When the first crypto, bitcoin, was launched in 2009, speculation was rife that this bubble would likely burst. Few could have predicted that thousands more cryptocurrencies with a total market value of about $2 trillion would be in circulation within just a few years.
Cryptocurrency is unregulated in the UK, and the value of investments can go down and up. Any profits made may be subject to capital gains tax.
There are still plenty of myths surrounding the crypto space (“is it bad for the environment?” “Is it only used for illicit activity?” “Is it even legal?”) – hopefully, this blog will help to dispel these – and other common misconceptions:
And there are still plenty of myths surrounding the crypto space (“is it bad for the environment?” “Is it only used for illicit activity?” “Is it even legal?”) – hopefully, this blog will help to dispel these – and other common misconceptions:
Myth #1: Digital assets are only used for illegal activity
Cryptocurrencies have been known to be exploited by criminal organizations and individuals, but in fact, most crypto transactions are conducted with legitimate and legal intentions. As crypto usage is growing, the regulations put in place to govern it are getting tighter; governments all over the world are cracking down on cryptocurrency used by criminals and organized crime, with many countries adopting measures to combat the use of cryptocurrencies in money laundering and terrorism financing by employing specialist agencies and teams.
Myth #2: Cryptocurrencies aren’t secure
As the first digital currency to make “trustless” peer-to-peer currencies a reality, bitcoin introduced the world to blockchain technology, a distributed public ledger secured with encryption that uses a vast amount of computing power to keep it secure. The appeal of decentralization naturally comes with a security concern – contrary to popular belief, the bitcoin network itself has never been hacked.
Instances of ‘crypto hacking’ in the headlines are generally the result of security breaches on third-party businesses and services that use crypto, hence the need to choose carefully which crypto exchange they use. What is true is that cryptocurrencies are – as yet – unregulated in the UK. And when it comes to careful use, Ziglu is keen to educate and enlighten its customers about the risks involved when investing in crypto.
Myth #3: Digital currencies don’t have value
Following its launch in 2009, the value of a single bitcoin jumped to $0.09. By November 2021, it had reached a record-high value of almost $69,000 which shows that any asset’s value is entirely subjective. Thanks to their restricted supply and increasing demand – helped by investors and large-scale organizations now holding cryptocurrencies for uses in finance, investment, and venture capital projects – commonly held crypto assets – like bitcoin and ether – have a store of value and can even function as a unit of exchange.
Myth #4: Digital currencies are bad for the environment
As with all digital economy aspects requiring energy, crypto mining is an energy-intensive process. ‘Miners’ must use high-powered computers to solve complex problems to release the cryptocurrency and to keep the network secure by making it prohibitively expensive for hackers to attack it.
However, blockchain technology is ever-evolving, with many cryptocurrencies taking steps to reduce their environmental footprint. Today, at least 39% of bitcoin mining is powered by hydro, wind, and solar energy.
According to researchers for Cambridge University’s Bitcoin Electricity Consumption Index, “bitcoin’s environmental footprint currently remains marginal at best.” At the same time, research carried out in 2021 by New York-based fund Ark Investment Management concludes that “bitcoin is much more efficient than traditional banking and gold mining on a global scale.”
Myth #5: Investing in crypto is gambling
Cryptocurrencies like bitcoin have experienced significant price volatility over the last decade, which is no surprise given crypto is regarded as an immature, growing market. As with many other types of investment, investing in crypto is about taking calculated risks and the level of risk you, the investor, are happy to accept. The level of risk may be mitigated by the investment strategies used.
Dollar-cost averaging, for instance, can help mitigate the impact of volatility, where users invest a fixed amount every week or month no matter how well (or badly) the market is performing – a strategy that can often result in positive returns. Cryptocurrency is unregulated in the UK, and the value of investments can go down and up. Any profits made may be subject to capital gains tax.
Myth #6: Crypto is a fad
In a couple of decades, technology has transformed our personal and work life, and the crypto space is also evolving. Although we can’t predict where it might be in the next few decades, the transformative changes it has already made to the financial world and how everyday investors view their money is straightforward.
Will it replace traditional currency completely? That remains to be seen. But crypto technology is maturing with DeFi applications attracting interest from consumers, financial institutions, and commercial investors. And, as governments introduce robust regulatory structures and look to implement stablecoins and their central bank digital currencies, the future for crypto certainly looks very bright.
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