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There is a lot of talk about cryptocurrencies these days, and it seems everyone has an opinion on it. Here are some cryptocurrency myths and facts every investor should know.
Some will praise cryptocurrency as being a new alternative to traditional currency. Many will claim that it is one of the best investments you could ever make. On the other hand, some people believe that cryptocurrency isn’t here to stay and that it will implode and lose all value once the bubble bursts.
What are the facts about cryptocurrency, and what are the myths? Should you really invest in cryptocurrency, or should you stay away from it? Keep reading to learn all this and more as we go over eight cryptocurrency myths and facts that you should know before investing in it.
Myth – Bitcoin and The Blockchain are Interchangeable
Fact – Each Cryptocurrency Has Its Own Blockchain (For the Most Part)
Many people don’t fully understand what a blockchain is, which has led to a lot of myths surrounding its nature. A blockchain is like a virtual ledger that cryptocurrencies are built and traded on. Though there are exceptions, each cryptocurrency has its own blockchain and can only be traded on that blockchain. This means that you wouldn’t be able to go to the Ethereum blockchain and trade Bitcoin on it or vice versa.
Also, keep in mind that different blockchains function differently. For example, the blockchain is created to make Bitcoin work like digital cash in Bitcoin’s case. On the other hand, Ethereum was created to allow developers to build peer-to-peer apps that don’t need an intermediary to work in addition to the blockchain itself.
You should take away from all of this because there are multiple cryptocurrencies; they each have their own blockchain in most cases and function as separate entities. The blockchain is not the cryptocurrency itself, but rather a platform that allows you to use the cryptocurrency.
Myth – Cryptocurrencies Aren’t Regulated
Fact – Cryptocurrencies Are Becoming More Regulated Each Year
When cryptocurrencies first appeared, it really was like the wild west since no laws or regulations had been created to regulate them. As a result, some people were wary because they thought governments would simply crackdown and ban cryptocurrencies rather than regulate them. However, as time has passed, things have started to change, and governments have begun looking at ways to regulate cryptocurrency rather than ban it outright.
One of the reasons for this approach is that huge businesses like Amazon, Dell, and Twitch have started to accept cryptocurrencies as a payment option. Since these companies have a lot of influence across many nations, world governments are more open to working with cryptocurrencies rather than against them.
Myth – Cryptocurrencies are Illegal in Areas Where They’re Not Regulated
Fact – Not Being Regulated Doesn’t Necessarily Make Cryptocurrency Illegal
Just because something is unregulated doesn’t make it illegal. For example, you and your friends could invent a form of currency that you use just between yourselves. It could be anything really, and it wouldn’t be illegal just because it isn’t regulated. Thanks, basically how it is with cryptocurrency.
An excellent example of this is the situation in South Africa. The South African Reserve Bank is working on drafting laws and regulations for cryptocurrencies, but currently, cryptocurrency is not considered legal tender. But, of course, it doesn’t make them illegal either; it just means that SARB doesn’t back cryptocurrencies.
The main thing to remember is that if you have any questions about whether cryptocurrencies are legal or regulated in your area, there is plenty of information to clear things up for you. Just make sure you get your info from a legit source, as you would with anything related to legal issues.
Myth – The Blockchain is Only Useful for Cryptocurrencies
Fact – The Blockchain has Many Uses
Once again, people tend to misunderstand the true nature of the blockchain. It isn’t just a wallet for cryptocurrencies online; it’s an entire platform that can provide multiple functions. In addition, people are coming up with new innovations for the blockchain that give it additional functionality.
One good example of how the blockchain can do more than store and trade cryptocurrency is the fact that it can also host contracts between two or more parties. This can be a big help in various cases, such as storing the contract between a loan company, and the beneficiary. It can even make the loan payments automatic if so desired.
Myth – Cryptocurrency is Used For Criminal Purposes
Fact – All Currencies are Used for Criminal Purposes, Crypto is No Different
Some people are under the impression that cryptocurrencies were created to conduct criminal business and fund criminal enterprises. However, this is not the case. A report from Chainalysis indicates that around 1% of crypto is used for illegal activity, a decrease from previous years.
Cryptocurrencies can and will be used for criminal purposes, but the same can be said of all currencies. The fact that crypto has only 1% used for illegal activity is pretty impressive, considering how traditional currencies are used.
Myth – Cryptocurrency Makes You Anonymous
Fact – Cryptocurrency Can Make Tracing Your Identity Much Harder, But Not Impossible
One of the reasons people associate cryptocurrency with criminal activities is that they think using crypto makes you anonymous. The truth is that it doesn’t, not entirely anyway. While cryptocurrency can make it incredibly difficult to trace transactions and discover a person’s identity, there are ways to do it since all transactions are recorded on the blockchain.
If you’re concerned with privacy, you should be pleased to know that cryptocurrency is one of the most secure payment methods globally. This lets you make transactions without fear of hackers or other nefarious forces getting your information and discovering your identity.
However, it should be noted that an exceptionally skilled hacker or government agency can still get into the information on the blockchain and discover a person’s identity. Interestingly enough, this is rarely done by hacking the blockchain directly, but through more indirect methods that target a person’s account, such as password phishing.
