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7 Biggest Bitcoin Myths
Bitcoin is a new form of currency that is not controlled by any government or bank. Read these 7 myths about bitcoin to get the truth behind this revolutionary system.
The Bitcoin⚡️ Energy Standard
October 31, 2022
Table Of Content
Content
Introduction
Conclusion
FAQ
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It seemed like a good time to look at some of the most common myths and misconceptions people tend to have about the world's first cryptocurrency, Bitcoin, to determine whether or not they have any basis in reality and to set the record straight, as Bitcoin has recently reached new all-time highs and major news has been breaking almost every day. This tutorial is for you if you have any preconceived notions about Bitcoin's value, such as the notion that its worth is "based on nothing" or that the cryptocurrency is too volatile to have any practical use. We are separating fact from fiction about the most popular cryptocurrency on the planet so that we can learn the truth about it. However, we are not ignoring the real dangers that exist.
Myth #1: Bitcoin is a bubble
Even if it's true that some individuals acquire Bitcoin as a speculative investment in the hopes of making large profits, this does not suggest that Bitcoin itself is in a bubble. Bubbles are economic cycles that are characterized by spikes in market value that cannot be sustained over time. When investors understand that prices are much greater than an asset's worth, the bubble will inevitably explode. Bitcoin is commonly likened to the notorious early speculative bubble known as "tulip mania," which occurred in the Netherlands in the 17th century. In the year 1637, speculators drove up the price of some types of tulips by a factor of 26. The bubble lasted for six months until it burst and has never recovered since then.
The real story:
Over the span of more than a decade and a half, Bitcoin's price has been subjected to a variety of price cycles, but it has consistently rebounded to reach new highs. It is to be assumed that boom and bust cycles will occur with any new technology. For example, at the end of the dot-com era in the 1990s, Amazon stock dropped from around $100 to only $5, but in the years since, it has become one of the most valuable companies in the world.
Major Bitcoin investors are of the opinion that the cryptocurrency's price fluctuations follow a pattern that is characteristic of emerging markets. They predict that Bitcoin's price will continue to rise and fall, but that the swings will be fewer and the intervals between them longer until it settles into a state of relative stability at some time in the future. However, only time will tell for sure.
Myth #2: Bitcoin has no real-world uses
It is common for skeptics to assert that Bitcoin has no practical use in the real world, or that if it does, it is mostly applicable to illegal transactions. Both of those assertions are false. Neither one is true. Bitcoin has a long history of making payments to anybody in the world without the need for a bank or payment processor to act as a middleman in the transaction. Also, large institutional investors are using it more and more like gold as a way to protect themselves from inflation.
The real story:
Bitcoin has earned the term "digital gold" in recent years due to its growing popularity as an inflation-resistant store of value that is comparable to gold. This trend occurred over the course of many years. For millions or even billions of dollars, Bitcoin is being purchased by a rising number of significant funds and publicly listed firms (including Tesla, Square, and MicroStrategy) to better manage their assets. This trend is expected to continue.
Bitcoin is very rare, comparable to gold (there will never be more than 21 million bitcoin). Gold is notorious for being cumbersome and difficult to move and store due to its weight and volume. On the other hand, Bitcoin may be sent digitally in the same way an email can be transferred.
In its early years, bitcoin was met with a great deal of unwanted attention as a form of payment on the dark web. However, within just a few days after the closure of the first major dark web market, Bitcoin values began to soar, and they have continued to do so ever since.
Just like every other kind of money, some of it will be put to inappropriate use. However, the illegal use of bitcoin is a drop in the bucket compared to the usage of US dollars. According to research that was published not too long ago, 2.1% of the total number of Bitcoin transactions in 2019 were tied to illegal activity.
And since all Bitcoin transactions take place on an open blockchain, it is often simpler for authorities to follow illegal conduct using Bitcoin than they would be able to do using the conventional monetary system.
Myth #3: Bitcoin doesn’t have real value
Bitcoin, like the United States dollar and practically all other forms of contemporary fiat money, does not have any kind of tangible backing, such as gold or other precious metals. Bitcoin is pre-programmed to have a limited supply, which contributes to the cryptocurrency's resistance to inflation. When huge amounts of a fiat currency are generated, this may lead to inflation since it dilutes the quantity that is already in circulation.
