Five Myths People Have About Cryptocurrencies DebunkedBy Apr 18, 2020 4 Min Read
Crypto is used for everyday purchases more than what the general public is aware of. Although cryptocurrency’s stereotypes linger from its black market origin, purchases nowadays may not be as unlawful as people believe. Larger retailers around the world are now accepting cryptocurrencies as a form of payment. Overall, only 16% of consumers familiar with cryptos have invested in them, showing that crypto’s stereotypes may be impacting its adoption potential. While savvy investors have already made a fortune trading cryptocurrency, the general consumers are still holding skewed beliefs about the digital asset class. Most consumers still hold wrong beliefs that mislead them when it comes to cryptocurrency. Five main myths that consumers hold about cryptocurrencies are highlighted as follows.
1. Cryptocurrencies have no value
Skeptics question the value of cryptos and ridicule investors for backing unregulated, speculative assets. But the reality is that cryptocurrencies are borderless, global currencies that fluctuate based on demand and supply. Cryptos are cashless, and that is the reason many supporters believe that they are the future of finance. The general trend around the world is a move towards cashless societies. Over 90% of the fiat money people hold, like the pound, euro, or the dollar is already in digital format. Cryptocurrency like Bitcoin cannot be inflated away through quantitative easing like physical currencies. Since Bitcoin is a deflationary and scarce currency, it is a much better store of wealth than fiat currencies.
2. Crypto is dirty money, used for illicit activities
Bitcoin and other cryptos are frequently viewed with caution due to alleged linked to criminal activities. Many people misbelieve that cryptocurrencies attract criminal activity because of its anonymity. Although users can be pseudo-anonymous, every transaction on the underlying blockchain is traceable. While it is undeniable that cryptos have been and will be used for illicit transactions, every transaction is visible and recorded through blockchain.
The single most-outdated misconception is that cryptocurrencies are the preserve of weapons merchants, child abusers, drug dealers, and dark-web lurkers. Any attempt to associate cryptocurrency with criminal activities is a throwback to its earliest days and has been unhelpful. The majority of cryptos are not entirely anonymous as they have a layer of transparency, which sets them apart from cash and physical commodities. The US dollar remains the main fiat currency used for wicked transactions worldwide, and that’s not going to change any time soon. Fiat money remains king as it offers a level of anonymization, which cannot be replicated by any crypto.
Criminals have existed far longer than any cryptocurrency. Drug trade and money laundering have been around for centuries before the first crypto (Bitcoin) was brought into the market. The assumption that cryptos make illegal activities easier than the US dollar is fundamentally incorrect.
3. Cryptos are too volatile and purely speculative in nature
The dramatic increase of the value of cryptos in late 2017, with a series of bursts and bubbles in 2018, 2019 and 2020, has led many people to dismiss them as nothing more than a speculative asset with no purpose or intrinsic value. Like all fiat currencies, cryptos are only worth what somebody is willing to pay for them. They are different from physical assets like a house, where despite the price declines, a person still has a house.
Simply because a currency is not backed by a physical asset doesn’t mean that it is purely speculative in value. Although the US dollar has no intrinsic value, it is trusted in the entire world. Cryptos are experiencing increased stability despite short-term fluctuations in their prices. Currently, Bitcoin products are more stable than several financial products. Cryptos have become essential alternatives used to simplify international payments and operate independently of government policy. They are known to offer a secure payment option for emerging markets with vulnerable currencies.
4. Cryptos are not regulated
Crypto regulation across the world has significantly increased since the start of the new year. Europe’s Fifth Anti-Money Laundering Directive (5AMLD) came into effect on Jan. 10, while some countries like Australia, Japan, China, the US, and others were early movers and adopted proactive measures to regulate the crypto space. The Financial Action Task Force (FATF) has come along the way with a proposed series of actions, which have increased the urgency for nations across the globe to have robust anti-money laundering regulatory frameworks for cryptocurrency. Crypto businesses are required to comply with regulations for them to conduct their operations.
5. Cryptocurrencies get hacked and are unsafe
Blockchain is one of the more secure options for financial transactions. Some markets are hacked because of poor stewardship, but blockchain remains secure throughout. Blockchain is a chain that changes not only one block, but also the surrounding blocks and picked up by the network, therefore making it extremely difficult to corrupt. However, this is different from a case whereby some cryptos are being targeted for money laundering purposes, which might adversely affect legitimate investors. Crypto investors are continuously being advised to check where they invest their funds.
80% of people have never purchased cryptocurrency
Despite debunking these myths, adopting cryptocurrency will remain a challenge because of several reasons that hold most people back. Most consumers feel that cryptos are highly volatile, not profitable, and some don’t fully understand how these digital currencies work. The cost associated with crypto adoption, lack of understanding, and fear are the main factors that hold people back. However, trust is vital for consumers to adopt cryptos. Institutions and companies should develop trust by working with legislators to adopt the latest cybersecurity solutions on blockchain.
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