Cryptocurrencies are new since they’ve been around for a little over a decade. When faced with something new and complex, our minds fill in the blanks with preconceived notions, even if they don’t have a factual basis.
It’s no wonder that there are dozens of cryptocurrency myths floating around.
About 43% of Americans aged between 18 and 29 years have used and traded cryptocurrencies. This statistic tells you that digital currencies are growing in popularity. Even then, you might still come across some rumors about these digital currencies.
Here, we will tell you about the common cryptocurrency myths and debunk them. We hope the information will boost your confidence in deciding whether to invest in cryptocurrency.
Cryptocurrencies Are Only Used for Illegal Activities
This is the first myth you’ll hear when you tell someone that you want to invest in cryptocurrency. You might believe individuals use cryptocurrency for illegal activities, such as money laundering. It might make sense because cryptocurrencies are decentralized and not well-regulated by governments.
Criminal organizations have indeed used digital currencies for nefarious activities. But, it’s no different from how they’ve used other forms of money for illegal activities.
The truth is, you can use cryptocurrencies for legal purposes like any other currency. In fact, many businesses have started accepting cryptocurrency as a form of payment. For example, you can use bitcoins to pay for apps and games on Microsoft.
Cryptocurrencies Are a Scam
Other than hearing that digital currencies are used for illegal activities, some people will tell you that the whole idea is a scam. They’ll convince you that you’ll be signing up for extortion by malicious individuals.
Some criminals can indeed scam you to gain from your cryptocurrency. For example, someone may try to convince you to give in to unverified transactions. They can also pretend to be government officials and demand that you pay your cryptocurrency debts.
Such scenarios do not imply that cryptocurrency is a scam or a pyramid scheme. Technology creates cryptocurrencies through a legit process known as mining. It involves verifying transactions on a blockchain and adding them to the blockchain ledger.
Cryptocurrencies also have real-world uses that prove they’re legit. For example, you can use bitcoin to buy goods and services. The government has also started to regulate cryptocurrency, which has helped to legitimize it.
To eliminate the chance of getting scammed, you should be aware of how the industry operates. You can find such information on the consumer information website of the Federal Trade Commission. Knowledge will ensure that you don’t fall for some of the most common scams in digital currency.
Cryptocurrencies Have No Value
Naysayers will tell you that bitcoins have no value. They’ll say that because cryptocurrency isn’t backed by anything physical, it must be worthless. You might also hear that cryptocurrency is nothing more than a bubble that will burst in the future.
But cryptocurrency does have value. Bitcoin gained value shortly after its introduction in 2009. Its value has been increasing since then and stands at over $44,000 today.
Cryptocurrencies have value because people are willing to use them to buy goods and services. The more people who use cryptocurrency, the higher its value will go.
Not only that, but cryptocurrency also has utility. For example, you can use bitcoins as a censorship-resistant store of value. This means that the government fiat can’t devalue it like other currencies.
Only Tech-Savvy People Use Cryptocurrency
While it is true that early adopters of cryptocurrency were tech-savvy people, this is no longer the case. Cryptocurrency is now used by people from all walks of life, all over the world.
The reason for this is simple: cryptocurrency is easy to use. Thanks to platforms like Coinbase and Blockchain, you can buy and sell cryptocurrency. All you need is a credit or debit card, and you can be up and running in minutes.
It’s even easier to exchange cryptocurrency if you’re familiar with other trading platforms. You’ll have an account where you can speculate, buy, and sell in the crypto marketplace.
The best exchange platforms will have educational features that keep you updated on anything you need to know about crypto. For instance, if you’re interested in centralized exchanges, you’ll learn the basics of converting your fiat currency into crypto.
So, whether you’re a tech-savvy early adopter or someone getting started in cryptocurrency, there’s a place for you.
Cryptocurrencies Aren’t Secure
Some people will tell you that because cryptocurrency is digital and not backed by anything physical, it must be insecure. They’ll tell you that people can doctor the technology and steal your cryptocurrencies.
It might make sense because there are no authorities or organizations you can reach out to in the case of fraud. But this couldn’t be further from the truth.
Blockchain technology and distributed ledger technology ensure that cryptocurrencies are secure. It does this by creating a digital ledger of all cryptocurrency transactions. This ledger is then distributed across a network of computers, making it impossible to tamper with.
As you enter new transactions into the blockchain, information about the previous transaction moves into new blocks and is encrypted. This creates a blockchain network.
The block linkage and the encryption make it impossible for someone to change the blockchain’s information. As such, no one can steal your digital currency.
Furthermore, cryptocurrency exchanges have implemented strict security measures to protect users’ funds. Bitcoin ATM networks like bytefederal.com use strategies such as buy limits. These factors reduce the risk that someone will steal your debit card and drain your account.
Cryptocurrencies Are a Passing Trend
You might come across a myth that cryptocurrencies are a fad and will disappear within a few decades. Although it’s difficult to predict the fate of cryptocurrencies, there are a few indicators that they’re here to stay.
