Myths Surrounding Investments in Cryptocurrency

Top 7 Myths Surrounding Investments in Cryptocurrency

Cryptocurrencies have come a long way since the inception of bitcoin in 2009. Many investors have made a fortune owing to the high growth rate of bitcoin. However, due to the complex structure of blockchain technology, many people find it hard to understand how cryptocurrency works. It has created many misconceptions and stigmas around crypto investments. Many investors refrain from investing in any altcoin due to the myths surrounding crypto investments.

From believing that investing in digital assets is gambling to scrutinizing crypto for its ecological impacts, here is a list of the most popular cryptocurrency myths: 

Investing in Crypto is Gambling

One of the popular myths surrounding crypto investments is that it is straightforward gambling. Although cryptocurrencies have seen many dips and highs, it still doesn’t mean investing in them is comparable to gambling. The fact is that this response is predictable for an emerging market.

Historically, the most traded altcoins, including Bitcoin and Ethereum, have shown a constant upward trend with only a few downhill phases. With regulations underway for these major cryptocurrencies, many believe that the speculative nature of digital investments will fade away slowly.

Some of the newer cryptocurrencies, such as Chainlink (LINK), also have a lot of potential for investors, based on a faster and more secure framework than bitcoin. LINK is based on the Ethereum blockchain and facilitates smart contracts between businesses. It drew the attention of investors when its value reached $52 in 2021. Now, it is being traded for $8, but it is expected to rise in value once the crypto market comes out of its bearish phase. If you are an investor, you can buy Link now and hold it until the market becomes bullish.

Cryptocurrency is Not Secure

Cryptocurrency is based on a complex blockchain framework that is very hard to hack, and yet many people still believe that investment in this asset class is not secure. It is because most investors don’t know how blockchain technology works. Understanding how its underlying blockchain technology works is essential for realizing that cryptocurrency is a secure investment.

A blockchain is a shared database that records transactions in structures called blocks. These blocks have a certain capacity to hold data. Once block storage is filled, it is linked to a previously filled block, thus making a chain. A blockchain exists on many nodes, and a different user owns each node. The data stored in these blockchains cannot be altered because it does not exist on a single server. This blockchain structure ensures that cryptocurrency cannot be stolen or hacked.

Criminals Use Cryptocurrencies Only

As most cryptocurrencies are still unregulated, most people still believe in the myth that only criminals invest in digital assets. While the statement does hold some weight because you can instantly send money anywhere in the world, that is certainly not the case. According to Chainalysis, only 0.34% of crypto transactions were used for illicit purposes in 2020.

It is also important to note that many governments are trying to crack down on criminal activities targeting cryptocurrencies. Some have already adopted anti-money laundering laws to prevent illegal activity through crypto.

Digital currencies are Not Backed by Anything, So They Have No Intrinsic Value

Probably the most popular cryptocurrency myth is that since government security or asset do not back cryptocurrencies, so they have no value. While it might be true for some people, it isn’t for others. Value is a subjective matter. Some people might believe something has value, while others may regard the exact item as worthless. The popularity and growth of bitcoin show that it has some value in the eyes of its investors, as it reached its all-time high of $69000 in 2021. Once a more significant number of people start accepting cryptocurrencies as a payment solution in their daily life, the value of cryptocurrencies will rise even further.

Cryptocurrencies are Bad for the Environment

Another popular myth surrounding crypto investments is that it is bad for the environment. Many people believe that crypto mining is an energy-intensive process. While it is true that some bigger mining setups use as much energy as required to power up a small country, most of these setups use sustainable energy from solar or wind.

Moreover, we must consider that the entire banking system and its transactions require energy. A recent research study by Fund Ark Investment Management indicates that bitcoin mining is still much more energy efficient than conventional banking.

Digital Currency will Replace Fiat Currency

Inspired by the popularity of bitcoin and Ethereum, many people believe that digital currency is the way forward. They want digital currency to replace fiat currency. However, it is still very early to predict whether digital currency will replace fiat currency.

Fiat currency has been around for centuries, while cryptocurrency is still relatively new. Fiat currency is backed by some commodity or a government’s security, while there are no government authorities or entities to endorse digital currency. Due to these reasons alone, it seems almost impossible for altcoins to replace fiat currencies. 

Crypto is a Fad

The likes of Warren Buffet believe that cryptocurrency is the same as the 17th-century dutch tulip craze, and it will fade away similarly. However, the growth of bitcoin demonstrates that digital currency is here to stay. Since its inception in 2009, bitcoin has seen its value grow from nothing to an all-time high of $69,000 in 2021. It’s been 13 years, and cryptocurrency is not only still around but is also growing gradually.

Cryptocurrency has become so popular that Central banks of many countries have launched their versions of digital currency. Governments are trying to regulate the crypto market to control the volatility of digital currencies. Once the crypto sector is wholly regulated, digital currencies will not go anywhere. Instead, cryptocurrency investments will only increase with time.

The Final Word

Cryptocurrencies have gained popularity in the past few years, but some people still don’t know much about the crypto network. It has created many stigmas around crypto investments. These stigmas discourage investors from investing in cryptocurrencies. Educating investors to burst some of these myths to promote investments in cryptocurrencies is essential. This article sheds light on some of the most popular misconceptions surrounding cryptocurrencies. Hopefully, this article has managed to counter the myths, and you should be able to invest freely in cryptocurrencies.

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