Bitcoin Misconceptions
Updated over a week ago

Cryptocurrency is often surrounded by myths and misconceptions, so we'll address these to understand how Bitcoin operates and the legitimate risks associated with this digital currency.

Bitcoin is anonymous

On the contrary, the data stored on the Bitcoin blockchain is easily accessible so that transactions can be verified and scrutinized by anyone on the network. This makes the digital currency highly secure as the risk of transactions being subject to manipulation and fraud remains low.

You have to purchase an entire Bitcoin

Bitcoin is highly divisible by up to 100,000,000 units (the smallest unit is called a Satoshi), and you can purchase fractions of a coin. This allows Bitcoin to function as a practical payment system for even the smallest of transactions.

Bitcoin doesn't have real value

Bitcoin derives its value from its scarcity. There can only be up to 21 million Bitcoins in circulation, so the currency cannot be manipulated or inflated. Along with limited supply, the rate at which Bitcoin is mined is declining, and every four years, Bitcoin halving occurs, which 'halves' the amount of bitcoin awarded to miners. This reduction in supply follows the basic economic principle of scarcity which has caused the price of Bitcoin to trend upwards in the long term.

Bitcoin isn't secure

Bitcoin uses cryptographic methods to encode and decode data, making it highly secure and universally accessible. The open-source nature of the code allows it to be verified and scrutinized by any party. The security of cryptocurrency can also depend on the form of wallet used for storage. Cold wallets are typically considered to be safer than Hot wallets as they are only required to be connected to the internet when a user is making a transaction.

When you invest with CoinHQ, our institutional-grade Copper custody means that we take care of the security of your Bitcoin for you. You can effectively operate on a 'wallet-less basis', removing the risks often associated with losing your 'keys' or your wallet falling into the wrong hands.

Bitcoin cannot be used in the real world

It is often assumed that Bitcoin has little real-world use. However, the digital currency is legitimately used to hold, transfer and receive value without intermediaries. Bitcoin is often misunderstood to only be used for illicit activities. On the contrary, because all transactions are verified and recorded on the blockchain, it's easier to detect fraudulent activity and trace transactions than in the traditional financial system. Further, Bitcoin is widely recognized as an inflation resistant resource and large funds and publicly traded companies have invested in Bitcoin.

Bitcoin is a bubble

A bubble is an unsustainably rapid surge in the market value of assets that eventually crash as investors realize that the prices have exceeded the underlying fundamental value of an investment. While Bitcoin still exhibits a degree of volatility, the digital currency cannot be characterized as a bubble. There have been multiple price cycles through Bitcoin's history, and these follow the expected patterns of any new technology. While the currency may continue to surge and recede, Bitcoin should stabilize in the next few years as cryptocurrencies become increasingly mainstream.

Bitcoin harms the environment

Bitcoin mining takes immense computing power and the energy consumption has an environmental impact. However, traditional payments systems also have energy-intensive processes and are typically required to power physical office spaces and ATMs. Keeping that in mind, Bitcoin may be considered more efficient than traditional payment mechanisms, particularly given that renewable energy sources power around 70% of Bitcoin transactions. The environmental impact of Bitcoin is completely reliant on how the energy is produced that mining uses. Just like how we charge our phone and celebrate EVs changing the emissions of vehicles, Bitcoin mining uses the same energy to operate, ultimately having the same effect as all electrical devices.

Investing in Bitcoin is highly risky

Like any new technology, Bitcoin has experienced price volatility over the last decade. However, the digital currency has steadily grown in market cap, which exceeded 800 million USD in February 2022. Over the past decade, Bitcoin has demonstrated a positive trendline and has attracted investment from major hedge funds and global companies such as Tesla. However, Bitcoin also has down cycles, and in that event, investors can use dollar-cost averaging and invest a fixed amount frequently regardless of volatility.

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