Cryptomania Part2- Crypto Myth’s
Bitcoin has been called all kinds of things, currency, asset class, investment, scam... It’s one thing for sure, controversial. Before we get a bit more into detail what it is and how it works, let’s look at some of the negative narratives out there first.
1.Bitcoin is a scam
There are about 10,000 Cryptocurrencies and many of them are indeed scams. With the increasing number of new cryptocurrencies being launched each day and the evolution of associated services like trading, exchanges and transfer services as well as the anonymous and decentralized nature of it, scammers have also discovered Crypto. It’s important to understand that Bitcoin itself is not a scam and that there are things Bitcoin owners can do to protect themselves.
It is vital how you obtain and store your Bitcoin. You don’t need ‘a guy’ to buy Bitcoin for you and you should always store your Bitcoin in a wallet. Make yourself familiar with hot and cold wallets and then decide what level of security you are comfortable with.
Don’t get lured into questionable ICO’s (initial coin offerings) which there are countless of. Stick with Bitcoin or some of the other legit Cryptocurrencies like Ethereum, Litecoin, Cardano, Solana and a few others. Learn to understand the difference between these and meme coins. Many of the meme coins, like Dogecoin and Shina Ibu are pump and dump schemes like Jordan Belforts pink sheet penny stocks.
2.Bitcoin is a Ponzi scheme, has no intrinsic value and is like the Wild West
Many prominent Financial Institutions have taken large positions in Bitcoin and other Crypto and 18% of the worlds richest consider it as an Inflation Hedge. The fact that we are in a period of a declining gold price while going through high inflation proves that Cryptocurrency, in particular Bitcoin has taken on that role.
Bitcoin is not backed up by anything but neither is the US Dollar or any Currency. Bitcoins intrinsic value is the economics of its supply and demand. The Bitcoin price will fluctuate, dramatically sometimes. Volatility is cyclical, it is to be expected and much higher than with everything else, since Bitcoin has started to become globally recognized and has been outperforming everything over the last decade by far.
3.Crypto mining is a dirty technology and needs to be managed as an environmental crime
It is no secret that mining Bitcoin takes a fair amount of power. However, it still uses less than the existing banking system.
4.Crypto is an evil tool used by criminals for money laundering and fraud
Our common currencies (Fiat) are still the tool-of-choice for smart criminals and money laundering. Crypto is transparent, public and trackable. The laundering of Fiat Currency is at least 400 times LARGER than crypto. In 2020, just 0.34% of all cryptocurrency transaction volume consisted of illicit activity, compared to 2%-5% of global GDP, or approximately US$800 billion to US$2 trillion annually being associated with money laundering and illicit activity. Current Financial Institutions/Central Banks act as enablers for the criminal use of our currencies, with authorities only stopping a small fraction of it.
Many of these negative narratives are created by Banks and Governments. Bitcoin would eliminate a vast number of middlemen within the banking sector that currently benefit every time you make a transaction of any kind. Governments would lose control and the ability to manipulate the Dollar and other currencies any way they want. The enormous incentive to print fiat currency by issuing debt means individuals, corporations, and governments face a strong incentive to get into debt. The monetization and universalization of debt is also a war on savings. Fiat increasingly divorces economic reward from economic productivity and instead bases it on political allegiance. Bitcoin's system and how it works is mathematically predictable, which is a strong difference from the shadow finance system the U.S. Government and the Federal Reserve have participated in for decades. (see Cryptomania1)
Bitcoin has some unique values, one of them being the limited supply while demand has clearly increased. In Cryptomania3, we will look at how to mine Bitcoin, how to invest in it the right way and possible downsides. Have a great week everybody!
