Previously posted on Investopedia by Samantha Chang
Teen bitcoin millionaire Erik Finman says Millennials who are curious about investing in cryptocurrencies could dip their toe in the crypto pond by investing $1,000. After all, that strategy transformed the 19-year-old high school dropout into a millionaire.
Many people are understandably leery of cryptocurrencies because of the erratic price movements of bitcoin and other digital coins. Moreover, they’re unregulated and are not backed by a central government or bank, adding to their murky reputation as an investment vehicle.
But Finman thinks bitcoin is the wave of the future, and for now, he believes it’s the safest virtual currency to invest in. “I think bitcoin is the safest cryptocurrency right now,” he told CNBC.
Of course, Finman is biased: The teen crypto phenom used $1,000 his grandmother gave him when he was 12 years old to buy his first bitcoin when the little-known virtual currency was just $12 a token. By age 18, Finman had become a millionaire. (See more: Who is Erik Finman, the Bitcoin Millionaire Teenager?)
The baby-faced investing whiz currently owns 401 bitcoins, which translates to about $3.8 million using today’s bitcoin price of $9,300.
While $1,000 isn’t chump change for most Millennials, it isn’t a prohibitively huge amount, Finman noted. According to CNBC, 40 percent of people between ages 24 and 35 have at least $1,000 in their savings account.
Finman said Millennials would be better off investing that money than letting it sit idle in a savings account. However, he warned Millennials (or anyone, for that matter) to heed the advice of billionaire Mark Cuban: Only invest what you’re willing to lose.
When asked about the recent plunge in bitcoin’s price since the beginning of 2018, Finman was nonplussed. “I still believe in cryptocurrencies,” he told Business Insider. “There are always ups and downs on the way up. Many people have anticipated this decline. It was almost a self-fulfilling prophecy after many experts spoke of a bubble.”
Finman said a major problem with inexperienced investors is their short-term outlook. “The biggest mistake they can make is to get out of the market now and sell their bitcoins just because of a setback,” he explained.
Finman said if you’re careful, you can get huge dividends by investing in crypto. “The area is still relatively small. The market capitalization is just over half a trillion dollars,” he explained. “I do not want to be misunderstood: This is, of course, a very high amount, but in comparison to other asset classes, it’s small. Therefore, I say if you do not become a millionaire in the next 10 years, then it’s your own fault.”
Meanwhile, bitcoin and other cryptocurrencies have come under fire by leading figures in the financial world. JPMorgan Chase CEO Jamie Dimon famously slammed the cryptocurrency as “a fraud” and called its investors “stupid.” (See more: JPM’s Dimon Calls Bitcoin a ‘Fraud’, its Investors ‘Stupid‘.) Dimon has since backpedaled a bit, but remains a crypto skeptic.
Similarly, billionaire Warren Buffett warned that the crypto bubble will eventually come crashing down. “I can say with almost certainty that they will come to a bad ending,” the Berkshire Hathaway chairman told CNBC. (See more: Buffett: Cryptocurrency Will Come to a Bad End.)
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no cryptocurrencies.