Bitcoin myths: All the Facts and Figures on Bitcoins. Now that Bitcoin is price is fluctuating and major news is being released almost daily, it seems like a good moment to examine some of the most common misconceptions, the Bitcoin myths: All the Facts and Figures on Bitcoins the world’s first cryptocurrency to see if they are grounded in reality and to set the record straight.
For those who hold misconceptions about Bitcoin, such as that its worth is “based on nothing” or that its volatility makes it useless for everyday transactions, this tutorial is for you. To learn the truth about the most widely used cryptocurrency in the world, we must separate fact from fiction while not ignoring real dangers.
 1. Investing In Bitcoin Is A Bubble
One of the first bitcoin myths is that bitcoin is a bubble. Well, some people invest in Bitcoin hoping to make a fortune, but this doesn’t make Bitcoin a bubble. Unsustainable increases in market value are a hallmark of the economic cycles known as bubbles.
Eventually, investors will discover that the asset’s price is well above its true value, and the bubble will burst. Bitcoin has been compared to the infamous tulip mania of the 17th century Dutch, another speculative bubble that occurred during a period of rapid economic growth.
Some tulip types saw a 26-fold increase in price due to speculation in 1637. Six months in, the bubble burst and never came back.
For more than 12 years, Bitcoin’s price has fluctuated several times, but it has always rebounded to reach new highs. Boom and bust cycles are normal for every emerging technology.
Stock in Amazon, for instance, plummeted from roughly $100 to just $5 towards the conclusion of the dot-com period in the nineties before rebounding to become one of the most valuable firms in the world.
Several industry leaders have interpreted the volatility of Bitcoin as following a pattern common in emerging economies. People predict that Bitcoin will continue to experience waves of popularity and decline, but the fluctuations will become less extreme, and the intervals between them will grow longer. Time, though, is the only thing that can tell.
2. Bitcoins are not recognized as legal cash; hence they are against the law.
The question of whether or not Bitcoin can be considered legal tender is another important one, and it is one of the bitcoin myths that need to be answered.
Coins and paper currency issued by the United States government are accepted throughout the country as legal tender.
However, this does not mean that bitcoins are legal tender; the US Financial Crimes Enforcement Network (FinCEN) recognizes virtual currencies like bitcoin.
Although Bitcoin’s legal status is unclear now, it is not illegal.
3. Bitcoin can be used for nothing practical
Bitcoin’s detractors often argue that the cryptocurrency serves no practical use and that its only applications lie in the underground economy. Both bitcoin myths are false.
Bitcoin has been around for a while as a way to send money to anyone else in the world, completely bypassing the need for a central bank or payment processor. Institutional investors are increasingly using it as a gold-like inflation hedge.
To hedge against inflation, Bitcoin has been called “digital gold” in recent years. Many large financial institutions and publicly traded firms (including Tesla, Square, and MicroStrategy) have recently purchased Bitcoin for millions or possibly billions of dollars to diversify their holdings.
Bitcoins, like gold, are extremely limited (there will never be more than 21 million Bitcoin). Gold, being so heavy, presents a number of challenges in terms of both transit and storage. However, Bitcoin transactions can be conducted digitally with the same ease as email.
In its early years, Bitcoin was widely criticized for its use as a means of payment on the underground web. Bitcoin values, however, increased only days after the first major dark web market was shut down, and then kept going up.
Some of it will be wasted, just as some of the money you have now has been wasted.
However, when measured against US dollars, the black market value of Bitcoin is insignificant. A recent study found that 2.1% of 2019’s total Bitcoin transaction volume was connected to illegal activity.
Furthermore, all Bitcoin transactions are recorded on a public ledger called the blockchain, making it far easier for authorities to monitor illegal conduct than it would be with the standard financial system.
4. Bitcoin energy consumption
One typical concern and very popular bitcoin myths are the amounts of energy that is used to mine new bitcoins.
When you think about how many machines are working worldwide to keep our networks safe, you can see why this is a genuine concern.
However, this shouldn’t be used as a reason to dismiss bitcoin, particularly when weighed against the energy use of other networks and governmental bodies.
Bitcoin’s energy consumption may be high (it’s been estimated that it’s comparable to that of a small country), but it’s still much lower than that of the traditional financial system.
Bitcoin’s energy consumption pales in comparison to that of the computer networks running the world’s modern banking system. Bitcoin, sometimes referred to as “digital gold,” really requires less energy to mine than actual gold does.
