Since introducing cryptocurrency in 2009, it has gradually increased in popularity. The allure around cryptocurrency has grown so much that it has been hailed as a medium for gaining financial independence.
While cryptocurrency does yield the power to help a person raise his financial portfolio to newer highs, there are so many misconceptions associated with it that must be addressed so that people may know what they are getting into before investing in cryptocurrency. So, without further ado, let’s discuss the most common myths surrounding cryptocurrency.
Myth # 1: Only Master Traders Succeed in Crypto
Let us ease some of the pressure on your shoulders if you believe cryptocurrency is not your forte only because you haven’t learned anything about it beforehand. Only a few people knew about crypto after the inception of Bitcoin in 2009, and there was a time when people used Bitcoin to pay for pizzas.
However, with time, it became popular and has become a norm for millions of people to follow everything related to crypto. Many names have made a fortune in the crypto world and have become billionaires after investing and trading in cryptocurrency.
Many aspire to reach their levels and work hard on learning techniques that can help them effectively interpret the market. You can also become one of those success stories if you do your due diligence and learn these techniques and methods to help you pick effective trades after proper technical analysis, learn risk mitigation techniques, and keep up to date with the external market conditions.
Keep pursuing your hope of achieving success just by thinking you have arrived late to the party. The beauty of the crypto market is that it allows everyone to turn their fortunes if they find the right opportunity at the right time.
If you believe that holders of popular cryptocurrencies like Bitcoin, Ethereum, etc., can only reach higher levels because they have invested first into these coins, it doesn’t mean you can’t do the same.
Who knows which upcoming project can alleviate your financial status, just like these projects did for others when they were new. You need to find the right opportunity; believe us, it will arrive.
In the meantime, keep learning about different techniques that can help polish your trading skills, and try to start small and work your way upward when you gain more experience.
Like any other field requiring professional expertise, successful crypto trading demands dedication, ongoing education, and the meticulous development of a personalized arsenal of strategies.
Myth # 2: Chase the Whales to Gain Success
Another one of the common myths surrounding cryptocurrency, which most of the newbies of the crypto world fall victim to, is to follow the path of the crypto whales. We are not talking about trying to follow their practices, the paths that lead them to success, or learning from their decisions and steps. We are trying to copy their exact trading decision on a smaller level.
The first thing you should know about crypto whales is that they have accumulated a lot of crypto assets in their investing career. They are called whales because they have the appetite to swallow the risks associated with any crypto trade. The same is true with following crypto influencers who have accumulated millions in crypto assets and boast on social media about their next move or what they believe will transpire.
While they may be right because they wouldn’t have reached such levels if these influencers didn’t make the right calls, what you must know is that they think ten steps ahead of the rest of the market, and if you are playing with limited funds, then following their style is not what you can afford.
Whales and prominent influencers operate with vastly different goals and risk tolerances than individual traders. Their massive holdings allow them to weather market fluctuations in ways retail investors cannot.
Additionally, their motivations may not always align with yours. They might be executing complex hedging strategies or capitalizing on specific arbitrage opportunities that would translate to something other than smaller-scale investments.
Also, unthinkingly following hot tips or mimicking the trades of influencers ignores the crucial element of personal research and market analysis. Proper understanding and conviction should drive investment decisions rather than unquestioning belief in online personalities.
Relying solely on external guidance deprives you of the opportunity to develop your analytical skills. It increases your dependency on others, increasing the risk of falling prey to misinformation or manipulation.
Myth # 3: Learning Indicators Alone Will Suffice
Stay clear by the heading. No one denies the importance of learning technical analysis techniques and understanding crypto indicators, which are instrumental to a successful trading journey.
The world of crypto trading contains many technical indicators like Bollinger Bands, MACD, RSI, etc. These complex technical tools help you deduce the market’s future direction and even pinpoint the expected next price of a particular crypto asset. In essence, they act as a prediction tool that will tell you what may transpire in the future if the market continues to behave as it is currently.
Mastering these techniques ensures that most of your crypto trades end in profit. However, to say that learning such techniques will act as a crystal ball that will tell you what will transpire in the future is a dangerous oversimplification.
The reason behind urging you to exercise extreme caution is that the crypto market is known for its unpredictability and highly volatile nature. Relying solely on technical indicators will deprive you of the ability and desire to monitor external factors that may not be directly visible to you but can significantly impact the crypto market.
