Bitcoin prices have fallen more than 70% and other coins are down by 90%+ some even 95%+. This has led to a lot of misconceptions and negativity around the industry and people unwilling to participate. Not just this, it has also resulted in a lot of misconceptions being risen and floating around by the public. Helping here clear out some of them which are common ones
It will replace Fiat currency
This is one of the most prevalent myths about cryptos, and it is simply not true.
First of all, cryptocurrencies are not backed by any government. And even if it does, the high volatility in most of the cryptocurrencies will just not offer enough stability for them to be used for financial transactions in day-to-day working for a considerable amount of time. Except for a category of cryptocurrencies called “Stable-coins”, which are pegged to the dollar or any other fiat currency and do not change in value.
All cryptocurrencies are the same
This has a lot to do with the lack of awareness around cryptocurrencies among the people at large. But the fact is, the term cryptocurrency is used to describe a wide variety of coins and tokens, many of which have different properties, ownership structures, and levels of volatility.
A detailed blog on this would be published soon.
A get-rich-quick scheme
Crypto markets are highly volatile in nature, due to
1. Smaller participation base when compared to Equity or Forex markets.
2. Few big players playing part in the market affect the prices
3. A lot of Pump and dump schemes along with prevalent Market manipulation are a part of the crypto ecosystem.
A handful of big coin success stories of the past have somehow fueled this misconception. But just like any other trading or investing, crypto is also a zero-sum game where you make money at the expense of others.
So be mindful of your choices in this market because wealth destruction also happens here at a frantic pace.
Crypto is Evil
It is a myth that crypto is predominantly used for illicit, nefarious, and dark purposes. Yes, such usages cannot be ruled out completely but that is true even for any Fiat currency as well. Isn’t it? The US Dollar is the biggest culprit of all.
Crypto markets have evolved a lot in the past decade or so. With a growing adoption rate, we are now even witnessing increased participation of big institutions such as Investment banks & NBFCs. Several governments across the globe have started to form a legal framework around this industry. Thus relatively increasing adoption, and paving the way for more clarity and adoption. Also proving it to not be evil.
Nobody Controls Crypto
Theoretically, All Cryptocurrencies should be decentralised. This means no one entity or individual controls it.
But because of the initial stages of the industry, almost all cryptocurrencies and tokens are centralised in nature, and have some levels of decentralisation, but not 100%. This affects us on 2 levels,
1. The progress and development of the coin/token
Most tokens are being run by some foundations or a company which in itself screams centralisation, which is good for the initial stages but has to drop out in the later stages of development.
2. The manipulation of the price
The possibility of manipulations cannot be ruled out, especially in the case of new launches. Interested parties work in tandem individually or within a closed-knit group dumping the asset while aiming to pocket huge profits at the expense of investors is a routine.
Governments will eventually kill Crypto
Cryptocurrencies are decentralized currency that does not require government approval. That means implementing a ban would only create complications with the monetary policies of various governments. Banks in the past have already tried different sanctions to discourage digital currency but despite that, the adoption rate has grown.
Of course, no one knows the future but looking at various aspects of this technology, any such possibility currently does not look feasible
Cryptos are for tech buffs
The whole idea of creating a cryptocurrency was to liberate the financial system from the clutches of intermediaries & government agencies, thereby giving people more control over their money. Understanding the underlying technology (i.e. blockchain) can be a little challenging, but its application is pretty straightforward for any layman. Just like understanding VOIP protocol for WhatsApp calls is not for everybody to understand, nor is HTTPS protocol for web-surfing, eventually all of the technology would be abstracted and we would be doing our business as usual.
Crypto is a fad that will be over soon
You cannot be more wrong in believing this. For countries which do not have a strong currency, people have seen their wealth collected over decades, get eroded in a span of 2 years because of inappropriate government policy. This has been pretty common across the African continent and some parts of Asia. Cryptocurrencies will become a strong force to reckon with in such areas giving them the stability that their governments could not.
It is a scam
People often resort to such claims for the lack of clarity or willingness to learn and explore. Scams can happen in any industry and so far crypto market also has witnessed its share. Nevertheless, it doesn’t define the character of the whole industry. The early days of stocks and derivatives markets are filled with numerous million-dollar scams, which took almost half a century to stabilize, A few bad apples are always part of the ecosystem to prey on the new participants. It is our responsibility as an individual to stay safe from such scams and not trust any random claims.
It is illegal
Lack of recognition doesn’t necessarily equate to being illegal. It is a fact that today many countries are contemplating a legal framework around the cryptocurrency market which is another way to look at things getting recognized soon!
Have any other misconceptions? Want to discuss this? Feel free to drop us an email – at firstname.lastname@example.org
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