Matthew Stafford, investor and industry expert, shares his thoughts on crypto, Bitcoin & NFTs* to help university and college staff feel confident in having conversations with students about these activities and build a better understanding of:
- The main language around crypto, Bitcoin & NFTs
- An explanation of crypto, Bitcoin & NFTs
- How some people have made money and other ways of using NFTs
- Potential risks
- Where to go for further info
Matthew has worked with startups, venture capital and angel investors, governments and large corporations to create and capture value. He is also co-founder of 9others, a global entrepreneurs’ network and Dot Matrix Group, an angel investment syndicate.
The language barrier
One of the most confusing things about the world of crypto, Bitcoin and NFTs can be all the lingo – HODL, WAGMI, gm, NGMI, wen Lambo – eh?!
It’s a foreign language to many and the acronyms can even look quite gimmicky at first glance. There are often lots of memes, GIFs and silliness surrounding crypto, Bitcoin and NFTs too, particularly on Twitter.
You’d be forgiven for wondering if a lot of the language is just gobbledygook, but it’s actually a useful way for investors to communicate.
Here’s what some of the acronyms around these activities mean:
- HODL = hold on for dear life
- WAGMI = we’re all gonna make it
- NGMI = not gonna make it
- gm = good morning
- wen Lambo = when are we going to make loads of money / when are we all going to get rich
Bitcoin history and facts
Getting your head around Bitcoin and its history is a good place to start when it comes to understanding crypto and NFTs. Bitcoin is the first mainstream digital currency. It was first documented in 2008 by the pseudonym ‘Satoshi Nakamoto’.
Blockchain technology
Bitcoin is distributed, meaning that there’s no central system.
What this means is that Bitcoin differs from traditional currency, where there’s a central bank (e.g. the Bank of England) that prints money and holds records, and banks (Halifax, Barclays, etc.) hold records too.
Instead, Bitcoin uses blockchain technology – a decentralised ledger of all transactions. Essentially, each person who owns Bitcoin keeps a record of everything else. There is no centrally held record.
While people try to counterfeit traditional money, the nature of blockchain technology means that it’s easier to go with the system than to try and cheat it. The interconnected peer-to-peer network makes it almost impossible to hack.
‘Digital gold’
Bitcoin is sometimes referred to as ‘digital gold’ and people can be afraid to spend it due to the volatility of its value. For example, there’s a well-told story of someone who bought a pizza for 10,000 Bitcoin – the equivalent of around $41 at the time. Today that would be worth around $200 million!
So rather than using it as a means to transact, Bitcoin investors trade and speculate hoping that the price will rise over time.
What about Ethereum, Solana, Dogecoin and the rest?
Bitcoin was the very first cryptocurrency. All those that have come since are called ‘altcoins’ (alternative coins).
Some of the most well-known altcoins include Ethereum, Solana and Dogecoin.
The founder of Ethereum’s aim was to emulate and improve Bitcoin. Dogecoin was first created as a joke, but its value soared when it garnered the attention of Elon Musk.
There are thousands of types of cryptocurrencies – more info.
What is an NFT?
NFT stands for Non-Fungible Token (meaning that it is unique – the opposite of fungible). No two NFTs are the same.
While they might sound complicated, an NFT at its most simple is just an online picture. For example, some photographers have created NFTs by using a photograph they’ve taken and uploading the JPEG image of it to the blockchain. This gives it a record of who owns it, who sold it and a unique identifier (making it non-fungible).
How are people using NFTs?
1. To become part of a community
Bored Ape Yacht Club
NFTs can engage people in a community by supporting artists or connecting owners with other owners. Take the BAYC (Bored Ape Yacht Club) for example; if you hold an original Bored Ape, you can connect with other people who do too.
2. To ‘unlock’ a real-life experience
Gary Vaynerchuk & VeeCon
Instead of a traditional ticket, an NFT is required to attend the in-real-life VeeCon conference, which was created by the entrepreneur Gary Vaynerchuk and focuses on topics including business, marketing, entrepreneurship, creativity and innovation.
This is an example of an NFT that has ‘unlockable’ intrinsic value behind it – in this instance, the value is a real-life experience. Another example of this is a new restaurant in New York that will require diners to own an NFT to enter.
