The crypto boom has surprised everyone with its exponential growth over the past couple of years. Since its launch in 2009, the price of bitcoin- the largest cryptocurrency by market cap- has increased several million times. Hundreds of other crypto tokens have provided similar returns to investors over the past few years. Despite the increasing real-world adoption, cryptocurrencies are a complex topic to understand for many. If you are a beginner, you can face some difficulties in understanding the crypto market. Since millions of new investors jumped on the crypto bandwagon in 2021, it is vital for them to understand the basics of the industry well. Proper education is mandatory to differentiate facts from common crypto myths.
The crypto user base is expected to touch the 3.5 billion mark by 2030. As the crypto industry grows exponentially, it is extremely important to have a well-informed and well-educated community, to make the most of this boom. As more and more new cryptocurrencies emerge in the market, one can notice the emergence of some mixed trends in the industry. From analysts to banking experts, and traditional investors, everyone has a different opinion about the industry. The crypto industry has its own share of facts and myths. The two can get mixed quite easily, affecting the investment decisions directly. Hence, it is extremely important to spot myths and misinformation about the crypto industry and stay away from them. Wondering how to spot myths about cryptocurrency? Well, we are here to dispel the most common crypto myths.
Most Common Crypto Myths
Myth: Crypto will replace FIATs
Reality: Many fear that the widespread popularity and skyrocketing adoption of cryptocurrencies could be the beginning of an end for FIATs. But, that’s entirely untrue. There are several factors that can help in dispelling the common crypto myth. FIATs are accepted by the masses and backed by governments and financial institutions. Unlike FIATs, crypto is decentralized and governments can not control its circulation. Financial institutions are unlikely to accept a decentralized currency over a centralized one. Moreover, there is still a lot of time before we can use crypto to buy common goods or commodities just like FIATs. In fact, it might never happen. Since both crypto and FIATs serve different purposes, it is unlikely that crypto will replace FIATs.
Myth: Cryptocurrencies are only used for illicit activities
Reality: From tax evasion to terror financing, cryptocurrencies are associated with a lot of illegal activities. The argument behind this claim is the nature of crypto transactions, which makes them extremely difficult to track. However, numbers tell a different story. According to Chainalysis, crypto transactions related to illicit activities accounted for only 0.34% of total crypto transactions in 2020. All the major crypto exchanges have a KYC process to verify the identity of investors. Moreover, governments across the world are regulating crypto transactions to crackdown on illegal activities. Recent developments have proved that government agencies can crack down on those using crypto for illegal activities. Thus, ignoring the vast utility of cryptocurrencies for negligible illicit activities would be childish.
Myth: Crypto is illegal
Reality: If you are in the crypto industry for quite some time, you must have come across the argument several times. It is one of the most common crypto myths floating around. But, with major banks, financial institutions, and public companies like Walmart and Tesla adopting crypto and blockchain, the trust in crypto has increased immensely. Governments of all the major global economies including the US, UK, France, India, and Australia are regulating crypto transactions. Thousands of businesses have started accepting crypto as payment. Businesses across industries are exploring crypto use. Hence, the argument that crypto is illegal is most likely to fail the test of time.
Myth: You don’t have to pay taxes on crypto
Reality: While cryptocurrencies have emerged as a globalized means of transaction, the definition of crypto differs from country to country. The value of cryptocurrencies depends on the way a government recognizes them. Some may identify it as a digital asset, while others might recognize crypto as a legal tender. But the claim that crypto income is untaxable, is just another common crypto myth. Governments across the world have announced taxes on crypto income as a part of regulations. The US recognizes crypto as a property and levies tax between 0 to 37 percent on crypto transactions. The Indian government recently announced a flat 30 percent tax on crypto income, possibly the highest in the world. Other major economies including the UK, Australia, Canada, and the Netherlands also impose taxes on crypto.
Myth: Cryptocurrencies are just a fad
Reality: Another very common crypto myth that has been floating around for quite some time now is that crypto is just a fad. Fundamentalists like Warren Buffet compare cryptocurrencies to the 17th-century Dutch tulip craze. Despite all the reservations and arguments put forward by the critics, cryptocurrencies have transformed global finance and continue to do so. What many fail to understand is that the adoption of blockchain fuels the adoption of crypto. Hence, the crypto adoption is only going to increase with the increasing use cases of blockchain technology. There is enough data to back this argument. All the reports and analyses point to unprecedented growth of the crypto market over the next few years. Crypto has already passed the test of time and it is set to promote financial freedom globally.