Cryptocurrency Myths

Cryptocurrency has garnered both fevered adulation and scathing criticism throughout each of its well-documented price cycles. However, the intense speculation and media interest in the broader cryptocurrency sector has led to the proliferation of several myths about the flagship digital asset. Here, we put ten common cryptocurrency myths to rest.

Myth 1: Cryptocurrency is a Ponzi scheme

A Ponzi scheme is a specific type of scam that relies on a constant flow of new investors to give the impression of returns to existing participants while the operators of the scam take the bulk of the profits.

Cryptocurrency doesn’t share any of these characteristics. There is no central authority controlling or profiting from crypto, but rather a decentralized node network in which anyone can participate. A Cryptocurrency ledger is transparent and immutable, such that all fund movements are visible from the moment that any cryptocurrency is programmed into existence.

Myth 2: Cryptocurrency has no intrinsic value

Intrinsic value can be a subjective term. In its purest financial sense, intrinsic value is designed to provide an accurate evaluation of an asset irrespective of market price. However, since it uses measures such as cash flow, it’s not suitable for many assets beyond stocks and companies. This includes cryptocurrency, but also gold or other commodities that don’t have an underlying cash flow.

Using any broader definition, cryptocurrency arguably derives value from factors such as its scarcity, unique status as the first decentralized digital currency, and global community of users, developers, and miners, all of whom have contributed to it becoming an asset worth over one trillion dollars at its peak.

Myth 3: Cryptocurrency has no utility or purpose

Cryptocurrencies today have tens of millions of users across the globe. Some people use them to pay for services, some hold it as a passive investment hoping for an upward trajectory over the long term, while others trade speculatively on its volatility.

BTC is a legal tender in countries such as El Salvador and the Central African Republic, where it is used as a medium of payment. Cryptocurrencies also serve as the medium of exchange and store of value for people in countries where extreme inflation means that the national currency is more volatile.

Myth 4: Cryptocurrencies are used by criminals and money launderers

Cryptocurrencies are pseudonymous, rather than anonymous. Even if a cryptocurrency's network doesn’t require its users to identify themselves by name, all transactional activity from any given address is publicly visible. Crypto's pseudonymity has actually facilitated law enforcement, such as when the FBI was able to identify Ross Ulbricht as the mastermind behind dark web marketplace Silk Road, in part by linking on-chain activity to real-world accounts.

Furthermore, the increasingly widespread application of FATF (Financial Action Task Force) anti-money laundering rules and implementation of cryptocurrency regulations in many jurisdictions make it more difficult than ever for criminals to escape detection when using crypto for nefarious purposes.

Myth 5: Cryptocurrency isn’t secure

While hacks and security incidents are unfortunately rife in the cryptocurrency sector, this doesn’t imply that Cryptocurrencies are inherently insecure. Fundamentally sound Cryptocurrency Networks operate successfully without interruption or any major incidents.

However, individual accounts holding Cryptocureny can still be subject to theft, where criminals aim to steal cryptocurrencies by gaining access to private keys. One analogy is with a bank account. Cybercriminals may target individuals and successfully manage to gain access to their bank accounts using stolen e-banking credentials, but this doesn’t mean that the bank itself isn’t secure, or anyone else’s funds may be at risk.

Learning some basic crypto security precautions can help to keep your funds safe from cyberattacks.

Myth 6: Crypto can be used to evade tax

In many jurisdictions, cryptocurrencies are taxable, or at least reportable for tax purposes. The precise tax regime will vary according to the country of residence. In the United States & UK, cryptocurrencies are generally treated as assets and subject to tax, while other countries, such as Switzerland, don’t charge taxes on cryptocurrency gains. However, crypto received as income may be subject to different treatment.

Although most tax authorities will require self-declaration of crypto-related activities, it’s worth noting that all activity can ultimately be verified on-chain against an individual wallet address. Also, exchanges and other crypto service providers are required to comply with local rules regarding tax declaration and can be legally compelled to hand over information about individual transactions if the tax authorities demand it. As such, Crypto is not an ideal vehicle for tax evasion.

Myth 7: Cryptocurrencies are a fad, and the bubble will eventually burst

Since their inception Cryptocurrencies have undergone several identifiable market cycles where the price has increased to a peak high, most notably in 2014, 2017, and 2021. The run-up to these highs tends to be accompanied by intense market speculation and hype, leading to criticisms that the price is inflating like a bubble that will eventually burst.

While it’s become routine for cryptocurrency prices to correct after these highs, market activity has never impacted the ongoing operation of the cryptocurrency networks or resulted in a widespread loss of appeal that would indicate the end stages of a fad.

Myth 8: Cryptocurrency will eventually replace the entire financial system

Many crypto maximalists claim that crytocurrencies will eventually prevail over all other currencies and even the traditional banking system.

Although cryptocurrencies have seen tremendous success as a new asset, considering its growth in the relatively short time since their inception. However, most people don’t view cryptocurrencies like Bitcoin as a viable alternative to the traditional banking system, and there are compelling arguments against this hypothesis. One is the Bitcoin network’s lack of scalability to Visa-like transaction speeds. That is where the advancement in Distributed Ledger technology enables cryptocurrencies such as Dijets to achieve sub-second finality and visa-like transaction speeds.

Myth 9: Crypto is too technical for the average investor

Investors should always be prepared to spend some time researching a digital asset before adding it to their portfolio. However, that doesn’t always mean that one needs blockchain technology expertise to invest in it.

A basic understanding of the fundamentals enables you to understand some factors that influence crypto prices. But it is quick and easy to onboard to cryptocurrencies like Dijets web wallet, or through a reputable exchange without having extensive technical knowledge.

Myth 10: Crypto is dead

Cryptocurrency has been declared dead hundreds of times ever since Bitcoin launched in 2009 – virtually every time the market loses any significant value or a major incident in the crypto industry occurs.

However, cryptocurrency isn’t dead. In fact and to the contrary it continues to operate reliably, securely and with institutional grade backing and recognition which continues to expand over time.