3. To make money
Some people buy an NFT simply with the intention of ‘flipping’ it – selling it on at a higher price to make a profit. This has happened in the case of VeeCon, due to Gary Vaynerchuk’s popularity, and led to some people, who never had any intention of attending the conference, themselves making a profit.
Making money is a key motivator for some NFT investors, especially if they believe the NFT they are buying will quickly rise in value and be the next BAYC (originally sold for a couple of hundred dollars when they were launched in 2021, some are now worth over $1 million!) or CryptoPunk.
Of course, this is entirely down to speculation and there’s potential for the investor to get it wrong and lose money instead.
What are the potential risks?
While some people have made money through crypto and NFT investments, others have lost everything, and the fact is that these investments all carry significant risk.
Particularly so for students, who typically do not have an abundance of spare cash and aren’t able to withstand a financial loss in the same way that someone with a steady income stream may be able to.
New technology
Bitcoin, cryptocurrency and NFT investments are all so new and the technology is so fast-changing that there are a lot of unknowns. Like with any new activity (particularly when money’s involved), there’s increased risk when there’s a lack of history.
Lack of underlying value
Some cryptocurrencies and NFTs lack intrinsic value, meaning that investments can rely solely on supply and demand and the mood of those who have or want to have it. This can lead to dramatic fluctuations in value in short time periods. See a graph of ‘the Bitcoin rollercoaster’ here.
Getting caught up with the hype
A positive experience with crypto or NFTs – like doubling your initial investment within a short time period – can lead to the temptation to invest more to make more money. But when it comes to crypto and NFT investing, it’s often more luck than judgement and there are no guarantees that the luck will last.
Flipping NFTs is an activity that’s almost entirely hype-based; it’s impossible to guess what will happen to the value of an NFT without insider information. In many cases, this hype will never materialise and that’s why crypto and NFTs are sometimes compared to gambling.
Borrowing to buy
A positive experience can also lead people to borrow money in order to be able to buy more crypto and NFTs, believing that they will make enough to not only pay back what they’ve borrowed but also come away with a profit.
This is extremely risky behaviour and if the value of the investment falls, can lead to a cycle of debt.
Read more about the dangers of cryptocurrency for students and what support staff can do to help.
Scams
As with anything where people are trying to make money, others will attempt to take advantage and ‘piggy-back’ onto this by trying to scam people.
This should be kept in mind by anyone considering investing in crypto or NFTs; stay alert at all times, do adequate research and test the water with just a small amount of money at first. The golden rule of ‘if it’s too good to be true, it probably is’ should always be remembered.
Final note
As is true of most investments – crypto and NFTs are neither all bad nor all good and there are still a lot of unknowns about these relatively new financial behaviours.
What’s important is that crypto and NFT investment should not be considered a get-rich-quick scheme and these activities should only be invested in if:
- All potential risks are fully understood
- The investor is able to manage without that money and can ‘HODL’ (hold onto) their investment with the hope that the value will rise again at some point (although this could take years and is never guaranteed!)
Resources and more information
Getting help
As a result of these activities being unregulated, there is currently no organisation that specialises in offering support around crypto and NFTs.
This means that if something goes wrong, there’s no one to turn to and it’s unlikely the FSCS will be able to help.
It’s also why behaviour that would be illegal in traditional stock markets – like ‘pump-and-dump’ – is able to happen with crypto and NFTs.
It’s therefore important that students and potential investors understand the importance of financial regulation and what it means for crypto and NFTs to be unregulated.
While they don’t specialise in crypto and NFTs, StepChange can provide advice on debt.
Learning more
There’s a lot of information out there about crypto and NFTs, but it’s vital to check that sources are reliable.
Some good places to start include:
There is also a large, typically friendly, community of crypto investors on Twitter – but it should be kept in mind that any information shared on Twitter is not necessarily reliable.
Read more about how to support students with cryptocurrency.
Don’t forget to sign up to our staff email newsletter to get all the latest blogs, news and updates to help you support students and their financial wellbeing.
*The information in this blog does not constitute any form of advice and is not intended to be relied upon in making (or refraining from making) any financial decisions.
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