7 Most Popular Cryptocurrency Myths Debunked
With a market capitalisation in excess of over $1.4 trillion, the cryptocurrency sector has been a major success story for quite a few years. It has garnered interest from every corner of the world and there isn't any country that's safe from its influence.
However, the complicated nature of the industry combined with its immense popularity has also given rise to a plethora of myths about cryptocurrency. Let's take a look at some of the most discussed myths and the real truth behind them.
Myth 1 - Cryptocurrencies Are Used for Illegal Activities
Although there is some truth to the fact that the use of cryptocurrency started with the dark web where people used it for illicit and ethically questionable activities, the modern crypto market cannot be any further away from that. Chainalysis reports that only 0.34% of the crypto transactions accounted for illegal actions in 2020 which is actually less than the conventional banking sector.
Apart from that, some of the leading influential personalities and major technology giants have invested in cryptocurrencies including Elon Musk and Bill Gates. Today, many investors see Bitcoin and other cryptocurrencies as a safeguard against inflation and use digital assets to store value.
Myth 2 - Cryptocurrency is Impacting the Environment
While Bitcoin is one of the most energy-intensive cryptocurrencies as it relies on a proof-of-work protocol, many new and existing projects are now making a shift to the proof-of-stake mechanism which is eco-friendly and offers the same level of security. For instance, Ethereum is in the process of transitioning to ETH 2.0 which will replace the PoS protocol with the PoW approach.
Moreover, cryptocurrency mining is increasingly powered by alternative and clean sources of energy and some crypto projects are actively investing in carbon-neutral initiatives to ensure their net carbon footprint remains low.
Myth 3 - Cryptocurrencies Are Only for Tech Nerds and Rich People
This is absolutely untrue. In fact, one of the primary aims of inventing the entire concept of a decentralised currency is to empower common people and democratise the financial infrastructure by eliminating third parties including government authorities, financial institutions, and other intermediaries. Although blockchain and cryptocurrency are rather challenging to understand from a technical perspective, the underlying principle is quite simple.
In recent years, cryptocurrencies have become more mainstream than ever with a diverse range of services such as crypto exchanges, brokers, and peer-to-peer networks enabling easy trading and purchasing of digital currencies.
Myth 4 - Cryptocurrency isn't backed by Any Physical Asset
While this is technically true, the same goes for fiat currencies that you put your faith in. Many countries including the United States have either completely eliminated or substantially scaled-down the gold reserve system which means that there is no intrinsic value to the currency bills. The value of modern money, whether fiat or digital, is based on the trust and perception of the people.
This means that the price of Bitcoin and other cryptocurrencies is driven by market dynamics of supply and demand. If people are willing to pay $40,000 for one bitcoin, its value is $40,000.
Myth 5 - Cryptocurrency is a Bubble About to Burst
Another common misconception is that cryptocurrency is simply the next craze or novelty that will go away. Bitcoin and other digital currencies aren't going to disappear because there will always be individuals in this world who want significant autonomy over their wealth and a method to transmit money around the world fast and efficiently without incurring high costs. The best part about cryptocurrencies is that they do not require authorities or Federal Reserve to function as they are self-contained, enabling anybody to use them in short and long term.
Myth 6 - It's Too Late to Invest in Cryptocurrency
Totally incorrect. The most popular virtual currency, Bitcoin, was just founded in 2008, thus anybody entering the industry is still very much in the initial phase. In addition, new altcoins and cryptocurrencies are being introduced on a regular basis, each with its own set of uses and long-term growth prospects providing individuals with the opportunity to get behind the next big success.
Myth 7 - Cryptocurrency is a Scam
As you've seen, there are advantages and disadvantages in just about any sector. Every time one investor looks for a means to earn money legally, there's someone else there looking for a way to defraud them. When it comes to investing in cryptocurrency, investors are more likely to be conservative and overanalyse their every decision.
Cryptocurrencies are unlikely to be a scam since the authorities really haven't outlawed them. As long as you manage your risk properly and exercise caution, you are safe to invest in digital currencies.
Prior to investing in cryptocurrencies, it's always advisable to obtain an expert opinion. Have a discussion with an expert and get guidance from credible sources. Any information, statements, or misconceptions you come across should be thoroughly investigated before accepting them as reality.
- Myth 1 - Cryptocurrencies Are Used for Illegal Activities
- Myth 2 - Cryptocurrency is Impacting the Environment
- Myth 3 - Cryptocurrencies Are Only for Tech Nerds and Rich People
- Myth 4 - Cryptocurrency isn't backed by Any Physical Asset
- Myth 5 - Cryptocurrency is a Bubble About to Burst
- Myth 6 - It's Too Late to Invest in Cryptocurrencies
- Myth 7 - Cryptocurrency is a Scam
- Final Word