So much has been told about crypto throughout the years that it is somewhat challenging to identify myths from facts. But that’s why we’re here!
First, it’s normal for an industry in the early stages to be doubted. Cryptocurrencies haven’t been around for too long, which generates a bunch of questions regarding the technology behind them, their use, volatility, and, last but not the least, earning potential. Their emerging popularity combined with their complex nature has, thus, brought about lots of rumors and myths that need to be debunked.
Digital coins have garnered interest, and increasingly more individuals started to invest in or trade them. So, if you feel the same urge, we don’t blame you. In any case, the widespread lack of knowledge needs an adequate approach.
Thus, in no particular order, we’re going to analyze some of the most popular myths regarding cryptocurrency to help you make a relevant and informed decision on your next investment.
Myth: Cryptocurrencies are used for illicit purposes
One of the most persistent myths about cryptocurrencies is that criminals use them. This misbelief appeared from a grain of truth, indeed, but the statement above mentioned is by no means true. Money and, in general, means of trading have always been used for various purposes, some more ethical than another. But if we claim that crypto is used for illegal activities, we refer to real money, too. Most crypto activity functions on transparent and open blockchains, where each transaction, address, and wallet can be monitored in real-time. Illicit actors will indeed try their luck, but overall, crypto is used by responsible individuals and organizations.
To debulk the myth, a Chainalysis report shows that only 0.34 percent of crypto-related transactions accounted for illicit purposes in 2020.
Myth: Cryptocurrencies don’t have real money value
Indeed, cryptocurrencies are not real money, but this doesn’t mean they have no value. Since there are no material asset backing cryptocurrencies, it’s easy to fall into the trap of believing they have no underlying value. First, value is a totally relative concept – what some may treasure, others can put in the recycle bin. This is true for crypto, too. Let’s take the example of the legendary Bitcoin. It was once valued at only a couple of cents, but today it’s the largest cryptocurrency by market cap. Ether (ETH) is also valuable, as Ethereum, the blockchain ecosystem powering it, is the building stone for decentralized finance apps, NFTs (non-fungible tokens), and other technological developments. It’s right that ETH can’t be compared with Bitcoin in dollar value, but its potential and utility make it much more needful for organizations providing financial services and products.
Myth: Crypto negatively impacts the environment
While it’s true that crypto mining depends on energy, it would be a mistake to conclude that crypto is an environmental disaster. The largest cryptocurrency at this moment is one of the most energy-intensive tokens as it depends on a proof-of-work (PoW) mechanism. Indeed, mining Bitcoin requires huge amounts of energy, but the good news is that there are emerging projects that promote greener practices and that promise to rely on a proof-of-stake (PoS) protocol. For instance, ETH 2 promises to switch from PoW to PoS.
Plus, crypto mining has changed its route and become more and more powered by clean energy sources.
Myth: Blockchain and cryptocurrency are one and the same
There is a common misconception that crypto and blockchain are identical. Indeed, they’re interconnected, but they’re not in the same boat. The simplest way to explain them is in the following assertion: cryptocurrency is the car, while blockchain is the internal combustion engine. As everyone knows, the vehicle is powered by a machine, which makes us say that cryptocurrencies wouldn’t exist without blockchain. Nonetheless, blockchain powers not only crypto but a multitude of things, including transactions and vaccinations (see the Columbia case) that have nothing to do with crypto.
Myth: Cryptocurrencies are too volatile to be a realistic investment
Volatility shouldn’t influence your crypto decisions to such an extent that you give up trading or investing. As previously mentioned, it’s normal for cryptocurrencies to fluctuate since they’re relatively new on the market. We agree that these coins’ value can fluctuate wildly (not for nothing the concept of the “Wild West”), but this doesn’t transform them into a useless investment. With the right strategies in place, you can run the crypto volatility and even make profits out of it. It’s imperative to study the market well in advance, let your emotions aside, diversify your portfolio, and, most importantly, invest for the long term. While daily trading can be enticing, specialists don’t recommend this tactic, as there is a higher risk of facing a capital loss and paying multiple fees and taxes like trading commissions.
Start your investing journey with thorough research on each crypto that grabbed your attention. If you plan to invest in ETH, for example, ensure you get your information from trustworthy and reputable sources such as Binance to avoid ambiguity. You may also want to read news or reports regarding any crypto you’re interested in, as this can help you make a pertinent decision.
Myth: Crypto is just for the tech-savvy and rich
This common false belief may have its roots in the fact that many people still hesitate to use this technology, as it’s unfamiliar and complex. But this doesn’t mean it can’t be understood. You’d be thrilled to learn how easy it is to purchase cryptocurrencies and deposit them in a digital wallet. Besides, there are hundreds of resources on the Internet that can help you get started.
And no, crypto is not just for rich people. It was created as a concept of decentralized currency that would democratize the economic infrastructure and empower people of all social statuses.
Regardless of all this, digital currencies tend to be steeped in mythology. The only way to avoid uncertainty is to document properly and take well-thought steps before embarking on this crypto journey.
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