This means that protecting one’s identity while using cryptocurrency comes primarily down to following basic Internet security procedures like choosing a unique password, being careful what networks you access while using cryptocurrency, and not clicking on suspicious links in emails.
Myth – Cryptocurrency Has No True Value Because a Commodity doesn’t back it
Fact – Cryptocurrency Doesn’t Need to Be Backed by a Commodity to Have Value
This is one of the most persistent myths about cryptocurrency, but the value is subjective by its very nature, and this is especially true when it comes to currency. This has led some to claim that crypto doesn’t have an intrinsic value because it isn’t backed by a commodity such as silver or gold as many fiat currencies supposedly are. However, this fails to account for the fact that these days, fiat currencies aren’t backed by commodities either, and the commodities themselves possess no intrinsic objective value.
The value of cryptocurrency comes from the value that the buyers and sellers give it. That said, it is also subject to economic forces that influence the value as well, such as the fact that the more cryptocurrency there is, the lower its value will become. Even so, cryptocurrencies such as Bitcoin are not infinite, making them a more stable form of currency than a fiat currency in which more can always be created.
Myth – The Cryptocurrency Bubble is Going to Burst Soon
Fact – Cryptocurrency Has Steadily Gained in Value Over the Past Decade
The first cryptocurrencies were seen back in 2010, and since then, most have steadily gained in value, with Bitcoin being a good example. Yes, there have been peaks and valleys, but any currency can say the same. Will the cryptocurrency bubble burst soon? Recent findings seem to indicate that it is unlikely.
Something that needs to be taken into account when discussing the supposed cryptocurrency bubble is that it has recently become the world’s 5th most circulated currency. In fact, between 2020 and 2021, crypto experienced an average increase in value of 195%, which is pretty astounding.
Myth – Cryptocurrencies are for criminals, and criminals are fickle
Fact – That’s not true
Just because some people break laws with cryptocurrencies, it doesn’t mean everyone who uses it is the wrong person to fund organized crime. We all use cash, paychecks, and credit cards. Criminals use those currency systems, too; the fact that criminals use something shouldn’t condemn that item as bad.
Myth- Cryptocurrencies are not legal tender
Fact – This is not entirely true
It might not be legal, but cryptocurrency exchange is legal, and regulations vary from state to state and are dependent on the transaction. Cryptocurrency regulations state that it is a legal tender in such cases, where it is accepted. In addition, blockchain systems can manage and increase government transparency, as many governmental organizations adopt blockchain auditing as a public service.
Myth – Cryptocurrency is hackable
Fact – Unlike banking apps and fitness trackers, blockchain is highly secure
As with regular cryptocurrencies, the miners of the blockchain system are put in a confidential mode where they offer their abilities to solve some test transactions in compromising situations.
Myth – Only rich people would use cryptocurrencies
Fact: People who earn lots of money think differently from the poor people who face financial problems
Still, cryptocurrencies received a thousand+ businesses’ acceptance and are used by those who may not have much money. Cryptocurrencies are used in everyday purchases and non-financial transactions. If a dollar is too much for some, bitcoin is enough for many others. More businesses accepting Cryptocurrencies is not a social issue since transaction fees for people who don’t use cash are zero or minimal.
Myth – Cryptocurrency is bad for planning
Fact – Many businesses use programmed software dealing with business calculations, auditing, and accounting
Cryptocurrencies and the blockchain technology that keeps the transactions assured through cryptography and transparency don’t hinder net business businesses, logistic business traders, or financial trades.
Myth – Cryptocurrencies can never be used in a business
Fact – Blockchain technology creates a great platform to conduct transactions and cash flow in businesses
It has immense features to handle cash flow; as with cryptocurrencies, there isn’t any need for a third party to manage transaction codes. Cryptocurrencies make business management more effortless.
Myth – The cryptocurrency capacity is unlimited
Fact – Cryptocurrencies like Bitcoin are mined and finite
When the blockchain space has reached its full capacity, attaining more power is difficult since processing power takes time measured in hours and not days, weeks, or even years.
Myth – Cryptocurrencies are not real donations but purchases; they are based on an artificial medium that’s derivatives at best
Fact – Bitcoin is not ‘an artificial medium
It’s an ‘electronic cash address where every person gets their private keys (wallets). Money generated and earned purchases by handling cryptocurrency brings value to the currency and has real worth. Without buying and selling, cryptocurrencies melt away into oblivion like Bitcoin Cash.
Is Crypto Right For You?
If you’re looking for a way to make digital payment online easier, then there is no reason not to hop aboard the cryptocurrency train. Once you understand how it works, it can make online payments fast, easy, and convenient. Many people use crypto just for a fact because it’s highly secure and safe to use.
On the other hand, if you want to be a serious cryptocurrency investor, you need to understand what crypto is and the economic forces behind it. While cryptocurrency is a legit investment, there is a bit more to it than just purchasing some and hoping it rises in value as a stock would.
If you want to invest in crypto, now is a great time. Just make sure you do your research first, and make an informed decision. Do this, and you won’t regret it.
Image Credit; Pexels; Thank you!
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