Myths About Bitcoin, With Bitcoin reaching new all-time highs and making headlines virtually every day, it seemed like a good moment to examine some of the most common myths and misunderstandings about the world’s first cryptocurrency, determine whether they are valid, and close the gap. truth . This tutorial is for you if you believe that Bitcoin’s value is “based on nothing” or that it is too volatile for real-world usage. At get to the truth about the world’s most cryptocurrency-in-usa/">popular cryptocurrency, we’re separating reality from fiction while keeping genuine hazards in mind.
Myth 1: Bitcoin is a bubble
Myths About Bitcoin, While some individuals purchase Bitcoin as a speculative investment in quest of a high return, this does not imply that Bitcoin is a bubble. Bubbles are economic cycles defined by unsustainable market value rises. These inevitably burst when investors recognise that prices are much greater than an asset’s inherent worth. Bitcoin has been likened to the notorious “tulip fever” speculative bubble of the nineteenth century. XVII. Speculators caused the prices of certain tulip types to rise 26 times in 1637. The bubble lasted six months before bursting, and it never recovered.
The real story:
Over the last 12 years, Bitcoin has gone through multiple market cycles and has always come back to hit new highs. As with any new technology, there will be ups and downs. For example, during the conclusion of the dot.com period in the 1990s, Amazon shares fell from USD 100 to only USD 5, before rising to become one of the world’s most valuable corporations in the decades that followed.
Some of the most prominent Bitcoin investors feel that Bitcoin oscillations are characteristic of juvenile markets. According to them, Bitcoin will rise and fall with smaller swings and longer periods between them until it finds relative stability at some time in the future. However, only time will tell.
Myth 2: Bitcoin has no real-world uses
Myths About Bitcoin, Critics argue that Bitcoin is not helpful in the real world, or that if it is, it is largely used for illegal activity. None of these statements are correct. Bitcoin has a long history of being used to make payments to anybody in the world without the requirement for a bank or payment processor to act as a middleman. Furthermore, huge institutional investors are increasingly using it as a gold-like hedge against inflation.
The real story:
In recent years, Bitcoin has grown in popularity as an inflation-resistant storage medium of value, comparable to gold, earning it the moniker “digital gold.” As a method of better managing their assets, a growing number of major funds and publicly listed firms (Tesla, Square, MicroStrategy) have acquired millions or even billions of dollars in Bitcoin.
Bitcoin, like gold, is in short supply (there will never be more than 21 million Bitcoin). Gold, of course, is heavy, bulky, and difficult to carry and store. Bitcoin, on the other hand, may be transmitted digitally as simply as an email.
Bitcoin garnered poor press in its early years as a payment method on the dark web. However, when the first major dark web market closed down, Bitcoin prices skyrocketed and continued to rise.
As with any sort of money, some of it will be misappropriated. However, as compared to USD, illegal Bitcoin usage is a drop in the bucket. According to a recent research, illegal activity accounted for 2.1 percent of Bitcoin transaction volume in 2019.
Because all Bitcoin transactions take place on an open blockchain, authorities frequently have an easier time determining illegal acts than they would in the conventional banking system.
Myth 3: Bitcoin has no real value
Myths About Bitcoin, While Bitcoin is not backed by a real item like gold, neither is the US dollar, nor almost any other contemporary fiat money. Bitcoin is designed to be rare, making it resistant to inflation. Inflation may occur with fiat currencies when excessive amounts are generated, depleting the current supply.
The real story:
There will only be 21 million bitcoin available. Scarcity is a major driver of its value.
Aside from the fact that supply is limited, the amount of new Bitcoin mined decreases over time in a predictable manner. The block rewards awarded to network miners are slashed in half every four years in an event known as ” splitting “.
This helps to guarantee that supply is continually falling, which has helped to maintaining the price of Bitcoin on a generally upward trend in the long run, from less than a cent at the start to more than 50,000 USD later. February 20, 2021 (Check out the current Bitcoin price.)
Bitcoin’s value is also derived from the effort that computers on the network contribute via a process known as mining. Powerful computers all across the globe dedicate massive amounts of processing power to the task of verifying and protecting each transaction (in return, they are rewarded with new Bitcoin).
Myth 4: Bitcoin will simply be replaced by a competitor
Myths About Bitcoin, The first fully successful digital money was Bitcoin. While new cryptocurrencies have long claimed to outperform Bitcoin by adding new features or providing additional benefits, none have come close.
The real story:
Despite the creation of hundreds of competing cryptocurrencies over the last decade, Bitcoin has always been and continues to be the most valuable cryptocurrency by total market capitalization by a substantial margin.
It is also the most widely used, accounting for over 60% of the cryptocurrency industry.
