It’s now well over a decade since Bitcoin was invented, but many people’s understanding of it, and of crypto in general, is still very hazy. As a result, there are many myths and misconceptions about cryptocurrency out there. This situation isn’t helped by all the dramatic stories seen in the media about crypto investors both making and losing vast sums of money, and the bewildering array of coins that have risen and fallen over the years.
All the above factors have led to a tendency to mystify cryptocurrency. However, although it is certainly a volatile and risky investment, many of the myths are out of date, and mainstream adoption is a growing trend. In this post, we’ll debunk six of the most persistent and inaccurate myths about crypto.
1. There aren’t any regulations in the world of crypto
Crypto has traditionally been seen as something of a Wild West, where anything goes and the regulations and red tape that come with normal trading are not an issue. Perhaps in the early days there was an element of truth to this one, but increasingly governments are taking action. The SEC, for instance, considers cryptocurrencies to be under its jurisdiction, and the U.S. government is increasingly moving in the direction of crypto regulation.
However, investors and potential investors needn’t see this as a bad thing. Although the relative lack of regulation has attracted some, more traditional investors will be reassured that along with increased regulation comes greater protection against scams, which have historically been an issue.
2. Crypto is inherently bad for the environment
Like most myths, this does have some basis in reality. In the case of Bitcoin, for example, the large amount of energy used to verify transactions means that mining operations have a large, and exponentially increasing, impact on the environment. This is down to Bitcoin’s proof-of-work design, which demands that miners expend huge amounts of computational resources.
However, cryptocurrencies don’t have to be as energy-intensive as Bitcoin. Proof-of-stake based coins require far less resources from miners, and have a correspondingly lower impact on the environment. In September 2022, Ethereum switched its consensus mechanism to proof-of-stake, slashing its energy usage by a whopping 99%.
3. All transactions involving crypto are completely anonymous
One myth that has been repeated many times is that crypto transactions are completely anonymous, meaning that cryptocurrency can be used for money laundering, making payments on the Dark Web, and other nefarious activities, without any consequences for the individuals doing so. Crypto transactions can be tracked, firstly because cryptocurrency is nearly invariably converted to fiat currency for a brief instant during the transaction, and secondly because all crypto transactions leave a public blockchain record, which authorities are now learning how to trace.
So, while it’s true that crypto—just like any other medium of exchange—has been exploited by criminals, it’s certainly not the case that they enjoy impunity while doing so, or that the transactions are untraceable. In fact, it’s getting harder and harder for them to do so as authorities wise up on how to pursue illicit crypto transactions.
4. Bitcoin is fading away and being replaced by meme coins
This is a myth that’s sprung up in the last five years, based on the growing popularity of meme coins. The most infamous of these is Dogecoin, the coin featuring the Shina Ibu dog from the “doge” meme that was originally created as a satire of crypto mania and became one of the largest crypto coins in the world. However, most experts believe that these coins have little long-term viability: they cannot be used for financial transactions and there are no restrictions on their supply, meaning they lack intrinsic value.
Bitcoin, despite its relatively outdated technology, is still top of the pile, with a 39% share of total cryptocurrency market cap making it easily the world’s biggest. It remains the world’s best-known coin and is seen as a relatively stable asset in a volatile market. Newer, more sophisticated coins may eventually displace it, but this is still some way off—and when it happens, it’s unlikely to be meme coins that take Bitcoin’s place.
5. Crypto Is Valueless
In terms of subjective value, this one is easily debunked—just take a look at the dollar valuation of Bitcoin. As of early 2023, one bitcoin was valued at over $21,000. Clearly, society is placing value upon cryptocurrencies, and they can be exchanged for goods, services, and other currencies—often at very favorable rates.
But do they have any intrinsic value? A great example of a coin that does seem to have intrinsic value is Ether (ETH). Its value comes from being powered by the Ethereum blockchain, which has been key in the development of decentralized finance and NFTs. Therefore, if a company is developing technology based in Ethereum, having a coin in the same ecosystem is highly convenient, and hence possesses intrinsic value.
6. Cryptocurrencies were just a craze, and they’re already fading away
Various public figures from the world of finance have dismissed cryptocurrencies as a fad over the years—most notoriously, Warren Buffett recently said he wouldn’t buy all the Bitcoin in the world for $25 if given the opportunity. This has led many intelligent laypeople to follow suit; after all, if an investor as astute as Buffett isn’t interested, he’s got to have a point, right?
Well, maybe not. Buffett’s views are mostly based on some of the myths that we debunked above—in particular, he seems convinced that cryptocurrency lacks intrinsic value, and also that it’s something shady and unregulated that’s mostly useful to criminals. As we’ve discussed, those were either untrue to begin with or are rapidly changing (although he might have a point in the specific case of meme coins).
Ultimately, the impact of cryptocurrency on the modern world is undeniable and permanent. More and more crypto-related startups are springing up around the world, and cryptocurrencies are increasingly being used for real-world transactions, to the extent that the technology is increasingly being considered by central banks for creating official digital money. These are permanent changes, and their impact is more likely to increase than to dissipate.