The real story:
There will never be more than 21 million bitcoins in circulation. This is a significant factor that contributes to its worth.
Not only is there a limit on the supply, but the quantity of newly minted Bitcoin follows a pattern that indicates it will gradually decrease over time. The block rewards distributed to miners on the network are halved every four years during an event referred to as a "halving."
This helps to ensure that the supply is always decreasing, which, according to the fundamental economic principle of scarcity, has worked to keep the price of Bitcoin broadly trending upwards over the long term. The price of Bitcoin has increased from less than a penny at the beginning to more than $50,000 as of the middle of February 2021. (For the current price of Bitcoin, go here.)
The value of Bitcoin is also derived from the effort that computers connected to the Bitcoin network contribute via a process known as mining. Strong computers located all over the globe provide a substantial amount of processing power to the effort of verifying and safeguarding each transaction. These computers are paid with newly created bitcoins in return for their labor.
Myth #4: Bitcoin will just be replaced by a competitor
Bitcoin was the first digital currency to achieve widespread acceptance. And despite the fact that new cryptocurrencies have long claimed to surpass Bitcoin by including new features or other benefits, none of these new cryptocurrencies have even come close.
The real story:
By a large margin, Bitcoin has always been and continues to be the most valuable cryptocurrency as measured by market value. Even though hundreds of competing cryptocurrencies have been made in the last ten years, this is still the case.
Furthermore, it is the most widely used cryptocurrency, accounting for roughly 60% of the market.
Bitcoin is popular for several reasons, including the fact that it was the "first-mover" digital currency and the fact that it is a decentralized and open currency.
But it doesn't mean that other businesses can't give it a go and compete with us. Bitcoin is "decentralized," which means that it is not controlled by one centralized authority but rather by a worldwide community of "miners" and "nodes."
For instance, if Bitcoin's fundamental architecture has to be modified to provide new functionality or features, or to defend against a newly found problem, the Bitcoin community may launch a fork to update the network. This will allow for the necessary changes to be made.
It is necessary for there to be support for the modification from a majority of the community—at least 51%—before the update may be approved. This lets Bitcoin change and grow as needed, like when the Segregated Witness (also called SegWit) update was put in place in 2017.
Because the software is open source, developers who are unable to win over the Bitcoin community may even construct a hard-fork of the Bitcoin blockchain and produce an altogether new cryptocurrency. This allows them to circumvent the need for the community to reach a consensus. Bitcoin Cash, for example, was created in this manner; however, none of the Bitcoin clones have been able to significantly replace the original cryptocurrency.
A significant amount of innovation is taking place in this sector, and as a result, the emergence of a more formidable competitor is not inconceivable. But given how things are right now, the vast majority of people who work in the industry don't think Bitcoin will be replaced anytime soon.
Myth #5: Investing in Bitcoin is gambling
Although it is true that Bitcoin's price has been quite volatile over the last decade, this kind of movement is to be anticipated in a market that is still relatively new and expanding. Since the creation of Bitcoin's genesis block in 2010, the cryptocurrency has shown consistent growth in its long-term value, reaching a market valuation of more than one trillion dollars (as of February 2021; see the current market cap). A solid regulatory system in nations all over the globe has helped to attract a wave of institutional investment as Bitcoin has continued to develop over the last few years (Tesla, hedge funds).
The real story:
When you go to a casino, you are well aware that the odds are stacked in the casino's favor. On the other hand, there is a fundamental reason for a Bitcoin investor to assume that the value of their assets should increase. Even though there is no way to know how Bitcoin will do in the future or to be sure that its current results will stay the same, Bitcoin's long-term trend over the last ten years has been up.
The practice of investing a certain sum of money once every week or month, regardless of how the market is doing, is known as dollar-cost averaging, and it is one of the more common investment strategies used to mitigate the negative effects of market volatility. In an environment with a positive trendline, this technique will almost always result in positive returns, regardless of the level of volatility.
The volatility of the Bitcoin price looks to be decreasing. A recent investigation by Bloomberg compared the current bull run in Bitcoin to the boom that occurred in 2017, and they discovered that the volatility is far lower this time around. Why? The rise of institutional players and the generally calming effect of cryptocurrency "becoming mainstream."
