Crypto Myths: Do Not Believe These Statements
Cryptocurrencies were first introduced in the year 2009 with the introduction of Bitcoin. Since then, the world of cryptocurrencies has evolved greatly with several new currencies listed on the crypto exchanges every day. In addition to this, a number of exchanges have also emerged in the ecosystem, creating a lot of confusion among the investors. Furthermore, different investors who happened to be successful in the crypto market are claiming to be the know-it-all of cryptocurrencies. But often the statements issued by them turn out to be myths. So, here we have busted 10 common crypto myths that you must never give in to.
Crypto Myths #1: Cryptocurrencies are Real Money
Some crypto investors argue that cryptocurrencies are real money. However, the definition of real money issued by the International Monetary Fund is not supported well by crypto coins. The IMF describes money as a medium of exchange that is also a store of value and is accepted by people around the world. So as we can clearly see that cryptocurrencies are barely accepted across the world. In fact, China has completely banned the use of cryptocurrencies in the nation. Moreover, money is something that remains stable in its value for some time at least. Cryptocurrencies, on the other hand, are highly volatile and their value fluctuates within hours. Thus, they can not be regarded as real money as of now.
Crypto Myths #2: Cryptocurrencies will Replace Fiat Money
Saying that cryptocurrencies will replace fiat money doesn’t make much sense as of now. It is because cryptocurrencies are still new and are still far away from achieving global public acceptability. So cryptocurrencies replacing fiat money is a very distant idea and is not happening anytime sooner or until the national governments of the countries around the world legalize the use of cryptocurrencies. Also, the volatile nature of cryptocurrencies will always be a hurdle in making them replace fiat money because people look for a medium of exchange that is more stable in its value and doesn’t fluctuate with every second, unlike cryptocurrencies.
Crypto Myths #3: Cryptocurrencies are Temporary and will Fade Away
Crypto critics may make you believe that cryptocurrencies are temporary that they will fade away within a few years and that the fiat money is permanent. However, this isn’t what the history of cryptocurrencies suggests. Bitcoin, the first cryptocurrency, was introduced in the year 2009 and it has increased in its value by over 5000%. In addition to this, since the year 2009, hundreds of cryptocurrencies and their exchanges have emerged in the financial ecosystem with their new ideas and problems to solve through the coins. This clearly shows that cryptocurrencies are here to stay and it is a good time to invest in them as a smart investor.
Crypto Myths #4: Cryptocurrencies are Used for Illegal Activities
To say that cryptocurrencies are particularly used for illegal activities like money laundering and tax evasions is not right. Such crimes can be executed with any form of money including fiat money. Chainalysis is a company that investigates crimes related to cryptocurrencies. It reported that the number of crypto transactions related to illegal activities fell to 0.34% in the year 2020. Moreover, different countries are putting forth regulations and legislation to look into this very small number of crypto-related crimes. For example, the National Cryptocurrency Enforcement Team has been set up in the United States to investigate criminal uses of cryptocurrencies and prosecute the offenders.
Crypto Myths #5: Cryptocurrencies are Bad for the Environment
The mining operations of the cryptocurrencies consume a lot of power which is often supplied by fossil fuel-powered power grids. This creates as much carbon footprint on the environment as is produced by some small countries. So, it may create a concern for the environmentalists that such large energy consumption is made by something digital which has no surety of being useful to the human being. While this is real to a great extent, cryptocurrencies and underlying blockchain technology are making constant efforts to reduce the power involved in the mining operations. In fact, the European Emissions Trading System has introduced an emissions allowance that can be bought by crypto miners to reduce their carbon footprint.
#6: Crypto Investments are Risky
Crypto investments are risky. But which investments aren’t? All kinds of investments including stocks, SIPs, and precious metals are bound to experience some dips at one time and hit highs at the other. The same pattern goes for cryptocurrencies as well. The difference lies only in the fact that crypto markets witness such fluctuations over a very short period of time whereas other investment options show such significant changes over some days or months. Sure, crypto investments are risky. But with the right approach to choosing the cryptocurrencies to invest in and the timings of investing can help you a great deal to earn huge profits from this market.
Crypto Myths #7: Trading in Cryptocurrencies is Difficult
As a beginner, you may feel intimidated by the uncountable crests and troughs in the graphs showing the volume trading and pricing histories of the crypto coins. However, trading in cryptocurrencies is not as complex as it looks. A good mix of gathered knowledge, experience, and information can help beginners become well-versed with the crypto world and its jargon. Following that, trading in cryptocurrencies is a smooth process as you have an idea of how it works.
#8: Crypto Investments are Anonymous
While a large number of people may make you believe that the crypto investments are completely anonymous and nobody can track the owner of the investments or the transactions, it is not completely true. Though crypto exchanges may give investors a fake name and their real names are not publicly visible, the governments can track the wallet addresses to reach their true owners. Therefore, if the national governments want, they can easily bond with the crypto exchanges for mapping the users.
Crypto Myths #9: Cryptocurrencies are the Best Investment Option
Successful crypto investors claim that cryptocurrencies are the best investment option and people should put a significant amount of money in the coins to reap huge profits. This may be true to the part of earning good amounts of profits. However, putting all the money in cryptocurrencies can not be the best investment decision. This is because cryptocurrencies are highly volatile and the market changes every few minutes. So, investors must invest only 5-10% of their investment portfolios in cryptocurrencies to avoid losing all of their money.
Crypto Myths #10: Cryptocurrencies are Not Secure
The statement that cryptocurrencies are not secure is completely false. It is because they have blockchain technology governing them, which builds new blocks based on the previous blocks to enable transactions. In addition to this, the transactions execute themselves only when the predefined conditions follow and agreed upon by all the participating computers. Such a consensus mechanism makes it nearly impossible for hackers to steal or manipulate the information on the blockchains.
Now that you know the reality behind all the myths mentioned above and circulated in the crypto community, we hope that you will make your own informed decisions rather than fall prey to any such misconceptions of the crypto world.
A passionate writer, seasonal poet, and feminist, I am trying to wrap my head around all the topics under the sky. You can often see me talking about crypto, social issues, traveling across the globe, how I am trying to change the world, and how you can be my ally!