Top 10 Myths & Misconceptions of Bitcoin

Bitcoin has been through several controversies. While some call it a gambling token, others look at it as an alternative to banks. Despite all the highs and lows, Bitcoin has consistently grown at an average rate of 67.43% since its inception in 2009.

In this blog, we will bust a few of the biggest myths and misconceptions revolving around Bitcoin. We will give you an honest and unbiased outlook on Bitcoin — without shying away from legitimate risks. If that sounds exciting, let’s debunk Bitcoin myths.

Myth #1: Bitcoin is a financial bubble

In simple words, a financial bubble is when an asset’s price is significantly boosted above its fundamental value due to overly optimistic projections. Unfortunately, Bitcoin is looked upon as a bubble by many institutional investors and government officials. Some even go so far as to compare Bitcoin with the earliest speculative bubble of the 17th-century Dutch “tulip mania,” which lasted for only six months, crashed, and never recovered.

Bitcoin is not a “financial bubble”.

Since its inception, Bitcoin has gone through several price cycles and has recovered every time, hitting new highs. If you look at Bitcoin’s long-term average appreciation, it has been fairly consistent. In fact, the monthly price has never closed below the 200-day Weekly Moving Average.

Myth #2: Bitcoin doesn’t have intrinsic value

This is one of the most common myths thrown around by novices. It’s true Bitcoin is not backed by any physical asset like gold; neither is the US dollar or any other currency. The value of the US dollar is purely based on the full faith and credit of the US government.

Bitcoin is no different. Its value is based on the unwavering trust the community has in the system. Unlike fiat money, Bitcoin’s supply is limited to 21 million coins. No one can generate additional coins at will. New Bitcoins can only be introduced in a limited quantity at regular intervals by a process called mining. This makes it scarce, valuable, and inflation-proof. 

Myth #3: Bitcoin is the currency of the dark web

Many critics argue Bitcoin is a dark web currency used for illicit activities. While that may be true to an extent, isn’t that how money works? It can be used to solve global problems or tear the world apart. In fact, a significantly higher amount of traditional money is used for illicit activities than cryptocurrencies.

The top 10 bank fines totaled a whopping $12 billion in 2020 alone for crimes such as money laundering, tax evasion, terrorism, and corruption. On the contrary, the illicit share of all cryptocurrency activity decreased from 0.15% in 2020 to 0.12% in 2021.

Bitcoin is built to be a global currency with broader use cases. From the COVID crisis in 2019 to the Ukraine war and a recent earthquake in Turkey — Bitcoin has helped humanity amidst the most challenging times. Leading NGOs around the world, including UNICEF, the Bill & Melinda Gates Foundation, and many others, are making a huge impact through crypto donations.

Myth #4: Bitcoin has no real-world uses

Many doubt Bitcoin’s utility by viewing it solely as an investment. However, Bitcoin is much more than that. It is used as an alternative to fiat currency in countries with a weak financial framework. Many investors use it as a hedge against inflation. That’s not all. Bitcoin is also accepted as a payment method by over 18,000 businesses across diverse industries.

Foreign remittance is yet another popular use case of Bitcoin. Users can send and receive Bitcoins anywhere in the world in a matter of minutes without paying a hefty amount of transaction fees.

Myth #5: Investing in Bitcoin is just like gambling

Since its inception in 2009, Bitcoin has grown by 37,225.12%. The price of Bitcoin went from $1 in 2011 to an all-time high of $68,500 in just a decade. Over the years, it has grown exponentially while giving consistent returns of 67.43%, which is six times higher than that of stock market or real estate. Hence, it would be naive to compare Bitcoin investment with gambling.

With a robust regulatory framework, favorable government laws, and rapid adoption — Bitcoin is bound to gain popularity among institutional investors and hedge funds. With only 21 million coins to ever exist on the network, Bitcoin cannot be inflated. Thus, with time, its price is expected to rise as it gets more scarce. All this is to say Bitcoin investing is nothing like gambling. With the right investment strategies, Bitcoin can give you massive returns.

Myth #6: Bitcoin transactions are too slow

Payments made through Bitcoin are slow — is yet another common myth among users who are new to the Bitcoin ecosystem.

Bitcoin transactions take anywhere from 5-10 minutes to be confirmed. However, this can vary based on the total network congestion, hash rate, and transaction fees. Granted, the waiting time is relatively long, but that’s to prevent double-spending and safeguard all the transactions.

To circumvent this flaw, Lightning Network was introduced in 2018 as a second layer on top of Bitcoin. It can process billions of transactions per second, and all the payments are settled in milliseconds. Moreover, the Lightning Network also supports micropayments as low as  0.00000001 bitcoin (≈$0.00029). Thus, now you can send and receive Bitcoins anywhere almost instantly, thanks to the Lightning Network.

Myth #7: Bitcoin is easily replaceable

Conceptualized in 2009, Bitcoin was the first-ever cryptocurrency on the internet. Since then, over 23,000 cryptocurrencies have emerged. Despite that, Bitcoin is still one of the most prominent virtual currencies, with a market capitalization of $540 Billion, representing a dominance of 47.04%.

No other cryptocurrency has come even close to Bitcoin, primarily due to its wide accessibility, low transaction fees, and giant user base. Its decentralized nature, open-source architecture, and diverse use cases make it an irreplaceable virtual currency.

Myth #8: Bitcoin transactions are completely anonymous

Bitcoin provides maximum privacy when it comes to peer-to-peer transactions. However, the transactions are not completely anonymous. Every transaction can be traced back to its origin through a Blockchain explorer. But no one can associate your real-world identity with a transaction. This gives you full transparency and maximum privacy.

Myth #9: Bitcoin is illegal

This is certainly one of the most common misconceptions about Bitcoin. Yes, there are countries that have banned crypto, but for the most part, Bitcoin is legal across many regions of the world.

Bitcoin is empowering millions of unbanked citizens by bringing financial inclusivity and necessary services at their fingertips. A few countries like Eal Salvador and the Central African Republic (CAR) use Bitcoin as a legal tender. Thus, Bitcoin is legal in most countries around the world. Anyone can trade it, use it to buy goods and services and invest in Bitcoin.

Myth #10: Bitcoin is not as secure as banks

Nothing can be far from the truth. Bitcoin is even more secure than banks. Throughout history, we have seen giant financial institutions and banks get hacked and robbed by cybercriminals. That’s not all. Bank runs, and collapses have also become quite common in the last few decades. Ultimately, depositors have to bear the losses.

On the flip side, Bitcoin is highly secure and reliable. No one can ever reverse a Blockchain transaction or temper with your wallet. Furthermore, no central authority, be it government or a bank, can freeze your funds or restrict you from using them. This makes Bitcoin one of the most trusted and reliable means of payment.