Published Aug, 27 2021

5 Things You've Got Wrong About Bitcoin

With Bitcoin hitting new all-time highs and major news breaking almost every day, now seemed as good a time as ever to look at some of the biggest misconceptions people tend to have about this popular form of currency: does its value rely on nothing?
Bitcoin Stock Image

With Bitcoin hitting new all-time highs and major news breaking almost every day, now seemed as good a time as ever to look at some of the biggest misconceptions people tend to have about this popular form of currency: does its value rely on nothing? Is Bitcoin too volatile or risky with no real-world use? This article separates fact from fiction (without ignoring any potential dangers along the way) to get down to business when answering these kinds of vital questions.

Myth #1: It’s Too Late to Get Into Bitcoin

Bitcoin’s price reached an all-time high in 2021 and many people feel that they’ve missed their chance to get in on the ground floor. But here’s the kicker: just before the COVID-19 pandemic began, the price of Bitcoin was still around $5,000. And since 2017, its price has been surging near $20,000 before sharply dropping down to $3000.

JP Morgan Chase has estimated the price of Bitcoin could reach $146,000 per coin and Citigroup predicts a price of up to $300,000. The road to $100,000 has been speculated since Bitcoin’s inception, so it's not surprising that some predictions range up to $1 million per coin!

Myth #2: Bitcoin is a Bubble

While it’s true that some people buy Bitcoin as an investment, this doesn't make it a speculative or economic cycle like those characterized by unsustainable rises in market value that pop when investors realize prices are much higher than the asset's fundamental value. Bitcoin often faces comparisons to various infamous bubbles such as tulip mania where speculators caused prices for certain varieties of tulips with surges 26-fold before crashing six months later.

Comparing Bitcoin to Amazon’s Stock

Bitcoin has gone through multiple price cycles over the course of 12 years, but it's always managed to bounce back and reach new highs. It's like a boom and bust cycle as with any other new technology; Amazon stocks lost their value at the end of 1999 after going from $100 down to around $5 - only for them to become one of today’s most valuable companies in less than 20 years time.

Volatility In Young Markets is Normal

Some major Bitcoin investors believe that the volatility of this currency is typical for a young market and will change as it matures. They say that while Bitcoin can peak in surges, there are longer periods between these bursts where prices remain more stable than they have been historically.

Myth #3: Bitcoin Isn’t Secure

Bitcoin is the first-ever electronic currency to use cryptography and blockchain technology. The core protocol has functioned securely with 99.9% uptime since its creation in 2009. This continues today without interruption or security breach of any kind despite handling more than 300 million transactions a day at times. The Bitcoin network has never been hacked and its open-source code is constantly being tested & reviewed by countless security experts and computer scientists alike.

Bitcoin was also the first digital currency to solve what's called "the double-spend problem", a challenge that has long been thought impossible until Bitcoin came along. In essence, this means all transactions are irreversible. It would be virtually impossible to steal or counterfeit bitcoins without significant computing power (and even then it might not work).

Myth #4: Bitcoin is Bad for the Environment

The energy-intensive process of Bitcoin mining has a lot to do with its environmental impact. But, determining the full extent is difficult because everything in modern life requires some level of energy, from banking and powering office buildings to just opening an ATM or going into your local branch for help on something. What's more, Bitcoin miners have made strides toward reducing their carbon footprint since it was first mined back in 2009, thanks largely due to advances like hydroelectric power plants that don't burn any nonrenewable resources.

Bitcoin mining is not as bad for the planet as people think. According to Cambridge researchers, 20% of Bitcoin miners are powered by renewable energy sources like wind and solar (which can be harnessed without any long-term adverse effects on our environment). The actual number ranges from 20% to more than 70%, according to Cambridge Bitcoin Electricity Consumption Index. The research concludes that "Bitcoin's environmental footprint currently remains marginal at best."

Myth #5: Bitcoin Has No Real-World Uses

Bitcoin is the new way to make financial transactions with the power of cyberspace. It's like using email for money, and it will empower people all over the world who don't have access to traditional banking systems or want privacy in their finances. Even with these differences, you can still walk into your local Circle K gas station and use a Bitcoin ATM to withdraw or deposit cryptocurrency just as you would with your traditional bank account.

Critics like to claim it's not useful in the real world, but this statement couldn't be more wrong. Bitcoin can help people pay anyone anywhere without a bank or payment processor in between giving both sides privacy and cutting down costs of transactions. It also acts as a hedge against inflation by major institutional investors who are turning their capital into cryptocurrencies such as Bitcoin due to how volatile fiat currencies have become lately (United States Dollar Index).

Bitcoin has been called "digital gold", because, like gold, it has been made to be finite in quantity: 21 million to be exact. The difference is that gold is both heavy and bulky, making carrying large amounts difficult. However, Bitcoin can easily travel through digital space via your mobile phone.

Setting the Story Straight

The truth behind Bitcoin is coming to light as more and more innovative uses of blockchain technology are deployed. As time goes on, people will see that this new form of currency holds the potential to revolutionize commerce.