The axiom "money is no object" has never seemed more accurate. In recent years, the evolution of cryptocurrency has radically altered the financial landscape. However, new studies indicate that an increasing number of students and teenagers are investing in this new currency without a thorough understanding of its potential benefits and risks.

A cryptocurrency (or crypto) is a type of digital currency that, like any other type of currency, can be used to purchase goods and services. What makes cryptocurrency unique is that it utilises a digital record of transactions that is then replicated and distributed across the entire network of computer systems that comprise the blockchain. In theory, this decentralised blockchain should make changing or cheating the system nearly impossible. This also means that cryptocurrency is not controlled or regulated by a central authority or administrators, whereas traditional currency is issued and backed by central banks.

Bitcoin is one of the most widely used cryptocurrencies. It has been extremely successful over the last year, with the price of bitcoin reaching over £45,000 in April and a current market capitalisation of over $850 billion. This success has increased the appeal of Bitcoin to both younger and more seasoned audiences.

According to recent surveys conducted by UniHomes and Save the Student, student interest in and investment in cryptocurrency has risen significantly over the last year. Around 6% of students currently invest in cryptocurrencies, and two-thirds have considered doing so.

The primary reason for this increase is the inability of students to maintain financial stability during the pandemic. The unstable job market, loss of parental earnings, and low-interest loans have all contributed to students seeking alternative sources of funding for university life. By leveraging celebrity endorsements and influencers, social media platforms such as Instagram and Tiktok have also highlighted the success of young people investing in cryptocurrency.

While more students are getting involved in cryptocurrency, many are not adequately assessing the risks and instead view cryptocurrencies as a quick, novel way to earn money. To begin, it is critical to comprehend the volatility of cryptocurrencies. Despite the fact that Bitcoin's value surpassed £45,000 in April, it lost nearly half of its value in the months that followed. Bitcoin's price fluctuates significantly in comparison to traditional currencies, which are backed by central banks and governments.

Additionally, cryptocurrency's digital nature and anonymity present a significant risk. Cryptography's proof of ownership is limited to the private "keys" used to authenticate transactions, as user names and locations are encrypted. This makes cryptocurrencies an attractive target for hackers, all the more so because many young people and small businesses are unaware of how to secure this new form of currency.

The future of cryptocurrency appears to be in doubt. On the one hand, as the future becomes more digital, many large brands, such as Microsoft, are beginning to accept bitcoin payments. El Salvador became the first country to accept Bitcoin as legal tender earlier this month, indicating that the currency is gaining traction. On the other hand, countries such as China and large cooperatives are tightening their restrictions and regulations on cryptocurrency usage.

Additionally, there are technological considerations. The processing power of new 'quantum' computers has the potential to underpin the blockchain and cryptocurrency's tight security. This could create difficulties in the near future, as 'quantum' computers are expected to become operational within the next five to ten years.

Finally, there are environmental concerns to address. The development of cryptocurrencies necessitates the use of massively parallel computing networks to perform a plethora of intensive calculations. These computations consume a tremendous amount of energy, and some experts believe Bitcoin networks consume as much as entire countries such as Argentina. That is why it is critical to educate the public about the environmental impact of cryptocurrency use.

Numerous financial authorities, including the FCA, are warning young people about the dangers of cryptocurrency investing. Individuals must be aware of the risk they are taking, whether their transactions are protected and regulated, and whether they are receiving advice from credible sources. This is the most effective way to increase the number of risk-averse investors.

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