Bitcoin’s “first mover” advantage, as well as the purity of its aim as a decentralised and open money, are among the reasons.
That isn’t to say competitors can’t attempt. Bitcoin is decentralised, which means that it is run by a worldwide community of miners and nodes rather than a single central authority.
For example, if Bitcoin’s underlying architecture needs to be changed to add new functionality and features or to provide protection against a newly discovered bug, the community can initiate a fork to update the network.
A majority of 51 percent must support the modification for the update to be approved. This allows Bitcoin to adapt and evolve as needed, as evidenced by the 2017 Segregated Witness (“SegWit”) update.
Because the software is open source, programmers who are unable to reach community consensus can hard-fork the Bitcoin blockchain, resulting in the creation of an entirely new cryptocurrency. Bitcoin Cash, for example, was developed in this manner, although no Bitcoin clone has ever come close to replacing the original.
Clearly, there is a high amount of innovation in the field, thus a stronger competitor may emerge. However, given the present state of affairs, most analysts feel that a Bitcoin replacement is unlikely.
Myth 5: Investing in Bitcoin is Gambling
Myths About Bitcoin, While Bitcoin’s price has fluctuated significantly over the previous decade, this is to be anticipated in a new and expanding industry. Bitcoin has consistently increased in value since its genesis block in 2010, with a total market capitalization in excess of USD 1 trillion (as of February 2021; see current total market capitalization ). As Bitcoin matured, a strong regulatory environment in nations throughout the globe aided in attracting a wave of institutional investment (Tesla, hedge funds).
The whole story:
There is a fundamental reason for a Bitcoin investor to assume that the value of their assets would rise, but at a casino, the odds are stacked in favour of the house. Of course, no guarantees can be made about future performance or results, but Bitcoin’s long-term trend has been upward over the last decade.
Dollar cost averaging is a common investing method for reducing the effect of volatility, in which you invest a certain amount every week or month regardless of how the market performs. In a favourable trend situation, this technique produces a positive return regardless of volatility.
Bitcoin volatility looks to be decreasing. A new Bloomberg investigation compared the present Bitcoin surge to the 2017 boom and found that volatility is far lower this time around. Because? The rise of institutional players, as well as the overall stabilising effect of cryptocurrencies as a result of “general public acceptance.”
The inclusion of Bitcoin or any cryptocurrency in your investment portfolio is determined by your particular circumstances, risk tolerance, and investing time horizon. Despite Bitcoin’s consistent increasing tendency over the last decade, it has also seen significant downturn cycles. When navigating tumultuous markets, investors should exercise caution (and consider working with a financial advisor before making large investments).
Myth 6: Bitcoin is not secure
Myths About Bitcoin, There has never been a hack on the Bitcoin network. Numerous security experts and computer scientists have examined its open source code. Bitcoin was also the first digital money to overcome the double-spending issue, ushering in the era of “trustless” peer-to-peer currencies. All Bitcoin transactions are also irreversible.
The real story:
Many misunderstandings about Bitcoin’s security arise from attacks on third-party organisations and services that utilise Bitcoin, rather than assaults on the Bitcoin network itself. Early on, major hacking assaults by Bitcoin organisations with deficiencies in security protocols (such as the one that attacked Japan-based exchange Mt. Gox) and occasional data breaches (such as the one that harmed customers of wallet provider Ledger) caused some users to doubt Bitcoin’s security.
Since its launch in 2009, Bitcoin’s main protocol has operated with 99.9 percent uptime.
The network is secured by a high amount of processing power. The miners that power the grid are scattered globally, with nodes in 100 countries, ensuring that there are no single points of failure.
Myth 7: Bitcoin is bad for the environment
Myths About Bitcoin, Bitcoin mining consumes a lot of electricity. However, determining the environmental effect is challenging. On the one hand, all parts of the digital economy need the use of energy. Consider the whole global banking system, as well as the energy required to conduct financial transactions and power office buildings, ATMs, local branches, and other facilities.
The real story:
According to a recent study undertaken by the New York-based firm Ark Investment Management, “Bitcoin is significantly more efficient than conventional banking and gold mining on a worldwide scale.”
A major amount of Bitcoin mining is fuelled by sustainable energy sources (including wind, hydro and solar) (including wind, hydro and solar). According to the Cambridge Bitcoin Electricity Consumption Index, the real figure is between 20% and 70%.
“Bitcoin’s environmental impact remains minor at best,” the Cambridge researchers found.
In a world where renewable energy is quickly developing, it might be argued that the economic incentives inherent in Bitcoin mining are helping to push sustainable energy innovation, as miners always attempt to boost profits by cutting power costs. become the least expensive choice