By now, almost everyone has heard of Bitcoin. Understanding Bitcoin? That’s a different story. It may be easy to nod along when crypto comes up in the conversation, but the basics still trip even the most savvy investors up.

Whether you’re skeptical, curious, or somewhere in between, these five key facts will give you a clearer picture of what Bitcoin really is—and what it isn’t.

What is Bitcoin?

Bitcoin isn’t just a tech trend or “internet money”—it’s a digital currency created in 2009 as an alternative to the U.S. dollar and other international fiat currencies. It operates independently of traditional banks and central authorities, relying instead on a decentralized network and a public ledger called the blockchain. For investors and planners alike, Bitcoin represents a new kind of asset class—one that’s driven by code, scarcity, and market demand, rather than by banks or monetary policy.

Think of Bitcoin as the first form of “money” built for a global, digital economy: borderless, finite, and immune to policy shifts (or printing presses). Additionally, when used correctly, Bitcoin transactions can be conducted privately and discreetly—though they can still be traceable. (More on this in just a minute under the “Digital Wallets” heading below.)

The Next Generation’s Currency?

Among young adults (ages 18 to 24), cryptocurrency is quickly growing into more than just an alternative asset—it’s becoming foundational. According to a study covered by the World Economic Forum, over 62% of Millennial investors had crypto holdings making up at least a third of their portfolios, while 35% of Gen Z investors allocated more than half of their portfolios to crypto.

This shift isn’t just theoretical. Serious dollars are backing it.

Those aged 18 to 24 invested an average of over $6,100 per year on crypto, and those aged 25 to 40 spent more than $8,500 annually.

With over 94% of all crypto buyers falling into this age group, their combined spending translates to billions of dollars annually.

Bitcoin, in particular, is increasingly becoming integrated into everyday platforms used by this age group. Apps like Cash App and PayPal, with over 489M active accounts worldwide combined, enable users to buy, sell, and hold Bitcoin directly. Tech titans and food and beverage giants, such as Microsoft, Chipotle, Airbnb, and Burger King, all accept payments through Bitcoin-enabled services like BitPay, allowing users to spend cryptocurrency on everyday purchases, subscriptions, and travel—often without needing to convert it to cash first.

Digital Wallets: No Password = No Bitcoin

Bitcoin lives in digital wallets, not bank accounts—and the only way to access those wallets is with a private key or password. Lose it, and there’s no recovery process or customer support to call. It is estimated that roughly 20% of all Bitcoin, worth over $140 billion, has been permanently lost in this manner.

This behemoth-level risk makes one thing brutally clear: in the world of digital assets, secure storage is not optional; it’s essential to ownership.

An additional note on privacy: While many think every Bitcoin transaction is totally anonymous, this isn’t the whole story. In fact, all Bitcoin transactions are public, traceable, and permanently stored in the Bitcoin network—they’re just associated with Bitcoin addresses rather than personal information. Bitcoin addresses are created privately by each user’s digital wallet, but they’re still traceable. Once addresses are used, they become tainted by the history of all transactions they are involved in. Anyone can view the balance and all transactions associated with any address.

Therefore, it’s imperative to use a new Bitcoin address each time you receive a payment or have multiple wallets, should you want to maintain a certain level of privacy.

Volatility: A Key Bitcoin Trait

Bitcoin’s performance in 2024 highlighted one of its most well-known characteristics: volatility. Throughout the year, it experienced price swings even more dramatic than those seen in the stock market during the 2008 global financial crisis—and we all remember how that went.

For investors looking to gain exposure while mitigating that volatility, Bitcoin ETFs have emerged as a more accessible and potentially less risky entry point. By offering regulated, exchange-traded access to Bitcoin, these funds enable individuals to participate in the asset class without managing private keys, wallets, or direct holdings, thereby dramatically reducing their risk of loss.

Uncle Sam Is Still Watching

The IRS doesn’t treat Bitcoin like cash—it treats it like property. That means every time you sell, trade, or even spend it, you’re triggering a taxable event. Even small transactions, such as using Bitcoin to buy a cup of coffee, require gain or loss calculations, making it easy to see how the convenience of crypto can also breed complexity. As a general rule of thumb, if you use cryptocurrency, you are likely to trigger a taxable event.

For most people dealing with Bitcoin or any other cryptocurrency, tax reporting and gain/loss planning should not be treated as an afterthought, but rather as a core part of the strategy—one mistake can result in a hefty tax bill, a significant financial setback, or even criminal sanctions.

Here at Felton & Peel, understanding emerging assets like Bitcoin is part of building a well-informed, future-ready financial plan. Whether you’re exploring crypto for the first time or helping the next generation make smarter money moves, we’re here to guide you with clarity and strategy. We’re here to help—and your first consultation is on us.