Cryptocurrencies are all the rage right now, with the thousands of cryptocurrencies in the crypto market valued at nearly $1.1 trillion 💸
In truth, the cryptocurrency landscape has been plagued by an incredibly bearish season in the past few months with several cryptocurrencies sliding in value. The recent volatility in prices of crypto assets has raised questions about the reliability of investing in the cryptocurrency space. As a result, people have spread several narratives about cryptocurrencies, many of which are untrue. Since blockchain is a relatively new technology, this was bound to happen.
Below you will find common crypto myths. We invite you to study the facts, analyze other myths, and determine whether they are true or false.
- Crypto Money Laundering
- The Crypto Market Will Lose Its Popularity As a Result of the Crypto Winter
- Cryptocurrencies Are Not Safe
- The Сryptocurrency Market Is a Scam
- Crypto is Difficult to Trade
Interact with the underlined words and green dots to get additional details and explanations.
Explanations and definitions of terms.
1️⃣ Crypto Money Laundering
A common myth about digital currencies is that they are used primarily for illicit activities. It is often called “Crypto money laundering”. Indeed, digital currencies have been used by criminal organizations and individuals with nefarious intentions, but this is true of all forms of money.
According to the 2022 Crypto Crime Report by blockchain data firm Chainalysis, cybercriminals laundered $8.6 billion worth of cryptocurrency in 2021, reflecting a spike of nearly 30 percent between 2020 and 2021.
But let's take a second look at this. For starters, cash remains the most widely used payment method for criminals because it's difficult to track but easy to sell. For that reason, should cash be eliminated? Or is it possible that cash also serves a useful function for the rest of society? Additionally, the traditional banking system is the main source of money laundering. But this does not imply that money is only for criminals since it is contradictory.
You may have noticed that criminals are often ahead of the curve with new technology. Unfortunately, many other technologies have followed this, too, such as the internet, drones, cell phones, cars, and many others. Therefore, we believe it is a weak argument to avoid using new technology due to an association with criminal activity.
This misconception is, perhaps, derived from the fact that cryptocurrency users are anonymous.
While that is true, all Bitcoin transactions can be read by anyone, and due to the software's open-source code and shared ledger, Bitcoin can be traced back to its original origin. Additionally, the emergence of special blockchain anti-money laundering (AML) services which monitor transactions limits “dirty crypto business”.
Crypto assets involved in suspicious operations can be marked, increasing the credibility of newly mined assets or those withdrawn from trusted exchanges.
2️⃣ The Crypto Market Will Lose Its Popularity As a Result of the Crypto Winter
2022 has been a challenging year for the crypto market. Since the height of a massive rally in 2021, the market has lost roughly $2 trillion, with several cryptocurrencies collapsing in value. Bitcoin, in particular, is 66.5% off its November all-time high of nearly $69,000. The brutal effects of the crypto winter have inevitably increased the fear that crypto will eventually lose popularity.
While these fears may be understandable, the probability of a collapse in the crypto market is very unlikely.
This is because a large proportion of professional market participants hold crypto assets. Several notable institutions in the global financial market are heavily invested in crypto. The El Savador government and American multinational automotive company, and even Texas have invested billions of dollars in the crypto market.
Additionally, the crypto market has survived several bear markets. Take 2017, for instance. After rising by about 2500% in early 2017, investors watched as Bitcoin fell from $20,000 to $3,200 in December. Fast forward to November 2021, Bitcoin would rally to $68,990, increasing remarkably by over 2,000%. Indeed, we cannot ignore the influence of existing realities in the global market, such as inflation and the rising interest rates following Russia’s invasion of Ukraine and Covid-19 in the crypto market turmoil.
If we expect the stock market to recover after this challenging year, why should we expect cryptocurrencies to disappear?
3️⃣ Cryptocurrencies Are Not Safe
What do you think of this myth crypto? The fact is that many people are also skeptical about the security of cryptocurrencies. For instance, several people are wary of their assets being carted away due to the lack of centralized authorities and the anonymous nature of blockchain transactions.
Firstly, you should know that blockchain technology is what gives cryptocurrency its functionality. Due to its encryption techniques and technology, the blockchain is an extremely secure decentralized database. The blockchain is a record of previous transactions in blocks. New blocks are created and encrypted each time new transactions completed, adding them to the blockchain. Since the blockchain is encrypted with linked blocks and has consensus mechanisms, it is virtually impossible for the information in the chain to be changed.
The only time cryptocurrencies have weaknesses is when they are stored and accessed. Then, they become vulnerable to attack due to their access and storage methods, including cryptocurrency wallets and centralized exchanges. Cryptocurrency can be safely sent from one user to another; however, the platforms and software used to access and store it can be hacked.
Trading on Olymp Trade eliminates most of these risks.
Firstly, you don’t have to purchase Bitcoin or any Altcoin to trade it on the platform. Although the platform supports deposits with tokens such as Bitcoin, Ethereum, and Tether, most Olymp Trade users use USD or EUR.
Secondly, Olymp Trade’s Forex mode functions as a Contract for Difference (CFD). In essence, you can trade crypto assets and profit from the market without having to purchase the underlying asset.
With CFD trading, you can easily enter and exit these often volatile markets with significantly less risk. Finally, the Olymp Trade platform has professional trading tools, such as Take Profit and Stop Loss, so you do not have to worry about your trades while you are offline or asleep.
4️⃣ The Сryptocurrency Market Is a Scam
In recent years, retailers and merchants have begun to widely accept cryptocurrency. As a result, governments are exploring ways to regulate them since they are accepted in personal transactions.
You should, however, note that most cryptocurrencies do not contain any artificially-generated malicious intent that aims to steal your money.
It is a fact, however, that scammers have created ways to scam you out of your cryptocurrency or money. For example, several initial coin offerings have proven to be scams due to their unregulated nature. You might also be asked to accept unverified transactions in cryptocurrency, or the scammer might pose as a government official and ask you to make some payments.
5️⃣ Crypto is Difficult to Trade
A lot of people carry the opinion that it is difficult to trade in the cryptocurrency market and that it is difficult to navigate. That is not entirely true.
All you need to be good is the right knowledge and a platform that provides a good user experience, so the process is simplified.
A good recommendation is the Olymp Trade platform. For instance, trading on this platform does not require you to fully understand the blockchain, buy a cold wallet, set up a hot wallet, or anything complicated. It is quite straightforward.
Now that we've debunked these myths about cryptocurrency, you can start your journey in the crypto market with more guides and materials via the Olymp Trade Blog. Our guide is concise and valuable and will give you a huge head start in your growth process.Trade Crypto
Risk warning: The contents of this article do not constitute investment advice, and you bear sole responsibility for your trading activity and/or trading results.
A Contract For Difference (CFD) is an agreement between two parties, a seller and a buyer, to transfer the difference between the current value of an asset at the time of opening the contract/opening a position and its value at the end of the contract/closing position. If the price of the asset increases between the opening and closing trades, the buyer will receive the price difference from the seller. If the price has decreased, the seller will receive the difference in price from the buyer.
A bearish market is a market that is dominated by a downtrend. When the price goes down, the market is said to be "bearish" and traders who expect prices to go down are called "bears". It is characterized by the increase of sales volumes over purchase volumes. It can be applied to both a single asset and to a group of assets.