­ga­pore on July 4, 2017.

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