Talk about bitcoin or any other cryptocurrencies in your family or friends. You are likely to come across different opinions. Some in favour some against – some disbeliefs or misconceptions to are likely to surface. It shouldn’t surprise me. In fact, that is the beauty of the freedom of expression. However, what’s wrong needs a correction based on facts. PCEX Member, the leading cryptocurrency trading platform in India, performs an acid-test on common bitcoin myths that are stopping beginners from taking the benefit of the crypto trading market.
#1. Bitcoin Trading is Only for Illicit Trading
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Citing the contribution of the Silk Road black market in the 2017 bitcoin bull run, many still believe that virtual currencies are a way to hide one’s real identity in illegal trade while sending or receiving funds. They believe it a tool that drug traffickers used to stay anonymous, thereby evading the law enforcement agencies and drug regulators.
They are not completely wrong, nor completely correct. You can spend your fiat currency either to buy a mineral water bottle or a banned drug – the choice remains with you. You can’t hold the currency to be illegal. It’s you how do you really want to use it or what you want to buy with it. A currency is only a medium of exchange, and it should be treated like that only. The circulation of bitcoin and other VCs in the economy is gradually improving and exchanges allowing them are now more serious about the KYC of their members.
#2. Bitcoin Trading is Completely Anonymous
It’s true that bitcoin works on a cryptographic blockchain model, but it doesn’t mean that the source and termination point of a fund transfer is untraceable. The cryptography technique benefits users in protecting their privacy, which is good. When it comes to proof of transactions, it’s always there with bitcoin. Like a banking transaction bears a corresponding entry on the statement, a bitcoin transaction does have on the blockchain ledger. Remember, when you give cash to anyone in fiat, you literally do not have any proof, until you get a receipt.
Whether it’s bitcoin (BTC) or bitcoin cash (BCH), which was forked from BTC in 2017, the transactions are recorded in the blockchain ledger and can be traced to real-world persons or addresses. Using a simple tool called a block explorer or other analysis software, any and all bitcoin transactions can be viewed publicly. This means bitcoin is a reliable currency and legalization by regulators will strengthen it further.
#3. Bitcoin Trading is Only for Short Term Benefits
The price of bitcoin on December 14, 2020, stood at $19,141 and today (March 22, 2021) it’s $57,690. Citing the bitcoin value rise, it’s easy to say that one can become an overnight millionaire with crypto trading. However, it doesn’t amount to concluding that bitcoin is only for short-term gain. How would you categorize investors who bought bitcoin in 2014 when it was around $100? Clearly, they are in a more advantageous position.
Volatility is a good aspect of the market as many investors who have earned proficiency in technical analysis are making a good profit out of it even on short-term or intra-day trading. The growing interest of big investors to the likes of Tesla, MicroStrategy, and Square is proof that bitcoin or cryptocurrencies aren’t for short-term gains only.
#4. Bitcoin is a Ponzi scheme
First, you need to understand what ponzi scheme is and how it works. A Ponzi scheme is a fraudulent investment operation, where the owner pays returns to its investors from the money paid by subsequent investors, instead of from profit earned by his or her business. Ponzi schemes are designed to collapse at the expense of the last investors when there are not enough new participants.
In contrast to a ponzi scheme, nobody owns bitcoin. It has no central authority. It’s a decentralized peer-to-peer payment network. Transactions are approved with the consensus of a few members in a group. Above all, every transaction is recorded on the blockchain. All this innovation makes bitcoin or any other virtual currency completely different and secure from vulnerabilities associated with a Ponzi scheme.
#5. Bitcoin has no real-world use-cases
Nowadays, you can use Bitcoin to make payments at popular retailers like Expedia, Overstock.com, JM Bullion, Microsoft, and PayPal. You can browse products or services that you can buy for bitcoin on spendabit.com. Likewise, you can see what businesses are offering it as a payment option on BitcoinWide.com.
These bitcoin myths are born out of lack of information and public awareness. So, if you happen to come across any individual, be polite to make them understand the facts rather than combating their views with baseless arguments.
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