The market value of a stock, a currency or anything else is determined by how much someone is willing to pay for it. When Bitcoins price rises, it might be because investors are anticipating an event that will increase the adoption of Bitcoin. When Bitcoins price declines, investors probably have reason to believe that Bitcoin is doomed to fail. In the crypto environment, you can oftentimes witness enormous pumps on assumptions, that turned out to be either insignificant or false, which meant a huge decline in price after the news came out. Misconceptions about the characteristics of a crypto coin can mean that a coin is over- or undervalued. I would like to share with you three common misconceptions that are being mentioned in the media and elsewhere all the time.
1. Bitcoin is anonymous - Governments don't want Bitcoin because people can do illegal activities without being caught.
Before we go on with this topic, let me share a screenshot with you:
People tend to do little or no research on most topics. I encourage you to type any question that bothers you into google, most of the time you'll find someone asking or answering that very same question. Bitcoin, as you can guess by now, is not entirely anonymous. Sure, the transactions are encrypted, but there are other ways people can find out about your identity when it comes to Bitcoin. People always leave a trace, police all over the world are starting to engage in investigations of dark web markets and activities. Just like with regular cash, not everybody is cautious when dealing with Bitcoin. Many crimes are documented on the public blockchain, saved for eternity. Once governments realize how much information they can draw out of what's openly available on the blockchain, they will change their minds quickly.
2. Bitcoin is mostly being used for illicit activities
While Bitcoin certainly became notorious for its part in the rise of Silkroad and other dark web market places, there is no clear evidence that most Bitcoins are used for illegal activities. Various studies state numbers anything from 1% to 50%. The problem is, since Bitcoin is decentralized, and somewhat anonymous, there are no official statistics that display what percentage is used for what cause. It is safe to say that a lot of people are placing their bets on Bitcoin being a store of value, rather than a means of exchange. With other coins, like Monero trying to fill the privacy gap, Bitcoin might even lose its rank as the "number one coin" for illicit activities. Moreover, if the masses adopt Bitcoin and start using it for legal activities, the percentage of Bitcoin used for illicit activities will likely decrease and equalize with the level that we see in cash.
3. Bitcoin is expensive and slow
The Bitcoin network is stable, but congested at times, just like your local highway or speedway. It won't break down, but it can be a pain in the ass to use it. I suggest you save this link in order to be able to monitor Bitcoin usage and traffic on its system. Basically, when the Mempool is full, transactions will be slow and expensive. The Lightning Network is supposed to help deal with that problem. If it works out transactions will be both cheaper and faster. You'll hear a lot of "experts" on TV stating how Bitcoins technology is already old and will be replaced soon. They usually don't talk about the Lightning Network, which is a modern protocol built on top of the Bitcoin protocol, which, if fully adopted by the market, will make transactions fast (again). Due to its nature, it can be used on other coins as well, like Litecoin. With Bitcoin having the most users as of now, many people are putting time and effort into making it better and faster. Watch the progress on the Lightning Network, and you'll be able to tell if Bitcoin survives.
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The information in this Blog is for educational purposes only and is not investment advice. I am not a financial advisor. Please do your own research before making any investment decisions. Online And Cryptocurrency investments are a volatile and high risk in nature. Don't invest more than what you can afford to lose. Links to products in this blog might contain affiliate links. The author has a stake in several cryptocurrencies.