Debunking the Top 11 Crypto Myths
Investing in crypto is considered high-risk, but many investors are successful and get a huge return on their investment. Unfortunately, as a new investor, you may not be able to discern fact from fiction. However, you must know what’s true and what isn’t about crypto before you start investing so you can make the best decisions. Here are the top crypto myths.
It Has No Value
Many people believe that crypto has no value because the government does not back it. On the other hand, other experts believe the value of crypto exists because it’s a global network of exchanges and merchants. Essentially, value is determined by supply and demand. When the usage of crypto grows, and the use of it as currency becomes mainstream, its value will increase.
Businesses are already accepting Bitcoin as payment, so it’s only a matter of time before more people start seeing it as a serious investment strategy.
Another huge myth is that cryptocurrency is illegal. Crypto is indeed a legal form of currency, even though it’s not a legal tender. A legal tender is any currency that has been minted and issued by the federal government. The U.S. government classifies bitcoin and other cryptocurrencies as virtual currency. So while there might be some gray areas associated with crypto, legality is not one of them.
Crypto is Used for Crime
Many people believe that because crypto is not regulated that it’s used for crimes such as money laundering. While technically, criminals can use crypto just like anyone else, that’s not what its main purpose is. Crypto investors want to follow the rules and are willing to cooperate with the government to increase mainstream adoption. While criminals can use cryptocurrency, they can also use the U.S. dollar, so it’s not fair to associate it with a crime.
Another crime that crypto is often associated with is tax evasion because transactions are anonymous. However, cryptocurrency is still taxed, and you’ll need to report it on your tax return.
It’s Just a Fad
Many people believe that crypto is just a fad that will go away. However, it’s becoming more mainstream every year. For example, popular crypto Dogecoin started as a joke but has become one of the most recognisable cryptocurrencies in the world. Businesses have started taking crypto as payments, and even forward-thinking companies offer crypto as an employee benefit that helps them recruit millennials.
While some experts believe that crypto isn’t a smart investment strategy, they recognise that it can be impactful. Most experts agree that crypto is here to stay, and governments are becoming more involved.
It is Given Away
Not understanding how crypto works or the mining process makes many people think that crypto is given away for free. However, tokens are mined in a computing process, which validates transactions through blockchains. However, the processing and verifications of transactions cost money. Mining crypto has already cost the industry hundreds of thousands of dollars. The mining process is intentional because it limits the number of cryptocurrencies found each day.
You Can’t Use Crypto for Purchases
While it can take some time to confirm crypto transactions and ensure the coins can’t be spent more than once, you can use cryptocurrency for purchases. Many companies accept payment via Bitcoin and other popular digital currencies. However, right now, people tend to use crypto for higher-ticket items because the transaction time can be close to one hour.
For low-ticket and convenience items, the long confirmation process can be problematic. For example, if you’re purchasing lunch at a local coffee shop, it doesn’t make sense to wait around to confirm your purchase.
Blockchain technology is safe and secure, but the decentralization of crypto makes many believe it isn’t safe. However, it might be safer than other forms of currency. Because it is decentralized and encrypted, it is secure for any type of transaction.
That being said, crypto exchanges are digital, which means they can be vulnerable to cyberattacks and hackers. Blockchain technology reviews everything to make it hard for hackers to access users’ digital wallets, and all investors are required to undergo precautions when trading and transacting with digital currency.
However, because the US government doesn’t regulate cryptocurrency, it can be susceptible to hacks and even scams.
Government Can Ban the Use of Crypto
The government cannot ban crypto as the government does not regulate them. Crypto allows anyone with access to the internet and money to spend to transact with them. The only way the government can ban crypto is by banning the internet. Many governments are working on ways to control crypto, but none have stated they would enforce law over the currency. Additionally, governments are becoming more willing to accept cryptocurrencies like Bitcoin.
Transactions Have No Records
Crypto transactions are completely anonymous, which leads people to believe there is no record of them. However, blockchain technology validates each transaction and records them in a ledger. Therefore, all transactions are public and traceable.
It is a Scam
Investors need to be cautious when investing in crypto because of its risk. Not to mention, there have been many scams involving cryptocurrency. However, that doesn’t mean that digital currency is a scam. Investors treat crypto the same way they make their other investments; they understand the risk they’re taking and are always skeptical.
Of course, anyone can get scammed, but that also happens in the traditional investment world when an investor doesn’t take the time to learn about the investment opportunity. Before you invest in cryptocurrency, you have to take the time to consider the potential outcomes and be ready to lose your investment. While you can get scammed, educating yourself can help you avoid it.
Everyone Should Invest in Crypto
Not everyone should invest in crypto because it’s such a high-risk investment. Experts warn you should only invest what you’re willing to lose because you can easily lose everything if you’re not careful. Additionally, crypto should be used as a way to diversify your portfolio rather than your only investment strategy.
Treat it like any other investment strategy when investing in crypto. Always do your research so you understand what you’re getting into.