Cryptocurrency has reimagined digital money. Although it’s been around for over a decade now, it’s not always been in mainstream consciousness and is still considered a fairly ‘new’ currency.
With that, we often hear certain misconceptions about crypto. So, we’ve separated the facts from the fiction and debunked three of the most common myths about crypto.
Myth #1 Bitcoin doesn’t have any value
Although Bitcoin isn’t backed by a physical asset such as gold (neither is the US dollar, for example) there is a finite supply of Bitcoin, 21 million to be exact. So, when there is more demand for Bitcoin, the price goes up, and when there is less demand, it goes down. Like any other market, sentiment, and features of the macroeconomic environment, including inflation, also drive Bitcoin’s value.
Myth #2 Cryptocurrency is used for illicit activity only
According to Chainanalysis, in 2019 an estimated 2.1% of crypto transactions were used to facilitate illegal activity, in 2020, this fell to just 0.34%. While there’s still work to be done, statistics show that a sweeping majority of crypto transactions are used for genuine purposes.
Myth #3 Bitcoin is a Ponzi scheme
By definition, a Ponzi scheme is a fraudulent investment operation that pays returns to early contributors using the money from later contributors rather than overall profits. While early adopters of Bitcoin have seen great returns, there are no paid dividends to these investors. And, as Bitcoin is decentralized, and operates peer-to-peer, there’s no central body to operate a Ponzi scheme.