Despite bitcoin’s dominance in terms of market capitalization, many alternative cryptocurrencies are far more energy-efficient.
According to research from Cambridge University, alternative energy sources account for 40% of cryptocurrency mining. Tesla ditching Bitcoin for payments owing to environmental concerns would also cause this statistic to climb.
5. Bitcoin is worthless in the real world
Neither Bitcoin nor any other modern fiat currency is backed by anything tangible like gold. Bitcoin’s inherent scarcity is one feature that makes it so resistant to inflation. The large-scale creation of fiat currencies can lead to inflation since it dilutes the currency’s value in circulation.
Bitcoin is a digital currency and there can only be 21 million of them. The value is mostly based on its scarcity.
Not only is there a hard limit on Bitcoin’s total supply, but the rate at which new Bitcoins are being mined is also decreasing with time. The “halving” occurs every four years and halves the reward for each block mined.
As a result, the supply is always decreasing, which, according to the basic economic principle of scarcity, has helped to keep the price of Bitcoin broadly moving upwards over the long run, from less than a cent at the start to more than $50,000 as of mid-February, 2021.
Bitcoin is valuable because of the effort put in by computers across the network, known as “mine.” To validate and secure each transaction, a network of powerful computers worldwide contributes massive amounts of computing power in exchange for new Bitcoin.
6. A competitor will just replace Bitcoin
A popular bitcoin myths is that a competitor will replace bitcoin.
When it comes to digital currencies, Bitcoin was the first one to take off truly.
Many other cryptocurrencies have tried to catch up to Bitcoin by adding new features or advantages, but none have come close.
Even though thousands of competing cryptocurrencies have emerged over the past decade, Bitcoin has maintained its position as the most valuable cryptocurrency by market cap throughout.
It’s also the most widely used, accounting for over 60% of all cryptocurrency transactions.
Bitcoin’s “first mover” advantage and the honesty of its aim as decentralized and open money are two reasons for this.
We have no problem with competitors trying to replicate our success.
Bitcoin is decentralized because it is run by a distributed network of computer users known as miners and nodes rather than by any central bank or other governing body.
The Bitcoin community can initiate a fork to upgrade the network if, for instance, the protocol’s underlying architecture needs to change to add new features or functionality or to protect against a newly discovered bug.
Acceptance of the update requires approval from at least 51% of the community.
This flexibility allows Bitcoin to undergo necessary upgrades, such as the Segregated Witness (“SegWit”) update in 2017.
Since the code is freely available, developers who fail to win over the Bitcoin community can always build a hard fork of the Bitcoin blockchain and launch a competing cryptocurrency.
This method was used to produce Bitcoin Cash, but so far, no Bitcoin clone has been able to compete with the original.
A lot of development is taking place in the industry so that a stronger competitor could appear. However, most experts agree that Bitcoin will not likely be replaced soon, given the current state of events.
7. Bitcoin investments are risky business
Bitcoin’s price has fluctuated wildly over the past decade, but that’s expected from a new and developing market.
Bitcoin’s long-term worth has increased gradually since its genesis block in 2010, and its current market cap is over $1 trillion. As Bitcoin has evolved, a swell of institutional investment has followed the worldwide trend of strict regulation (Tesla, hedge funds).
Unlike in a casino, where you know the chances are stacked against you, a Bitcoin investor has a good reason to think their holdings’ value will improve. Bitcoin’s long-term trendline over the past decade has been higher, but the past cannot predict the future.
Dollar-cost averaging is a common method of investing that helps investors weather market fluctuations by committing a set amount of money every week or month. In a trending up market, this method tends to generate positive returns regardless of the ebb and flow of the market.
It looks like Bitcoin’s volatility is decreasing. According to a Bloomberg study that compared the current Bitcoin bull run to the one in 2017, it was revealed that the current boom’s volatility is far lower. Why? Gaining acceptance from mainstream investors has helped stabilize the cryptocurrency market.
Your financial situation, risk tolerance, and investing time horizon should all be considered when deciding if Bitcoin or another cryptocurrency is right for your portfolio.
Though Bitcoin’s price has risen steadily over the past decade, it has also experienced significant declines. If you’re an investor, tread carefully in uncertain market conditions (and consider working with a financial advisor before making major investments).
