Although the cryptocurrency sector has massively expanded since the publication of the Bitcoin (BTC) whitepaper in 2009, occasional setbacks and deep-rooted myths have turned away many potential investors and prevented the industry’s faster proliferation.
With this in mind, Finbold has assembled several of today’s most common misconceptions about digital assets, along with the facts and details that shed some light on them and reveal why these myths may not be entirely correct.
Myth #1: Crypto is only used for illegal activities
Although the belief that cryptocurrencies are used in illicit activities or even funding criminal organizations isn’t that far from the truth, arguing that this is their sole purpose cannot be further away from it.
In fact, according to Chainalysis’ mid-year crypto crime report published in August 2022, cryptocurrency scam revenue had declined 65% in a year. On top of that, all forms of money, since its origins, have been used in crime in one way or another.
Myth #2: Crypto has no value
While there certainly are digital assets out there that are doomed to fail, many of them have value, although their monetary value can fluctuate over time. As a reminder, Bitcoin was only worth a few cents after its launch in 2009, but it has risen to its all-time high of as much as $69,000 in late 2021.
That said, aside from speaking about decentralized finance (DeFi) assets in terms of financial gain from selling them, cryptos such as Cardano (ADA), Ethereum (ETH), and Polygon (MATIC) – just to name a few – also have value in their usability and its potential. In short, it all boils down to individual perceptions of ‘value.’
Myth #3: Crypto is a short-lived fad
A lot of sceptics are certain that digital assets are just a passing trend and that fiat money would soon prove its superiority over the novel asset class. However, crypto has already existed for 13 years and has even survived active attempts to ban it, such as in China.
At the same time, other countries are seeking ways to incorporate crypto into their operations, for instance experimenting with central bank digital currencies (CBDCs), and some, like El Salvador and the Central African Republic (CAR), have gone a few steps further and adopted Bitcoin as legal tender.
Myth #4: Crypto is dangerous for the environment
Mining Proof-of-Work (PoW) cryptos like Bitcoin certainly consume a lot of energy, especially since their popularity has grown, but the effect is lower than many critics think. In fact, BTC accounted for only 0.1% of global greenhouse gas emissions in 2022.
Moreover, there are cryptocurrencies that require far less energy – Proof-of-Stake (PoS) assets, such as Ethereum (ETH), Cardano, and EOS (EOS), where participants, instead of mining, validate block transactions based on the number of their staked coins.
Myth #5: All cryptos are scams
In times when crypto companies collapse and their CEOs get arrested and/or prosecuted, it isn’t easy to trust the rest of the pack. However, like with stock market, some companies will inevitably turn out to be run by dishonest people.
That said, everyone looking to invest in crypto needs to do their own diligence, carefully study the digital asset they’re interested in and the crypto markets in general, and then make an informed decision on which one to trust.
Bonus myth: It’s too late to invest in crypto
Although it might not seem like it, beginners can start investing in crypto at any point, but some periods seem to be more favourable for stockpiling, including bear markets and market bottoms, according to experts.
For example, it is better for a newbie to buy Bitcoin when its market capitalization equals 0.1% of the global wealth and its price is still below $17,000 than it was during its ATH when it was changing hands at nearly $70,000.
As one turns from a beginner to an expert, they can better navigate the cryptocurrency landscape and themselves be the judge of the proper time to buy or sell various digital assets.