OPINION By Dennis Sahlstrom
Crypto has certainly been in the news a lot recently. There is a lot of speculation about what the future of digital currency holds, but due to an excess of misinformation, there are several myths that can make people hesitant to invest in them, especially dat a time when people are more protective over their finances.
Myth 1: Crypto coins have no real value
Crypto can hold value just like traditional fiat currencies, commodities, and other assets. The value of a cryptocurrency is determined by the market forces of supply and demand, similar to how the value of traditional currencies is determined.
Many, such as Bitcoin and Ethereum, have seen significant growth in value over the years, which is a testament to their perceived value. However, it’s important to note that the value of cryptocurrencies can be highly volatile, and can fluctuate rapidly due to a variety of factors, including market sentiment, regulatory changes, and technological advancements.
And not all cryptocurrencies hold the same level of value or potential for growth. Some have unique features or use cases that set them apart from others, and may have more or less value depending on their popularity and adoption.
Overall, their value is determined by a complex set of factors, and it’s important for investors to do their own research and understand the risks and potential rewards before investing in any cryptocurrency.
Myth 2: They are a bubble that will burst
While it is true they have experienced significant volatility, this does not necessarily mean that they are a bubble. Cryptocurrencies are a relatively new asset class, and their value is determined by supply and demand in a market that is still developing. However, as more people and institutions begin to adopt them, their value is likely to become more stable. Additionally, the underlying technology, ie: blockchain, has numerous real-world applications that suggest it is here to stay.
Myth 3: They are only used for illegal activities
While it is true that some individuals have abused them, most users are law-abiding. In fact, many businesses and institutions are now accepting them as payment for goods and services, and some countries have even started to recognise them as a legitimate form of currency.
Myth 4: They are too complicated for the average person to understand
While they can be complex, it is not necessary to have an in-depth understanding of the underlying technology to invest in them. Many cryptocurrency exchanges and wallets have made the process of buying and selling much more user-friendly in recent years.
Myth 5: All crypto coins are bad for the environment
Their environmental impact is a topic of much debate and concern. One of the main environmental concerns is the energy consumption required for the mining process. But it’s worth noting that not all have the same environmental impact. Some, such as Ethereum, are exploring more energy-efficient alternatives to the traditional proof-of-work mining process. Others, such as Cardano, use a proof-of-stake consensus mechanism, which consumes significantly less energy. As this industry becomes more regulated, I believe we will see more energy-efficient efforts made in crypto coins.
Why 2023 may be a good time to start investing in them
More businesses and institutions are beginning to accept them as payment. This increased adoption suggests they are becoming more mainstream and may continue to increase in value.
Also, as the cryptocurrency market has matured, governments have begun to establish clearer regulations. This regulatory clarity can help to reduce some of the volatility in the market and make it a more stable investment.
And more institutional investors, such as banks and hedge funds, are beginning to invest which can only help to increase the stability of the market and may signal that they are becoming a more mainstream investment option. This in turn can help improve investor confidence in crypto.
Dennis Sahlstrom is Head Trader at Investment Mastery