First, cryptocurrencies have been growing in popularity for more than a decade. Products that cryptocurrency has inspired continue to develop with each passing year. An example is decentralized finance applications.
These allow users to do everything related to digital currencies. For example, they can lend and borrow cryptocurrency. They can also earn interest on cryptocurrency holdings.
Cryptocurrency is also eliciting transformations in finance and money. It has already prompted some central banks to develop digital versions of their currencies. This means it might soon be easy to manage transactions using computer programs.
The cryptocurrency industry is also growing in employment. In 2021, career postings related to the cryptocurrency industry increased by 118%.
These trends show that industry players will continue to develop and redefine cryptocurrency. It might become a staple in a few decades.
Cryptocurrency Will Replace Fiat Currency
You might hear rumors that cryptocurrency will phase out fiat currency in the future. You should dismiss this myth as soon as you hear it. There are several reasons why cryptocurrency can never replace fiat currency.
First, people have been using fiat currency for centuries, and you’ll find it even in the most developed countries today. There’s no guarantee that soon all merchants will begin posting the prices of their products in cryptocurrencies. So, there is little chance that people will abandon it.
Second, cryptocurrency is not accepted across the world. People accept fiat everywhere. You can use fiat currency to buy goods and services worldwide. You can only use cryptocurrency to buy goods and services from a limited number of merchants.
The government may also be unwilling to let the fiat currency go. It already has strong systems of control over fiat currency to make it easy to complete processes like tax collection. The government cannot abandon these systems as it needs funds for social programs.
Cryptocurrency is not backed by anything, but fiat currency is backed by the full faith and credit of the issuing government. This gives fiat currency value. Cryptocurrency is not backed by anything and so has no stable value that can allow it to challenge the dollar.
Cryptocurrencies Are Too Volatile to Be a Reliable Investment
While it is true that cryptocurrencies can be volatile, this does not mean that they cannot be a reliable investment. In fact, many people will tell you that the volatility of cryptocurrencies is one of the reasons why they have such potential.
There are several reasons why cryptocurrency prices are so volatile. The most common reason is that the market is still small. When there are only a few buyers and sellers, it only takes a small amount of buying or selling to cause big price changes. As the market grows, it will become more efficient and this volatility will decrease.
Another reason for cryptocurrency volatility is the lack of regulation. Cryptocurrencies are not subject to the same rules and regulations as traditional investments. But governments and financial institutions are likely to start regulating them.
While cryptocurrency prices may be volatile now, this does not mean that they will always be. As the market grows and becomes more efficient, the volatility is likely to decrease. While cryptocurrency is still a riskier investment, its volatility should not deter you from investing altogether.
Cryptocurrencies Cause Immense Environmental Pollution
One of the most common cryptocurrency myths is that crypto mining requires more energy than other financial processes. It’s true that mining for cryptocurrency can be energy-intensive. But there are several ways that industry players can mitigate this impact.
For example, many cryptocurrency miners have started to use renewable energy sources such as solar and wind power. Some cryptocurrency mining operations are now using more efficient models that use less energy.
It is also important to keep in mind that cryptocurrency is still a new industry. Industry players will develop even more efficient mining methods as digital currencies grow and evolve. As a result, the currency will have an even smaller impact on the environment.
Cryptocurrencies Will Make You Rich Quickly
Don’t believe the stories that cryptos are the best shortcut to becoming a millionaire. It’s true that investing in cryptocurrency can lead to high returns. But there is no guarantee that you will become a millionaire overnight. The hard truth is that it’s more likely that you will lose money if you invest without first doing your research.
Cryptocurrency is still a new and volatile asset class, which means a high degree of risk is involved. Before investing, you should always understand the risks and potential rewards.
There is also no such thing as the best cryptocurrency to invest in if you want to become rich. This is because the value of each cryptocurrency is dependent on market conditions. Some cryptocurrencies may perform well in certain market conditions, while others may not.
The IRS Can’t Track Your Cryptocurrency Transactions
Those around you might convince you not to report your IRS transactions because the IRS won’t notice. Listening to them will only make you pay hefty penalties for non-compliance.
The government will treat your digital currency as property for federal income tax purposes. You have to pay tax on the capital gains that you incur when disposing of your cryptocurrency. It’s your responsibility to combine different exchanges and determine how much you owe the IRS in a given year.
The IRS has embraced various methods to track all cryptocurrency transactions. For instance, it has software that follows all digital currency transactions. If you file a tax return that doesn’t include the transactions, the software will flag your forms for under-reporting.
Dispel Cryptocurrency Myths and Invest Confidently
Although cryptocurrency is still in its infancy, it’s a promising investment that you could try your hands at. Be aware that you’ll encounter different cryptocurrency myths. These may lead you astray and let the opportunity to gain from digital currency slip.
To help set the record straight, we’ve debunked some of the most common cryptocurrency myths today. We hope this provides a little clarity about cryptocurrencies. Use this article to dispel misconceptions and invest in different types of cryptocurrency.
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