With bitcoin hitting new highs and major news breaking regularly, it is a good time to consider some of the biggest bitcoin misconceptions and bitcoin myths people have regarding the world’s first digital currency, see if they have merit, and correct the record.
This article is for you if you are among people who think that Bitcoin’s value is based on nothing” or that it’s too volatile to have any real-world use.
We’re drawing a line between fact and fiction without shying away from legitimate risks for getting to the truth about one of the most popular cryptocurrencies.
The number one myth is: Bitcoin is a bubble.
Some people buy Bitcoin as a risky investment seeking big returns, but, that doesn’t mean that Bitcoin itself is regarded as a bubble.
Bubbles can be considered economic cycles, which are unsustainable rises in market value. Eventually, they pop when investors get much higher prices than an asset’s basic value.
Bitcoin has sometimes been compared to an unpopular early speculative bubble: the 17th-century Dutch “tulip mania.” In 1637, people caused prices for some tulip varieties to increase 26-fold. The bubble lasted around 6 months, then crashed and never recovered.
Learn more: Crypto Bubbles: Is Bitcoin A Bubble?
The second myth is: Bitcoin has no real-world uses.
Most critics claim that Bitcoin isn’t useful in the real world. If it does have a use, it has more harm such as its involvement in most criminal activities. None of such statements is true. Bitcoin has a long history of making payments worldwide, all without a bank or payment processor.
Also, Bitcoin is increasingly being used as a gold-like hedge in combating inflation by most institutional investors.
Recently, Bitcoin has been emerging as an inflation-resistant store of value, much such as gold, thereby leading to Bitcoin’s “digital gold” nickname. An increasing number of main funds and publicly traded companies have bought billions of Bitcoins to better manage their assets. Bitcoin is short, just like gold.
Furthermore, Bitcoin, in its early years, gained many negative reviews and was considered a way of payment on the dark web. However, when the first big dark market was banned, the worth of Bitcoin increased.
The third myth is: Bitcoin doesn’t have real value.
While Bitcoin may not be backed by any physical asset such as gold, neither is the US dollar or any other latest fiat currency. Bitcoin is hard-coded to be scarce, which makes it unaffected by inflation. Inflation with fiat currencies happens when large quantities are created, diluting the existing supply.
It is said that bitcoin can be only 21 million. This scarcity is the main driver, which is increasing its worth. However, the amount of new Bitcoin being mined is decreasing with time. After every four years, in an event called “halving,” block rewards are paid to miners in the network, which are cut in half.
This aids to certain to make sure that the supply is always declining, which, by the basic economic principle of scarcity, has worked for keeping the price of Bitcoin broadly trending up over the long run, from a very less amount initially to more than $50,000 as of mid-February,2021.
The fourth myth is: Bitcoin will be replaced by a competitor
Bitcoin was among the very first successful digital currency. While many cryptocurrencies are emerging and tied to overtake Bitcoin by unique characteristics or other advantages, none have come close to bitcoin.
Though many rival digital currencies have emerged during the last few years, Bitcoin has always been and will remain the most valuable digital currency by market cap by a greater margin.
Also, it’s the most popular, making up about 60% of the crypto industry. The reason behind its success is Bitcoin’s first-mover advantage. Other than this, its purity of mission is a decentralized and open currency.
The fifth myth is: Investing in Bitcoin is the same as gambling.
Bitcoin has indeed suffered a major shift in price volatility over the past few decades; that’s to be expected of an emerging and growing market. As Bitcoin’s genesis block in 2010, it has progressively gained long-term value with a market cap of more than $1 trillion.
And as Bitcoin has continued to get mature, a robust regulatory structure in countries all across the world has helped to draw the attention of institutional investors.
There is a basic objective for a Bitcoin investor to believe that the worth of their holdings should increase. One popular investing strategy for decreasing the effect of volatility is dollar-cost avera
The sixth myth is: Bitcoin isn’t secure.
The Bitcoin network has never been hacked. Its open-source code has been scrutinized by many computer scientists and security experts. Also, Bitcoin was the first cryptocurrency for solving the double-spend problem, thereby making “trustless” peer-to-peer currencies a reality.
Moreover, all Bitcoin transactions are almost irreversible.
Many misconceptions about the security and safety of Bitcoin stem from attacks on third-party services and businesses that use Bitcoin and not the Bitcoin network itself.
High-profile hacks of Bitcoin companies with flawed security processes and data breaches have made some users worried about the security of Bitcoin. Bitcoin’s main protocol has been functional safely, with around 99.9% uptime since its formation in 2009.
The seventh myth is: Bitcoin is bad for the environment
Bitcoin mining is an energy-intensive process. However, determining the environmental impact is quite challenging. It is obvious that almost all aspects of the digital economy need energy.
Consider the entire global banking system and the energy needed to process bank transactions, power office buildings, local branches, ATMs, and many more.
Bitcoin is regarded as much more efficient than traditional banking and gold mining if we see it on a global scale. Most renewable energy sources like hydro, wind, and solar power are a major portion of Bitcoin mining. The actual number varies from 20-70%. Cambridge researchers say that Bitcoin’s environmental footprint recently remains marginal at best.
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