Bitcoin was the very first cryptocurrency that was launched in 2009. It has gone on to capture the world’s imagination with its radical philosophy. Today there are a few thousand cryptocurrencies with a current market valuation of more than $2 trillion. In the process, it has created more than a few cryptocurrency millionaires. With their extreme price volatility, investing in cryptocurrencies is fraught with risk. You will likely burn your finger badly if you are naïve, inexperienced, and believe in the many myths surrounding cryptocurrencies. A few top examples of myths:
You Can Use Cryptocurrency Just Like Real Money to Make Payments
The concept of cryptocurrencies like Bitcoin and Ether is enabling payments without going through conventional modes like currency notes, checks, and cards. According to many caught up in the fervor, blockchain represented the future of the payment industry. However, the truth is it takes a lot of time to transact using cryptocurrencies. Each transaction validation takes up to 10 minutes on average. Moreover, with the transaction cost hovering around $20, it is clear that Bitcoin was not going to be the first choice of people for making payments. Moreover, wild swings in the value of cryptocurrencies make them unreliable as a means of making payments.
Investing In Cryptocurrency Is a Good Bet
There is huge excitement in the financial industry regarding cryptocurrencies. With the values of most cryptocurrencies zooming in the year gone by, most investors have earned more than a decent return, as per Bitcoin Noticias. Many experts think even allowing for the fluctuations, cryptocurrency investments are profitable. You, however, need to appreciate the basis of the valuation of a currency like Bitcoin lies in its limited availability. However, it is not a reasonable basis because there is no value if there is no demand. With Bitcoin having no other use except for making payments, it cannot have any long-term value if it does not become a popular payment method.
Cryptocurrencies Will End the Dominance of the Dollar
Many leading economists are so taken by the allure of cryptocurrencies they think that they can be a severe threat to the supremacy of the dollar. With eager takers for trillions of dollar-backed U.S. Treasury securities at even low rates of interest, the high level of confidence in the dollar remains unabated. With the value of cryptocurrencies like Bitcoin and Ether depending on market demand, it has given birth to newer forms of cryptocurrencies termed as “stablecoins” with stable values. However, even these new currencies are backed by dollars or gold, according to Fortune. It is clear even though there might be some dilution in the importance of dollars as a payment mode, its importance as a store of value is not likely to be impacted.
Conclusion
Cryptocurrencies might not be very well understood, however, they are not a fad that is likely to vanish anytime. Even though they have many vociferous critics and governments and central banks are trying to think of ways of regulating them, it is clear that they have already triggered transformative changes to the way financial payment systems work.
