Common Misconceptions About Cryptocurrency
By definition misconception means ” a view or opinion that is incorrect because it is based on faulty thinking or understanding “. This is especially true of cryptocurrency as most peoples understanding of crypto is based on ” water cooler ” conversations and sensational news regarding a spectacular moon shot or devastating DeFi hack. Let’s take a dive into some of those misconceptions.
Myth : Crypto transactions are anonymous and great for criminals.
Much of this mentality stems from the early days of bitcoin and the darknet market one of which was Silk Road launched in 2011 and shut down by the FBI in 2013. Sure , crypto transactions aren’t directly linked to identities but a public blockchain is transparent and transactions can be traced. There are some goods and services which can be paid for in crypto but when converting crypto to fiat there is a paper trail.
Myth : Stablecoins are backed by USD.
Although stablecoins can be backed by USD they can also be backed by the yen , euro , gold or other commodity. Stablecoins can also be backed by an algorithm mechanism that can reduce or increase the supply in the market to match demand.
Myth : Cryptocurrency is a fad.
Most outspoken is Warren Buffet and his associate Charlie Munger who have have described cryptocurrency as the ” dutch tulip craze ” or ” rat poison squared ” . Many other outspoken individuals have labeled crypto as a ” ponzi ” or ” mother of all scams “. The fact is crypto is making transformational changes to money and finance. Decentralized finance , smart contracts , Web3 and NFT projects are still in their infancy but the future looks promising.
Myth : Crypto is too volatile to be a sound investment.
Most are aware of the volatility involved with crypto and the fact that huge gains or losses can be incurred in a short amount of time. Winning or losing in the short term is dependent largely on timing. One of my favorite quotes is ” It’s not about timing the market it’s about time in the market “. When investing in crypto expect volatility short term and growth long term. Understand and know the risk and never invest more than you can afford to lose.
Myth : Crypto is just for the tech savvy.
Sure , younger people have an advantage over those who have not grown up with technology but the same also applies to smartphones , computers and TV’s. There are plenty of online tutorials and YouTube videos along with podcasts and forums to get a basic crypto education. I recently learned of a non – profit in New York that runs community programs for older adults added a new course ” Introduction to Cryptocurrency ” to their curriculum. Another valuable resource for the elderly is younger family members. Imagine your surprise when grandma sends you sats for Christmas !