Here are some of the common myths you’ll come across once you get into the cryptocurrency world:
1. Cryptocurrencies can make you rich overnight.
This is a big misconception where many people think all they have to do is find the next big crypto, put in some money, and wait to be the next millionaire. This narrative is being pushed on social media and is a common story heard from the few crypto millionaires who were able to get on the doge wave.
The stories about crypto millionaires, even though faithful, are few and far between. People don’t tend to announce their losses. Thus it’s easier to hear about people making millions from crypto but not those who made huge losses. Newbies get a false representation of crypto and make investments based on rare outcomes. This makes them more susceptible to manipulation based on these preconceived notions. In a few years’ time, they are likely to drop out of their crypto journey once they notice they are not getting the millions they were promised.
Be wary of coins that promise to make you a millionaire because they are likely to do the opposite.
2. Day Trading Profits
Daily crypto moves are tough to read. They often don’t follow predictable trends thus are much harder to follow and read.
Holding is a much safer option as compared to day trading. There are only a few successful day traders, and they are the exception, not the rule.
3. Leveraged trading will increase your trading returns.
There is a belief that leverage trading will improve your trading returns. This is very risky, especially when you consider the fact that cryptocurrency is very volatile. Most retail traders get wrecked by highly efficient liquidation engines. They are more susceptible to getting liquidated.
Spot whales make part of the broader market manipulation. They can dump the spot market to liquidate over-leveraged longs and pick up more coins.
4. Retail traders can move cryptocurrency markets.
This is a misconception where many believe that because of their collective size, they can be able to impact the direction of prices.
The reality is that large investors and institutions control most prices. Professional traders are the most significant contributors to large market movements.
Most retail traders believe that headlines and social sentiment should drive the markets. Those with the most capital can influence crypto markets.
5. Effects of Bitcoin mining on the environment.
Ever since some well-known personalities started talking about the impact of Bitcoin mining on the environment, it has been increasingly seen on the news.
The fact is that Bitcoin mining gets almost 74% of its energy from renewable sources. Bitcoin mining uses almost three times more renewable energy than the bulk of all energy used globally.
Bitcoin mining is likely to spur a green energy revolution. This is because energy demand for bitcoin mining could make it more profitable for energy suppliers to build solar and wind plants.
6. Bitcoin is centralized and controlled by China.
This is mainly because a great deal of the mining hash rate has been in China. This fad has been used by opponents of bitcoin when talking about decentralization.
Just because most of the miners are located in one country does not make the network centralized.
Looking at the distribution of nodes across the world will show it’s decentralized.
There are over 13,000 nodes, all based on different locations.
7. Governments can shut down cryptocurrency
This cannot physically be done. This is because most cryptocurrencies are a network of decentralized nodes worldwide that run open-source software. It is also hard to determine who is running these particular nodes.
The only way countries could ban and eliminate cryptocurrencies is if they shut down the entire internet globally. This is why many countries that have tried to ban cryptocurrency have realized it cannot be done. The only way governments can slow the adoption of cryptocurrencies is to make it difficult for people to convert their crypto into fiat. This, however, can push people to use peer-to-peer transactions that require no intermediary.
8. Crypto is mainly used by criminals
This notion is dismissive and tries to paint everyone who uses crypto negatively.
The criminal share of all cryptocurrency activity fell to just 0.34% of all transactions in 2020.
9. Bitcoin transactions are anonymous
There’s a misconception that bitcoin transactions are private and allow people to engage in illegal activity. The transactions cannot be traced, and there are no identities on the blockchain.
This is a lie as all transactions on the bitcoin network are traceable. It is a transparent ledger meaning that any bitcoin used for illegal activity can be identified.
Every single wallet has a public address that is open for everyone to watch. Anybody can see what transactions are flowing into and out of an address.
This address can be linked to a real-world identity to determine who is behind it.
10. There is only one actual cryptocurrency that will last: bitcoin.
This is Bitcoin maximalism. They have the view that bitcoin is the only cryptocurrency that will be needed in the future and can be used for all of the use cases that other cryptocurrencies have been developed for. Given that Bitcoin is the father of all cryptocurrencies; its technology is nowhere as advanced as those we see today. Bitcoin is becoming less practical as a currency or medium of exchange. It’s increasingly seen as a long-term store of value.
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