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A Guide on How to Gift Cryptocurrency Coins to Your Child

Kids today are growing up in a digital age. Youngsters as little as 3 or 4 play digital games, and many of their slightly older siblings have already become experts on how to use non-physical currency while playing online games. Digital currency is simply a natural next phenomenon for a generation growing up in the metaverse. The next step is to consider a gift of cryptocurrency for your child.

Why give your kids a gift of cryptocurrency?

What would motivate you to bestow a gift of cryptocurrency on your child? Technology comes naturally to children who were practically born grasping a cellphone. Kids should be taught about crypto currency because it is an emerging technology. 

In addition, children, particularly teenagers, should understand how to responsibly deal with money or invest it.  As cryptocurrency may often be a long-term investment, it makes sense to present it to a child who can eventually access it at age 18. It is important to clarify at this point that children under the age of 18 are not allowed to purchase cryptocurrency, but parents can give it to their children for the future. 

Background on cryptocurrencies  

So, you want to give your child a gift of cryptocurrency but you’re not sure which ones? CoinmarketCap has determined that as of April 12, 2022, there are over 18,847 digital currencies with a combined market capitalization of $1.95 trillion. Confusing? You bet!

Here’s a bit of background. The largest and most popular type of cryptocurrency is Bitcoin, which was released in January 2009. In April 2022, it was worth more than $40,000 per digital coin. Another highly popular cryptocurrency is Ethereum. The latter is not just a currency, but also a ledger technology used by companies to build new programs. It is supported by the Enterprise Ethereum Alliance, a group of Fortune 500 companies working together to build upon Ethereum’s technology.

Despite their popularity and relative solidity, both coins are known to be volatile. However, on an average, investors have seen returns if they held on to the investment for a period exceeding 3 years. So, if your child has a time span of more than three years to wait, you may be able to yield some growth from your investment.

Due to the volatility of crypto coins, it is wise to do extensive research and learn about market trends before purchasing any type of cryptocurrency. Newcomers are advised to consult with financial advisors before entering this area.

How to buy and hold cryptocurrency for your child 

As cryptocurrency is not backed by traditional banks, there is no bank account in which to deposit your coins. One way to keep Cryptocoins safe is to place  them in a wallet. 

You can open either hot wallets or cold wallets. A hot wallet is connected to the Internet, while a cold wallet is mainly offline. Maintaining a hot wallet may expose the coins to hackers. If you are interested in a long-term investment for your children, a cold wallet is probably the better option. Cryptocurrency can be sent from the wallet to another address when the time comes.

Cryptocurrency presented as a gift does not have to be reported on a parent’s tax return. Unless the gift of cryptocurrency exceeds $15,000, it isn’t necessary to report the transaction.

Think Long Term

Cryptocurrencies have their ups and downs, and some are riskier than others. It may be wise to diversify your investment and dip your toe in the water slowly before making a gift of cryptocurrency. However, it would seem that crypto is here to stay, and in the long term your investment may just pay off.

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