Five More Myths About Crypto

There is no shortage of negative information published online and in mainstream media about the risks of digital currencies.  My goal in this article is to debunk some of the predominant myths that surround the burgeoning digital currency industry. I'm a fervent student of the industry, not an investment advisor.

1. MYTH: Digital Currencies Don’t Have Any Real Value.

The IRS and multiple other government agencies have created a tangled web of proposed crypto regulations which may have contributed to investors’ confusion about crypto’s classification and value. 

FACT: While Bitcoin (the world's first widely adopted digital currency) is not backed by gold, neither is the US dollar or any other modern fiat currency.

Central Banks and governments have the power to print fiat currency at their will resulting in their currency’s ability to depreciate. On the other hand, Bitcoin’s space is fixed and limited, making it less susceptible to inflation. In an appealingly simple explanation from Coinbase: bitcoin is digital money that allows for secure peer-to-peer transactions on the internet.

Bitcoin’s scarcity is the major driver of its value. There will only ever be 21 million bitcoin. According to Blockchain.com, approximately 83% of all the Bitcoin that will ever exist has already been mined. Estimates say minting will be completed around 2140.

Currently, the amount of Bitcoin being mined is declining. That is because every four years an event called halving takes place.. At that time, the amount of reward paid to bitcoin miners is cut in half.

According to Investopedia, this event induces inflation in crypto’s price by reducing the amount of bitcoin in circulation and thereby increasing demand. This event also cuts Bitcoin’s inflation rate in half, along with the rate at which new Bitcoin enters circulation. 

2. MYTH Digital currencies are primarily used for illicit activity.

One of the most widespread myths about digital currencies is that they are most commonly used for illicit activities. Then again, the same could be said for fiat currencies. 

FACT: Cryptocurrency-related crime is falling, and it still remains a small part of the overall cryptocurrency economy. 

The Chainalysis 2021 report states: “In 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume, or roughly $21.4 billion worth of transfers. In 2020, the criminal share of all cryptocurrency activity fell to just 0.34%, or $10.0 billion in transaction volume.”

According to the UN, it is estimated that between 2% and 5% of global GDP ($1.6 to $4 trillion) annually is connected with money laundering and illicit activity. This means that criminal activity using crypto transactions actually is much smaller than fiat currency and its use is going down year by year.

3. MYTH: Bitcoin Doesn’t Have Real World Uses

FACT: There’s a lot you can buy with Crypto.

Digital currencies are increasingly used to buy things that have real underlying value, including goods and services. Memberships, tickets, artwork, music and other real-world items are becoming widely available. 

Companies including AT&T, PayPal, Mastercard, Spotify, Apple, Amazon and many more have integrated bitcoin into their operations. 

The easiest way to buy anything with bitcoin is to use a crypto debit card. These cards are preloaded with the cryptocurrency of your choice. 

When you use the card to spend crypto, it’s converted into fiat money that the retailer receives as payment in real time. Crypto debit cards partner with payment-processing giants like Mastercard and Visa to ensure that these transactions occur seamlessly.

3. MYTH: Cryptocurrencies Are Not Secure

FACT: No network is 100% secure anywhere on earth. Unfortunately, many third party businesses and services that store cryptocurrency in online “wallets” have been hacked. However, the actual Bitcoin network itself has never been hacked.

A vast amount of computing power secures the Bitcoin network. The network is spread into blocks on a ledger. The miners who use the network are distributed globally in more than 100 countries. So there is no single point of failure. And there also are no coherent regulations, although the Biden administration is promising to release its policy soon.

Since a lot of data moves from system to system, denial of service attacks and other performance challenges exist.

The weakest link is individual users. The best place to keep crypto is in a “cold wallet” because it is not connected to the Internet. These are also known as “hardware wallets” and “offline wallets.” Nonetheless, if you forget your password, or the device you are using as a wallet becomes inaccessible, your crypto is gone forever. 

Crypto exchanges involve keys, some of which have been stolen, or famously, lost. 

4. MYTH: Bitcoin Mining Is Definitely Bad for the Environment

FACT - Bitcoin absolutely requires lots of energy. But exactly how much, and whether it’s worth it, is up for debate.

The fact that all aspects of the digital economy require energy to function must also be considered. For example, the global banking system, including the processing of bank transactions and the energy used to power ATMs and local branch offices, as well as credit cards, are all major energy users.

According to Wired’s Nicole Kobie, it’s complicated. And a lot of the answers depend on how and what data is used. 

As author Nic Carter argues in Harvard Business Review  “...ultimately it’s up to the crypto community to acknowledge and address environmental concerns, work in good faith to reduce Bitcoin’s carbon footprint, and ultimately demonstrate that the societal value that Bitcoin provides is worth the resources needed to sustain it.”

And then there’s Yassine Elmandjra, analyst for Ark Investment Management,  who argues in a Twitter thread that “contrary to consensus thinking, we believe the impact of bitcoin mining is a net positive for the environment. “

5. MYTH: Cryptocurrencies Are a Scam

FACT: While there’s reason for investors to be cautious when it comes to potential scams, the bottom line is simple. Smart investors will treat digital currencies the way they’d treat any other potential investment - with a large amount of research and caution - and definitely add a good dose of skepticism.

Plenty of investors have been drawn into fraudulent opportunities in the more traditional financial world: from real estate to stocks to business schemes. Some crypto investors have been outright careless, like the group who recently paid 100 times the going rate for a copy of the book, Dune. 

Before you invest, know what you’re getting into. There is a wealth of reliable and factual information about digital currency available online. Some reliable sources include Coinbase, Investopedia,  Shelly Palmer's Metacademy, Binance, Cornell University, Berkeley EDX Online and many more.

• Do your crypto research and invest only in what you understand
• Learn your tax responsibilities from a crypto tax expert. Don't brag about your crypto riches in social media! The IRS is watching, along with multiple other government agencies.
• Beware offers that sound too good to be true. They will be.
• Consider a Buy/Hold strategy, known as HODL by crypto investors.
• Just like the stock market, don’t invest more than you can afford to lose. 

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B.L. Ochman is a Fractional CMO, content creator fluent in digital strategy, podcasting, SEO and YouTube optimization. She  is a uniquely experienced and multi-faceted marketing professional skilled in development of high-yield, innovative programs that drive visibility and sales. She also is a really pretty good swing dancer.