As families gather for the holiday season, relatives will likely discuss different topics, and finance will probably feature. In this case, with cryptocurrencies integrating into the financial sector, digital assets are likely to be part of the discussion.
Indeed, with the infancy stages of digital assets, some of your relatives might be aligning with myths that have clouded the sector. If in this situation, below are some of the myths and possible ways to demystify them.
Myth #1 Cryptocurrencies are not real
Cryptocurrencies are real, but they exist virtually. In short, they operate like software and can be compared to the internet. At the same time, digital assets have found real-world use cases like being leveraged as a means of payment and can be tracked on the blockchain. Furthermore, cryptocurrencies can be bought and traded on exchanges.
Myth #2 Cryptocurrencies and blockchains are too complicated
It is right to acknowledge that blockchain technology is complicated, but it aims to improve shortcomings in existing systems. The public blockchain database complexity guarantees transparency and access to everyone. Interestingly, as traditional finance systems remain closed for the festive season, blockchain technology is available 24/7.
Myth #3 Bitcoin cannot be equated to money
At the moment, Bitcoin (BTC) and other cryptocurrencies can carry out functions performed by fiat currency. For instance, users can load Bitcoin on debit cards and pay for normal goods and services. Furthermore, cryptocurrencies are also finding use cases in areas like lending. In this case, countries like El Salvador have declared Bitcoin the legal tender.
Myth #4 Environmental impact
In recent years, Bitcoin has come under criticism for its environmental impact. However, the effect has been exaggerated. According to a Finbold report, as of Q3 2022, Bitcoin was consuming only 0.16% of the total global energy production. More mining operators are also increasingly moving to renewable sources. Furthermore, the number of cryptocurrencies embracing the energy-efficient Proof-of-Stake (PoS) protocol is emerging. For instance, Ethereum (ETH), the second largest digital asset by market cap, ditched Proof-of-Work (PoW) after the Merge upgrade.
Myth #5 Cryptocurrency bans
There is evidence that governments have attempted to outlaw different aspects of the crypto space, but the move has failed to yield the desired results. For instance, as reported by Finbold, China still accounts for the highest share of crypto transactions despite outlawing trading and mining. Meanwhile, several jurisdictions globally are working towards enacting laws that embrace the innovative nature of cryptocurrencies.
Myth #6 Crypto and criminal activity
As regulations come into the space, most companies must adhere to strict Know Your Customer policies to minimize the chances of criminals taking advantage of the sector. Indeed, criminals have attempted to explore the unregulated nature of cryptocurrencies to advance their course. Interestingly, a Chainalysis report revealed that crypto transactions associated with illicit addresses represented less than 0.15% of all crypto transaction volume in 2021.
Myth #7 Cryptocurrencies are costly
You can purchase a share of a select cryptocurrency instead of the whole unit, depending on your amount. Although assets like Bitcoin are relatively expensive, with as low as $10, you can own part of the maiden cryptocurrency.
Myth #8 You cannot recover lost cryptocurrency
Like fiat currency, your crypto holdings should be handled with extra care. As you interact with relatives, remind them cryptocurrencies are supposed to be stored in self-custody wallets. The safety of your assets should be dealt with great precaution to avoid accidental losses. There exist different online resources on crypto wallet safety practices.
Myth #9 Crypto is a scam
Notably, cryptocurrencies have been associated with scams mainly due to the lack of regulations. The sector has in the past associated with instances like ‘pump and dump’ with investors losing significant amounts of money. At the same time, Bitcoin has been compared to a Ponzi scheme; however, the misconception has been demystified. It is worth noting that, like other sectors, crypto is not immune to scams, and investors must do due diligence before spending.
Myth #10 Crypto is illegal
Despite assumptions that cryptocurrencies are illegal, anyone can transact in crypto in most jurisdictions, like the United States. Interestingly, crypto is only illegal in nine countries.
In conclusion, cryptocurrencies are a broad topic that can not be exhausted during the holiday season. However, with the above tips, you can have your relatives get started on crypto.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.