Your individual circumstances, level of comfort with financial risk, and investment horizon all play a role in determining if Bitcoin or any other cryptocurrency should have a place in your investing portfolio. And despite the fact that throughout the course of the last decade, Bitcoin's price has generally moved in an upward direction, it has also seen significant downward trends. Investors should be careful when navigating turbulent markets and might want to work with a financial advisor before making big investments.
Myth #6: Bitcoin isn’t secure
There has never been a successful attack on the Bitcoin network. Numerous computer scientists and security professionals have looked through its open-source code to ensure that it is safe to use. Bitcoin was the first digital money to address double spending, making it possible for peer-to-peer currencies to function without a central authority. In addition, Bitcoin transactions cannot be undone under any circumstances.
The real story:
Assaults against third-party companies and services that make use of Bitcoin have given rise to many misunderstandings about the safety of Bitcoin. Nevertheless, the Bitcoin network has not been the target of such attacks. A number of high-profile hacks of early Bitcoin companies with flawed security procedures (such as the one that hit the early Japan-based exchange Mt. Gox) and occasional data breaches (such as the one that impacted users of the wallet provider Ledger) have caused some users to question the security of Bitcoin.
Since 2009, when Bitcoin first started, its core protocol has been stable and safe to use, with a 99.9% uptime.
A significant quantity of processing power protects the network. Additionally, the miners who run the network are dispersed around the globe, with nodes located in one hundred different countries, ensuring that there are no single points of failure.
Myth #7: Bitcoin is bad for the environment.
Mining for bitcoin requires a significant amount of energy. The environmental effect, however, might be difficult to ascertain. To start, the digital economy in its entirety necessitates the use of energy. Think of the whole worldwide banking system, together with all the energy that is needed to handle bank transactions and power office buildings, automated teller machines, local branches, and a great deal more.
The real story:
A recent study by the New York-based investment management firm Ark Investment Management found that "Bitcoin is much more efficient than traditional banking and gold mining on a global scale."
The mining of Bitcoin is fuelled in considerable part by alternative energy sources (including wind, hydro, and solar). According to the Cambridge Bitcoin Electricity Consumption Index, the true figure falls somewhere in a range that goes from twenty to more than seventy percent.
Cambridge academics came to the conclusion: "At this time, Bitcoin's environmental impact is, at best, minimal."
It is even possible to make the case that the economic incentives that are inherent to Bitcoin mining are helping to drive sustainable energy innovation. This is because miners are constantly seeking to increase their profits by lowering their electricity costs, and this is happening in a world where renewable energy is quickly becoming the most cost-effective choice.
Conclusion
Nevertheless, we need to have a level-headed conversation about the benefits and drawbacks of mining Bitcoin. The truth is that very little is known about the long-term consequences of mining on the electrical system. Bitcoin mining has a good chance of becoming a way to put a price on unintended effects like flared gas.
FAQ
What was the biggest jump in Bitcoin history?
The value of Bitcoin more than doubled in 2021, but it saw a significant decline in January 2022 that wiped out virtually all of the gains it had made the year before. In the first half of 2021, the price of bitcoin skyrocketed to an all-time high of over $64,000. However, during the summer of that same year, the price fell back down to below $30,000.
Who has the most bitcoins in their possession?
According to its financial report for the first quarter of 2022, the United States-based software business MicroStrategy (MSTR) is the largest publicly listed corporate owner of bitcoin in the world, with holdings of around 129,218 BTC. As of July 22, 2022, the value of MicroStrategy's Bitcoin holdings was more than $3 billion. It is common knowledge that Tesla (TSLA) has bitcoin holdings.
Who is the youngest crypto billionaire?
Sam Bankman-Fried is one of the youngest billionaires in the world thanks to cryptocurrencies, and he is also one of the most powerful people in the young but rapidly growing cryptocurrency industry. He did not buy his first bitcoin until five years after he had already started working in the cryptocurrency industry.
That's all for today, see ya tomorrow! If you want more, be sure to follow our Twitter (@croxroadnews)
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
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