As the world of cryptocurrency constantly evolves, it’s not surprising to hear about various misconceptions and myths circulating. As crypto accounting is part of our offerings, we thought it would be helpful to delve into common myths that we hear and set the record straight. For example, maybe you’ve heard that Bitcoin’s value is too volatile to make it worth the investment. In this blog post, let’s explore some common myths and separate fact from fiction.
5 Cryptocurrency Myths to Debunk
- Bitcoin Doesn’t Have Real-World Applications
There are many critics who like to claim that Bitcoin isn’t useful in the real world and that any use cases revolve around illicit activity. In reality, Bitcoin has a long and proven history around the world. It continues to grow in popularity, especially in recent years as inflation impacts currencies.
For example, many major publicly traded companies such as Square and Tesla have invested millions of dollars into Bitcoin as an avenue to better manage their assets. Like any currency, some of it will be misused. In 2019, approximately 2.1 percent of Bitcoin’s transaction volume was linked to criminal enterprise. The fact that transactions occur on an open blockchain makes it easier to identify and track illicit activity versus other currencies.
2. There’s No Value to Bitcoin
Another myth that we hear is that Bitcoin doesn’t have any true value. Even though it isn’t backed by a physical asset, neither are currencies such as the US dollar. In fact, Bitcoin is designed to be scarce, a fact that helps make it resistant to inflation. Consider that there will only ever be 21 million Bitcoin; this scarcity helps to drive its value. The supply is capped and the amount of Bitcoin that’s being mined is declining in a predictable manner. This helps to keep Bitcoin’s price trending upward in the long term. The process of mining also helps Bitcoin derive its value.
3. Bitcoin Isn’t Secure
Unfortunately, this is another myth that we often hear. Bitcoin is commonly associated with hackers or an unstable network. In reality, the network hasn’t ever been hacked; instead, this particular misconception comes from attacks on third-party businesses that utilize Bitcoin, not the network itself. It has an open-source code that security experts and computer scientists scrutinize, but it was the first digital currency to solve the issue of double spending. On top of this, all Bitcoin transactions are irreversible which makes it a more secure currency.
4. Bitcoin Is Bad for the Environment
There’s no denying that Bitcoin mining requires a lot of energy, but it is incredibly difficult to determine the exact environmental impact that it has. Consider that all aspects of the digital economy such as the global banking system require energy. New York-based Ark Investment Management has also found that “Bitcoin is much more efficient than traditional banking and gold mining on a global scale.”
5. Bitcoin Will be Replaced by a Competitor
The last myth that we’ll debunk is the idea that Bitcoin will be replaced. Consider the sheer volume of cryptocurrencies that have hit the market with the goal of taking over Bitcoin due to exciting new features or advantages; none have come close to rivaling Bitcoin’s long-term success. Today, it makes up roughly 60% of the cryptocurrency market and will continue to remain popular for the foreseeable future.
Crypto Accounting By Founder’s CPA
If you have additional questions about Bitcoin myths or you’re interested in learning about how our team at Founder’s CPA can help, we’re only a phone call away. Our team has a deep understanding of cryptocurrency and we understand the ins and outs of how it works to help your business stay compliant. Contact us for a free consultation!
