Published 1 year ago
As crypto continues to gain popularity around the world, now’s a great time to take a look at some of the biggest misconceptions and rumours surrounding these digital currencies.
If you’ve had any questions about whether crypto is a shady Ponzi scheme (No shame. We’ve all been there), we’ve done the research to help you decide what’s fact or fiction.
Myth 1: Cryptocurrency doesn’t have any underlying value
Understandably, it can be hard to see why digital currency has any value, considering you can’t physically hold it in your hand like a piece of gold or a dollar bill.
Simply put, cryptocurrency checks two boxes: scarcity and utility.
Let’s take Bitcoin for example. There is a finite supply of Bitcoin, capped at 21 million coins. That means that no one can ever mine, create, print or issue more than 21 million Bitcoins.
The fixed cap of Bitcoin ensures that a treasure trove of Bitcoin will never be ‘suddenly discovered’, causing the price to crash because of an influx in supply. As the amount of Bitcoin decreases over time, the remaining Bitcoin left to mine will rise in value as they become increasingly rare. At the time of writing, 19,112,756 Bitcoin out of 21 million coins have already been mined.
When a token can be utilised in many ways, it also contributes to its value, especially since many believe that cryptocurrency has the potential to be a more efficient commodity than what already exists.
Unlike fiat currencies like USD that derive their value from the trust in a governmental and central banking system, cryptocurrencies derive their value in trust on a decentralised network of computers that may have utility on the internet.
For example, to mint an NFT you need to have Ethereum in your wallet. So if demand for NFTs increases, the demand for Ethereum might increase as well.
Myth 2: Mining cryptocurrency is bad for the environment
There’s been a lot of attention recently on some cryptocurrency’s shocking carbon footprint. The amount of electricity it takes to mine Bitcoin annually can power small countries like Malaysia, Finland, and Sweden.
Why? Because many digital currencies rely on a Proof of Work system that requires large amounts of calculations (hence, computer processing power) to mine a single token.
However, it’s important to note that not all cryptocurrencies are bad for the environment. The increasing awareness of crypto’s environmental impact has led to Tesla suspending Bitcoin payments, and countries like China, Russia, Iraq, and Egypt banning crypto mining, forcing the industry to adapt.
In response to these events, various cryptocurrencies are exploring renewable energy-based mining or migrating to a Proof of Stake system that is far less energy intensive. Ethereum is one such example and aims to reduce its overall energy consumption by 99.95%.
Here’s a list of environmentally friendly cryptocurrencies.
Myth 3 = Crypto is a good investment for everyone
Ever since crypto, NFTs, and P2E (Play to Earn) games exploded in the market, it’s become virtually impossible to escape hearing about crypto. (Speaking of which, did you know that NFT was Collins Dictionary’s word of the year?)
We all know someone who’s made money from crypto, and hearing about it from so many people paints the picture that investing in crypto is the ultimate get-rich-quick scheme.
But the truth is, many are putting their money into crypto without fully understanding what they’re doing. Research from the Financial Conduct Authority has shown that 78% of adults have heard of crypto but their understanding of it has declined.
A study from Alto also shows that 39% of millennials own crypto, higher than the percentage of those owning mutual funds and stocks. The larger risk appetite of millennials naturally draws them towards investing in crypto.
Yes, it’s possible to get rich by investing in crypto, but it’s also very possible that you could lose all your money. After all, crypto is infamous for its extreme volatility — just take a look at Luna’s epic crash to $0 when it was worth more than $100 at one point.
Although all investments carry some risk, it’s extremely important to understand the risks and do a lot of research on what you are getting yourself into before investing in crypto, rather than treating it like a get-rich-quick scheme.
Myth 4 = Cryptocurrencies are unregulated
As crypto usage continues to gain popularity around the world, countries are increasingly putting crypto regulations in place to govern them.
Take America for example. In March 2022, President Biden signed off on the much anticipated Executive Order on Ensuring Responsible Development of Digital Assets. This commits the White House to take part in research on crypto and to engage departments across the government to collaborate in the creation of a regulatory framework for digital assets.
The growing usage of crypto has also pressured central banks to create Central Bank Digital Currencies (CBDC), a form of digital currency that is pegged to a country’s fiat currency. 10 countries have fully launched a CBDC, with China to follow in 2023, and 105 countries exploring a CBDC, of which Malaysia is one of them.
Countries like Honduras and El Salvador recognise crypto as legal tender, and almost all countries require cryptocurrency exchanges to be legally registered. This article beautifully sums up crypto regulations around the world.
As the crypto regulatory landscape continues to expand, crypto investors can expect more stability in the market, an increase in investor confidence and protection, and a safer crypto ecosystem.
Myth 5: Crypto is mainly used for illicit activities
One of the most widespread misconceptions about crypto is that it’s mainly used for illicit activities (cue collective eye roll).
Where there is money, there will always be crime — crypto included, but not as much as you think.
Research shows that illicit activity accounts for less than 1% of crypto transactions. Of that small percentage, scammers make up the majority of the crimes — not money laundering, human trafficking, or terrorism.
Again, we repeat — less than 1%.
This is significantly lower than the 2 - 5% of global GDP that is laundered annually.
More than 99% of cryptocurrency transactions are also performed through centralised exchanges, which are subject to similar regulations as traditional banks. Scroll up to the previous section for a reminder. :)
So is crypto a passing fad?
Just think about how many 'crazy' ideas have evolved to become commonplace in our everyday lives, like staying in a complete stranger’s house, riding in a stranger's car, or meeting strangers on the internet.
It’s clear that magic internet money is here to stay and has already transformed the financial world. As governments continue to introduce regulatory structures and even implement their own Central Bank Digital Currencies, the future for the crypto space is looking bright.
How do you buy crypto in Singapore?
If you’re interested in buying crypto, here’s our comprehensive guide on how to go about it in Singapore.
In fact, did you know that you can top up your BigPay Singapore account with crypto to turn it into SGD?
This will allow you to spend your crypto through your BigPay card that's accepted by more than 64 million merchants worldwide.
You can also use your BigPay card to withdraw your crypto in cash from overseas ATMs. However, you cannot withdraw cash in Singapore.
At the moment, the cryptocurrencies accepted for top-up are Bitcoin (BTC), Ethereum (ETC), USD Coin (USDC), and Tether (USDT), with plans to expand more accepted currencies in the near future!
BigPay is 100% free to get and free to keep, so sign up now to top up your account with crypto!
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I’m Sabrina, a versatile writer with 7+ years of experience and I’ve been published by household names such as Tatler, Harper’s Bazaar, Mindvalley, and Cosme Japan.