EarlyBird Crypto Education Series Part 7: Some Final Thoughts (And The Big Question)

Well, here we are...

Our educational pleasure cruise has come to an end.  We talked about the original goal of crypto in the context of central banking, dove into the rollercoaster history of crypto performance, explained how a blockchain achieves its fabled “immutability”, took an honest look at the criticisms and challenges facing crypto, discussed the use cases of blockchain tech, and even gave you a guide to crypto lingo.

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I hope you enjoyed this content, but I also suspect it left you with that feeling that anyone who has been on an island-hopping cruise feels... right as your starting to get comfortable in one place, the captain says, “it’s time to move on. Come back to the boat now. If I have to tell you one more time, I’m leaving you here forever. Will, I am not kidding, I will leave you to die on this island.”

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You’re not off the hook yet

There’s still one big question to address: how should I think about investing in crypto for my child? To break this down, we have to start with two simple truths...
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1. Crypto is volatile
2. Crypto is risky

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Allow me to temper those two statements. Remember, volatility is a measure of the fluctuation in price. Volatility is not a bad thing if you have the time to ride out the ups and downs. A soon-to-be retiree who is planning to live off their investment portfolio should probably aim to reduce volatility — if the investments they own are highly volatile, a big dip could delay their retirement by a few years.

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The stock market is volatile too, but when we zoom out and look at the performance over 20 year periods, it looks pretty darn good. There has only been one period in the stock market’s long history where the average compound return over a 20 year period was below 5% (and that period included the great depression and WWII).

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A baby or kid or even teenager is in a very different situation. They’ve got some time to ride out the swings.

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Risk is a spectrum

The “riskier” an investment, the higher the probability of permanent loss. But also, the higher the potential reward.  I wish I could put cash into a savings account and earn 7% a year. But those days are long gone. In fact, your cash is guaranteed to lose value in a savings account thanks to inflation. So it’s all about striking the right balance of risk and security.

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“Crypto” is a big tent

By today’s standards, “crypto” encompasses Bitcoin, Ethereum, other “Layer 1” blockchains like Solana, Cardano, and Binance Smart Chain, a bazillion altcoins, DeFi, NFTs, DAOs, and surely weirder stuff that will emerge in the not-so-distant future (Metaverse, anyone?). But there’s a reason we’re starting out by only offering Bitcoin and Ethereum through EarlyBird Crypto.

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Bitcoin and Ethereum have two of the longest track records in the space. Bitcoin’s blockchain has never been hacked (and neither has Gemini’s exchange, for that matter). It has survived criticism, regulation, media outrage, Jamie Dimon’s tweets — just about everything that’s been thrown at it, it has dealt with and charged on.

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Ethereum, which, to be fair, powers some of the more speculative components of the crypto space, has fared equally well in the face of challenges. And 2022 is shaping up to be a BIG year for Ethereum as it transitions away from the energy-intensive Proof-of-Work consensus mechanism.

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The fact is

Anyone who has bought and held onto Bitcoin or Ethereum for 3 years has seen their assets appreciate. While the regulatory environment contains its share of uncertainties, Bitcoin and Ethereum have proven to be incredibly resilient.

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I am also seeing two things happen simultaneously: institutional adoption is increasing and consumer-facing tools are getting better. Another crypto winter could be right around the corner, but I think the next 10 years are going to be pretty exciting for crypto.

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Things to consider as you build your child’s portfolio

1. Diversify your investments (we also offer “traditional” assets like stock and bond funds).
2. Don’t put more into Bitcoin or Ethereum than you are willing to lose.
3. Contribute as regularly as you can (set that recurring contribution!).
4. Don’t do this alone! The coolest part of EarlyBird is the ability for friends and family to contribute to your kid’s future as well. As a company, we’re working to make this feel less transactional — we’ve got some very cool stuff on the roadmap.

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What happens next?

With your new knowledge, we encourage you to go check out getearlybird.io/crypto.

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And also, have a great day!