Read this before you buy someone Bitcoin as a gift
This story is part of a new MarketWatch series, “Gifts that pay off.” Between now and Dec. 25, we will look at gifts that could potentially earn the recipients money or improve their lives.
(MarketWatch) — Digital currency Bitcoin has gone from a strange fringe trend to a mainstream technological phenomenon in the past year, exploding in value to more than $10,000 per coin. While some people warn that the currency is a bubble doomed to pop, others say it’s not too late to invest or — as outrageous as this sounds — even give bitcoin as a gift for the holidays.
“Who doesn’t want something that is increasing in value as a gift?” said David Johnson, CEO and founder of Latium, a tasking platform based on a cryptocurrency (so he has a vested interest in the entire cryptocurrency phenomenon). He compares it to buying a bond. He added that because bitcoin is finite in its supply — the number of bitcoins will not exceed 21 million due to the structure of the technology — its value will only grow. “We are not even close to market saturation. The long-term outlook for cryptocurrencies in general is very bright.”
As interest in the cryptocurrency has risen, it is beginning to make an appearance on more Christmas lists this year, at least judging by its mentions on social media. What’s more, the gift makes for quite a conversation at holiday gatherings. And it jibes with one rule of gift giving: Given its highly volatile nature, it’s not something many people would likely buy for themselves. You don’t have to buy a full, $10,000 bitcoin to join in on the craze — you can buy any amount above $1 on most exchanges. So, if you are ready to join the crypto craze, here’s how to purchase bitcoin as a gift for the holidays.
Make sure the recipient actually wants the gift
Bitcoin is a fun gift to give — but only if the recipient knows, or cares, what it is. Often people are first exposed to the cryptocurrency by a friend or relative who may care more about it than anyone else present at the holiday festivities, said Neeraj Agrawal, a spokesman for nonprofit bitcoin advocacy group Coin Center.
“It can be a great way to introduce them to something that’s a big part of your life,” he said. “However, it’s always important to resist the urge to use gift giving as an opportunity to proselytize a technology that excites you about but the recipient doesn’t care about.” (Billionaire Mark Cuban has even called bitcoin “more religion than asset.”)
If a friend or family member is a tech nerd, finance expert, or has otherwise explicitly expressed interest in receiving bitcoin, proceed with gifting. Otherwise, hold off and buy some socks as stocking stuffers instead.
Decide on what kind of cryptocurrency to buy
Bitcoin isn’t the only digital currency to give: There are 900 other currencies on the market, including Litecoin, Namecoin, Dogecoin (based on an internet meme). Johnson said bitcoin is likely the best option for beginners in the cryptocurrency space because it is more widely known and established. You can also opt for another well-established currency like Ethereum or Ripple. Because many of the alternative cryptocurrencies are lower in value than bitcoin, it’s possible to buy a whole coin for someone, which could be an added perk. A Litecoin is $71.04 at the time of publication and Ripple is less than 3 cents.
Don’t fall for scams
Bitcoin is not FDIC-insured like banks and has been called the “Wild West” of finance by U.S. regulators. In the past, dozens of exchanges have taken off with customer money or been hacked, the most notorious of which occurred when exchange Mt. Gox lost $450 million of customers’ bitcoin in a likely hack in 2013.
This doesn’t necessarily bode well for people who want to experiment with it by buying holiday gifts, but customers can limit their risk by using an established exchange or purchasing platform to buy bitcoin. Johnson recommends Coinbase, LocalBitcoins.com, or Coinmama for people who want an easy-to-use option. All of these platforms accept credit card, so simply plug in the amount you want to purchase and your information to exchange dollars for cryptocurrency. Of course, in an era of digital currency and increasingly sophisticated hacking, nowhere is 100% safe. Be sure to enable two-step authentication on sites like Coinbase to minimize risks of being hacked.
Keep your money safe
Once you have your coin, you need to find somewhere to store the digital currency. You can hold it on Coinbase and other platforms where it can be purchased, but Johnson suggests moving it somewhere safer. Major digital wallet carriers have been hacked and bitcoin holders are better off keeping their funds in “cold storage” — that is, offline.
This involves generating a public bitcoin address, which is a long and unique set of numbers and letters used to send bitcoin, and a private key, a corresponding set of numbers and letters used to send your bitcoins to anyone else. The private key, or PIN, is what gives your bitcoin its value, and is best kept in a physical wallet or at the bottom of your sock drawer or, better yet, an actual safe-deposit box. Digital platforms like Coinbase don’t give users a bitcoin PIN, so Johnson suggests exporting the currency to a wallet like MultiBit or Hive and then extracting the PIN or sending it to an address generated by a site like Bitcoin.com.
Don’t miss: Why it’s easier to rob bitcoins than banks
Wrap it up with a bow
Once you have your private key, you can give it to the recipient in whatever way you’d like to “gift” the bitcoin, whether it’s printed on paper, hand written in a card, or tattooed on your body. Just be careful about how you send it. Some investors have had it engraved on jewelry. Be warned, however: anyone who sees your private key then has access to your money, so always use a secure sever to transmit the number. The most reliable and safe route is writing it by hand in a card, then photocopy it or take a photo with your phone and email it to a secure email address. Just don’t lose it.
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