The main cryptocurrency from the very beginning of its launch has been considered a pyramid scheme, but there are several other misconceptions about Bitcoin as well. Among them, the belief that digital currency can be easily hacked and is used mainly in illegal enrichment schemes.
Since its initial launch, a large number of erroneous judgments have surfaced about bitcoin, which continue to spread among people. As a result, this has tarnished the image of cryptocurrencies for the masses, since the vast majority of myths about digital currencies are aimed at discrediting them.
Bitcoin Is a Pyramid Scheme
Currently, the legislation of most countries does not provide a definition of financial pyramids. However, there are general signs by which pyramids can be identified:
- the promise of high profitability, several times higher than the market level;
- guaranteeing profitability (which is prohibited on the securities market);
- massive media advertising with the promise of high returns.
When buying bitcoin on crypto exchanges, no one promises the investor a high return; rather, on the contrary, the site warns him about the risks associated with investments, since digital currencies are a highly volatile asset. It is also worth noting that bitcoin is not advertised in the media or on other sources, since it is a decentralized asset and it does not have an issuer. The promotion of their own services can be carried out by sites whose activities are related to cryptocurrencies.
Bitcoin Can Be Hacked
Cryptocurrencies are created on the basis of blockchain technology, which organizes a database consisting of a chain of blocks. Each next block contains information about the previous blocks. Such a database is simultaneously stored on all computers of the participants in the system.
This technology is based on the principle of decentralization; that is, the base is not located in one place, but in all computers of the system participants that form the network. To somehow influence the network, you need to get 51% of its hash rate. Only then will it be possible to make changes to transactions and force their acceptance on the rest.
The computing power of the Bitcoin network is distributed around the world, and in order to try to take over the network, it is necessary to combine a large amount of equipment. This means that even if someone decides to attack the system, this maximum will lead to failures that will be eliminated with the help of emergency updates.
Cryptocurrency exchanges and other services that work with digital money can be hacked. When choosing a trading platform it is worth conducting a thorough analysis, learning more about the site, checking its reputation, and verifying whether it is legally operating.
Experts recommend paying attention to the Singaporean crypto exchange, BitXmi, which has already applied to MAS (The Monetary Authority of Singapore) and received a license to operate in Australia. The exchange has an impeccable reputation in the network, a transparent functioning system, conducts monthly bonus campaigns for its users, and has a wide range of functionality for both experienced traders and beginners.
Bitcoin Is Not Backed By Anything
In 1971, the US authorities abandoned the Bretton Woods system (gold standard) and the US dollar lost its peg to gold. From that moment on, the currency of the United States had no specific security, but directly depended on the financial stability of the country.
In order to understand how bitcoin is provided and how its price is formed, it is necessary to take into account the value and functionality that the cryptocurrency presents to its owner:
- Anonymity. Nobody monitors transfers in the bitcoin network, nor does anyone have the right to influence the transaction in any way (either canceling or suspending it);
- Low fees. The main cryptocurrency network has a fixed fee for transfers, which is set based on the load on the network. This means that the commission will be the same when transferring $100 or $100,000;
- Speed. Bitcoin transactions are usually instantaneous. Permissible delays range from several minutes to one hour, depending on the network load;
- Infinity. You can transfer bitcoins anywhere in the world. The only requirement is that the recipient has a cryptocurrency wallet.
In conclusion of this point, Bitcoin allows you to make payments and money transfers anonymously for any amount, regardless of the location of the sender or recipient of the cryptocurrency. This factor, combined with the limited emission of bitcoin of only 21 million coins, determines the demand – subsequently forming the price of the cryptocurrency.
Bitcoin Is Easy Money
Cryptocurrencies are considered to be a highly volatile asset due to the wide range of fluctuations in their prices. Bitcoin has experienced several major ups and downs; for example, at the end of 2017, the digital coin rose in price to $20,000. The following year, the cryptocurrency fell in price by more than 80% and by December 2018, it had fallen to $3,500.
The risk of incurring losses as a result of working with bitcoin still exists today. As an example, on April 18, crypto traders lost more than $9 billion due to a 13% drop in the bitcoin rate.
Bitcoin Is Used Only by Criminals
The anonymity that cryptocurrency provides allows digital coins to be used in illegal schemes. However, in this case, it is no different from cash – which is also frequently used in illegal activities.
In 2021, large companies began to actively buy bitcoin to protect themselves against inflation and other risks of the traditional financial market. In February, for example, Tesla acquired the main cryptocurrency for $1.5 billion. According to Elon Musk (CEO of Tesla), at the end of March, Tesla sold 10% of bitcoins, fixing a profit.
Now, the oldest US banks such as Morgan Stanley, Goldman Sachs and JP Morgan are also showing interest in cryptocurrencies. The latter is already preparing to launch the first actively managed bitcoin fund. Goldman Sachs will also provide an opportunity for clients to invest in cryptocurrencies in the second quarter of this year.