They’re seeing stories about newly minted Bitcoin millionaires. They’re being offered small amounts of free crypto. And they’re watching mainstream financial firms come around to the idea of investing in digital currencies. Now, rookie investors say they’re buying the cryptocurrency to get in on the action and not feel left behind. As the digital currency dances near $40,000, those investors are getting more comfortable sinking at least a small portion of their extra cash into something once seen as off limits and dangerous.
Amber Wells, 23, of Atlanta, remembers hearing about Bitcoin years ago when it was relatively inexpensive, but she didn’t buy it at the time. “All of a sudden I’m hearing people saying, ‘I’m a millionaire now!’ and I’m like, ‘Oh my God, I literally could have been you,’” she said. On Thursday, she bought Bitcoin on Cash App — a money transfer service developed by Square Inc. — and set up a recurring purchase of $20 a week.
“I didn’t do too much research. I was just thinking, ‘Let me just get in there any way I can,’” she said. “I just wanted to be a part of it.” Bitcoin’s price surge in 2020 came at the end of a bizarre year, when many people started trading stocks on their own — taking advantage of no-commission trades — and the average American household had more cash on hand than usual. Stock markets were also hitting record highs after one of the worst crashes in history. The trend has extended into this year, with Bitcoin hitting a peak of almost $42,000 earlier in January.
The digital currency’s resurgence led Khadijah Suleman, 27, to buy $300 of Bitcoin on Jan. 11. The Los Angeles-based social-media manager and entrepreneur said she has been watching crypto for a while but was too scared to get in. In December, rapper Megan Thee Stallion did a Bitcoin giveaway on Twitter, and a friend said she had invested, so Suleman decided to make the leap. She actually hopes the price drops so she can buy more, according to Bloomberg.
“I know it’s really risky,” she said. “But you never know until you play with it and figure it out, so I’m just going to keep investing little by little.” Israeli-British investing platform eToro Ltd. says it saw more than 530,000 new registrations in the first 17 days of 2021. To date, the platform has seen over 100% growth in new users invested in crypto as their first action compared with 2020 and 55% growth compared with 2019.
The exuberance has led to stark warnings from financial regulators and banks. The U.K.’s financial watchdog said this month that people buying crypto or investing in related companies “should be prepared to lose all their money.” And last week, UBS felt the need to remind clients that Bitcoin is ultra risky and could go to zero, invoking the names Myspace and Netscape.
For years, cryptocurrencies have been noise in the background to most everyday investors — it was seen as an asset that attracted coders, criminals and people with money to burn. Last year, however, large U.S. financial institutions started incorporating it into their operations. People were suddenly able to buy and sell things with Bitcoin on Paypal, Fidelity Investments created a Bitcoin fund and crypto trading platform Coinbase announced plans to go public, ostensibly taking its place with mainstream financial firms.
Some financial advisers are saying they would feel comfortable with clients putting as much as 5% of their investments into crypto. “A lot of my friends are starting to invest in Bitcoin,” said Will Scott, 23, of Bowling Green, Kentucky. “I hadn’t put that much thought into it. Long-term, it’s just a bit more about financial responsibility than a specific goal with returns.”
Scott, who works in marketing and sales, said he got some Bitcoin through a promotion run by a sports-betting site, which gave him a bonus for depositing crypto. He regularly bets on sports and day trades (when you buy and sell assets such as stocks on the same day), but it wasn’t until earlier this month — when the price moved to around $32,000, that he made his first Bitcoin purchase of about $150.
He described his knowledge of the digital currency as “minimal,” though he did do some research. With bank interest rates so low, he’s thinking of putting half of his savings into Bitcoin. “I feel like it’s a very lucrative investment,” he said. In the past, it wasn’t always easy to buy Bitcoin: There were brand-new companies to trust, several steps to navigate, new vocabulary to learn. Now it’s much easier. Scott bought some though Cash App, a service that he already used. “It was right at my finger tips,” he said.
Wells of Atlanta — like many new Bitcoin investors — says she was influenced by social media to finally dive in. She has some other investments in the stock market and is well aware that Bitcoin is risky. Still, “wherever it goes, I’m really excited,” she said. “The world is changing,” Wells said. “America could literally flip to crypto tomorrow, and I don’t want to not have any crypto to my name.” Some see Bitcoin as a part of a long-term strategy that could last through generations.
Leslie Steven Dcunha of Jassheim, Norway, is one such investor. The 39-year-old bought roughly $40,000 to $50,000 of Bitcoin last week. “I’m hoping to pass it on to my children eventually,” said Dcunha, who believes Bitcoin will double in price. “They are 5 and 6 years old now, and if it becomes something, it could be worth something for them.” Dcunha equates Bitcoin to gold. His father bought and kept the precious metal in his family for decades. Dcunha is now hoping to do the same, albeit digitally.
But Rosie Hooper, a chartered financial planner at Quilter Plc in London, warns against Bitcoin as an alternative asset. “With the increasing regulatory scrutiny, it could be that Bitcoin simply becomes more and more difficult to access, and as such investors would be better served growing their money over the long-term through more traditional asset classes, where returns are less volatile and the risk is reduced,” she said in an email. “This is especially the case for new and inexperienced investors.”
Utsav Kumar, a 30-year-old who lives in Paris, knows the cryptocurrency is risky, and that it will fluctuate in value. This is why earlier in the month when he saw a dip in price, he pounced. “That’s where I thought, ‘OK maybe this is a good time to purchase,” he said. So he bought around $240 worth of Bitcoin. He knows the price is high, and he knows it’s not a sure thing. But he wanted to get in, just in case. “I’m ok with taking 100% of the risk,” he said. “If it falls down to $8,000, fine. The amount I’ve put in is not going to hurt me.”