Even though cryptocurrencies and blockchain technology have been around for several years, many people have a very superficial understanding of them and generally consider cryptocurrencies mysterious. This is why many misconceptions about cryptocurrency appear to this day. This article will debunk the most popular crypto myths and discuss how to buy and sell cryptocurrency.
Definition of cryptocurrency
Cryptocurrency is a digital asset that works on a network of decentralized computers (also known as nodes). Cryptocurrencies are used as a means of settlement between network users, paying fees, and storing funds, but they can have many other uses. Most cryptocurrencies operate on a blockchain, a decentralized database that stores a chain of digital blocks containing all the necessary data.
A brief history of Cryptocurrency
The history of cryptocurrencies and blockchain began in 2007 when a person or a group of people under the pseudonym Satoshi Nakamoto introduced the idea of blockchain and cryptocurrency called Bitcoin. In 2009, after the first block (Genesis 0) was generated, the first BTCs were sent by the creator of Bitcoin. The ever-growing popularity of Bitcoin has led to the emergence of cryptocurrencies from other developers and, in general, to the development of the industry.
Importance of understanding cryptocurrency
It is almost impossible to ignore the cryptocurrency industry. Cryptocurrencies and blockchain technologies are gradually integrating into the lives of modern people, going far beyond the spheres of investing and trading.
It is already possible to see how blockchain is used in medicine, logistics, trading, banking, etc., and the legal regulation of cryptocurrency has been discussed in many leading countries in the last couple of years.
Myths about cryptocurrency
Some myths about cryptocurrency are quite harmless. However, several myths can scare someone who is just getting to know this phenomenon. Here are some of them:
Criminals only use cryptocurrency
Some people believe that crypto is used for various crimes. In particular, money laundering, drug trafficking, etc. But this is not true.
Bitcoin and other cryptocurrencies do not provide complete anonymity due to the KYC identification policy applied by most crypto exchanges. Even without KYC, law enforcement can track transactions to detect and prevent criminal activity due to the transparency and impossibility of making changes to the blockchain.
According to open-source data, the share of all crypto-related illegal activities in 2022 was only 0.24% ($20.6 billion). At the same time, from $800 billion to $2 trillion of dubious origin passed through traditional financial systems in 2022.
Cryptocurrency is too volatile to be a reliable investment.
Cryptocurrencies are considered risky assets due to their price fluctuations. For example, Bitcoin has experienced several significant ups and downs. At the same time, the volatility of cryptocurrencies is used to obtain high income in the shortest time possible. Experienced traders use technical analysis tools and specialized bots to predict rate movements. Thus, volatility is usually used by investors and traders to their advantage.
Cryptocurrency is not secure.
Like everything related to finance, cryptocurrency attracts the attention of scammers and other criminals. Of course, nothing in the world is 100% secure, and hacks of exchanges or wallets happen occasionally. However, the cryptocurrency industry is constantly developing, and mistakes are considered and eliminated. The risk of hacks is much lower than before, thanks to the advanced security systems exchanges use. They keep assets in cold wallets and use Web Application Firewall (WAF), AML, etc. In addition, security tools such as 2FA and strong passwords are available to users.
How to buy cryptocurrency
Although the industry is quite young, there are many ways to buy cryptocurrency. The most convenient and safest one is to use a centralized exchange (CEX). WhiteBIT, the largest European cryptocurrency exchange, can be used as an example of a good platform for purchasing digital assets.
To buy crypto on WhiteBIT, you must sign up and pass the KYC verification. Next, you must deposit fiat currency to your balance from a bank card or a merchant. Afterward, go to the “Trade” section and order the desired trading pair. You will receive the cryptocurrency you want once your order is executed.
How to store cryptocurrency
You can store cryptocurrency both on the exchange or crypto wallets. There are hot wallets that have access to the internet and cold wallets, autonomous devices for storing cryptocurrency, which cannot be hacked without access to a physical device.
Diversifying your cryptocurrency portfolio
When buying cryptocurrency, it is important not to forget the rules of financial security. The main one is investing wisely and diversifying your portfolio to protect your capital against excessive risks.
Investing in cryptocurrency is not nearly as difficult as it might seem. But there is no need to invest large sums in different projects immediately. Start with:
- Setting investment goals. Clear goals will allow you to choose investment instruments and develop a strategy for achieving your goal.
- Doing research and choosing the right cryptocurrency to invest in. When choosing an asset, you should consider many factors: from market capitalization to the public’s opinion about the project.
- Understanding the market trends and risks. The market is multifaceted and can change literally in a matter of hours. Before investing, you should study the current market situation and be ready to respond to all kinds of changes.
Like any interesting and new phenomenon, cryptocurrency is surrounded by myths and misconceptions. But as you can see, they aren’t true.
At the same time, it is very important to work on your crypto-literacy, as everything points to the fact that cryptocurrency and blockchain technology will be used even more.