With a market capitalization of over $1.4 trillion, the cryptocurrency sector has been a great success story for several years now. It has attracted interest from all corners of the world and there is no country that is safe from its influence.
However, the complicated nature of the industry combined with its immense popularity has also led to a plethora of myths about cryptocurrencies. Let’s take a look at some of the most discussed myths and the real truth behind in.
Myth 1 – Cryptocurrencies are used for illegal activities
While it is true that the use of cryptocurrencies started with the dark web, where people used them for illegal and ethically questionable activities, the modern crypto market couldn’t be further from that. Chainalysis reports that only 0.34% of crypto transactions in 2020 were due to illegal activity, which is even less than the conventional banking sector.
That being said, some of the leading influential figures and major tech giants have invested in cryptocurrencies, including Elon Musk and Bill Gates. Today, many investors see Bitcoin and other cryptocurrencies as a hedge against inflation and use digital assets to store value.
Myth 2 – Cryptocurrencies impact the environment
While Bitcoin is one of the most energy-intensive cryptocurrencies because it is based on a proof-of-work protocol, many new and existing projects are now switching to the proof-of-stake mechanism, which is environmentally friendly and offers the same level of security. Ethereum, for example, is in the process of moving to ETH 2.0, which will replace the PoS protocol with the PoW approach.
In addition, cryptocurrency mining is increasingly powered by alternative and clean energy sources, 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 main goals in inventing the whole concept of a decentralized currency is to empower citizens and democratize the financial infrastructure by eliminating third parties such as government agencies, financial institutions, and other intermediaries. Although blockchain and cryptocurrency are quite difficult to understand from a technical perspective, the underlying principle is quite simple.
In recent years, cryptocurrencies have become more mainstream than ever. A variety of services such as crypto exchanges, brokers, and peer-to-peer networks make it easy to trade and buy digital currencies.
Myth 4 – Cryptocurrency is not backed by a physical asset
While this is technically true, the same is true for fiat currencies in which you place your trust. Many countries, including the United States, have either eliminated or greatly reduced the gold reserve system, meaning that banknotes no longer have any intrinsic value. The value of modern money, whether fiat or digital, is based on people’s trust and perception.
This means that the price of Bitcoin and other cryptocurrencies is determined by the market dynamics of supply and demand. If people are willing to pay $40,000 for a Bitcoin, its value is $40,000.
Myth 5 – cryptocurrency is a bubble that is about to burst
Another common misconception is that cryptocurrencies are simply the next craze or novelty that will go away. Bitcoin and other digital currencies will not disappear because there will always be people in this world who want a high degree of autonomy over their wealth and a method to transfer money around the world quickly and efficiently without high costs. The best thing about cryptocurrencies is that they don’t need any authorities or central bank to function, as they are self-contained and anyone can use them in the short and long term.
Myth 6 – It’s too late to invest in cryptocurrencies
The most popular virtual currency, Bitcoin, was only created in 2008, so anyone entering this industry is still at the very beginning. In addition, new altcoins and cryptocurrencies are being introduced on a regular basis, each with their own uses and long-term growth prospects, giving individuals the opportunity to bet on the next big success.
Myth 7 – Cryptocurrency is a scam
As you’ve seen, there are pros and cons to just about every sector. Every time an investor is looking for a way to make money legally, there is another looking for a way to scam them. When it comes to investing in cryptocurrencies, investors tend to be conservative and analyze each of their decisions carefully.
It is unlikely that cryptocurrencies are scams as the authorities have not really banned them. As long as you properly assess your risk and exercise caution, you can safely invest in digital currencies.
Before you invest in cryptocurrencies, it is always advisable to get an expert opinion. Get advice from credible sources. Any information, statements, or misconceptions you come across should be thoroughly investigated before accepting them as reality.
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