News, events, regulatory changes, and general economic conditions significantly shape crypto prices. Focusing solely on technical charts provides an incomplete picture, potentially leading to misinterpretations and missed opportunities.
Technical indicators, by their very nature, are based on historical data. They analyze past trends and patterns to project potential future movements. However, the crypto market’s notoriously volatile and dynamic nature makes it prone to sudden and unpredictable shifts.
Therefore, the key to a successful trading career is finding the ideal balance between technical analysis and following the fundamentals. You can rely on technical analysis to identify a trade’s potential entry and exit points. Still, you should look at the buzz around the market for that crypto asset.
By looking at the bigger picture, you will make informed decisions that will prove profitable and give you the required experience and confidence to fare better in the crypto market.
Myth # 4: Crypto is a Shortcut to Being Rich
Well, if any of our readers thought we wouldn’t visit this argument, then sorry to disappoint you, but the reality is always complex.
While it’s true that many crypto traders and investors have made a fortune after putting everything they had into crypto trading and have made millions, in some cases even billions, from it, they have done after putting in so much effort.
Making a fortune from crypto trading requires much effort and time, and good luck would undoubtedly help. Those who have made incredible gains from crypto have learned a lot of techniques there are to learn to become a master of their craft and spent years perfecting that craft before they put it into good use.
You must understand that while there are stories of people turning from rags to riches through crypto trading, there are even more stories of people losing everything they had just because they couldn’t understand how the crypto market works.
A very famous term in the crypto world is Going to the Moon. It refers to speculative investments with the hope that a cryptocurrency’s value will skyrocket, resulting in substantial profits, often driven by hype or social media trends.
If you only think about these moon missions and quick profits, you might need to remember to be careful with your money and make wise investment choices.
Going after unpredictable, trend-driven coins or doing risky trading with borrowed money in the hope of making a lot of money fast can lead to making hasty decisions and not thinking about possible losses.
It’s like running through a field of explosives with your eyes covered, hoping to get through a pile of gold without getting hurt. The possible rewards might seem exciting, but the dangers should be lowered.
Myth # 5: Let Trading Bots Do the Work for You
Automated trading bots and strategies might make it easier to make money with cryptocurrencies, but it’s more complex. It’s like relying on a broken compass for a journey where you might end up in unexpected places, with a higher risk of facing problems.
Trusting automated tools too much ignores the need for human oversight. The crypto market changes quickly, and automated systems can struggle to adapt to sudden events.
Also, you need more than just automated tools to learn about the market. To be good at crypto trading, you must understand technical and fundamental analysis, create strategies, and make intelligent decisions based on your research.
Successful crypto trading means finding a balance between using technology and using your judgment. Automated tools can help you analyze data and make trades efficiently, but they should be like helpers, not replacements for your knowledge.
Let’s consider a scenario where you’re trading Bitcoin and decide to rely solely on an automated trading bot to handle your transactions. You set the trading bot to execute buy and sell orders based on preset algorithms without regularly checking its activity.
The market suddenly experiences a sharp dip due to unexpected news. The automated bot, designed to follow historical patterns, may struggle to adapt to this unforeseen event and execute trades at less favourable prices, leading to potential losses.
Myth # 6: Stay away from crypto! It’s a Scam
Cryptocurrencies have gained widespread acceptance in commercial transactions, with individuals embracing them for personal exchanges.
Governments are actively exploring regulatory frameworks to govern these digital assets. It’s crucial to recognize that most cryptocurrencies operate without embedded malicious code or artificial intent to extract funds.
Nevertheless, the cryptocurrency landscape is not immune to fraudulent activities. Instances such as deceptive initial coin offerings (ICOs) and unregulated fundraising campaigns for new cryptocurrency ventures have emerged as scams.
Additionally, scams may involve coercing individuals into accepting unverified transactions or posing as government representatives, requesting debt payments in cryptocurrency. While it’s impractical to eliminate the risk of falling victim to scams, cultivating knowledge and awareness can significantly mitigate the likelihood of encountering such fraudulent schemes.
The onus lies on you to separate fantasy from reality. If you have conducted your search correctly and know about the token’s authenticity and the team behind it, you have nothing to worry about. The crypto market is worth billions in market capitalization, so considering such a big industry a scam sounds premature.
Myth # 7: Cryptocurrencies are bad for Environment
We admit that this point does hold some merit, or it did in the past. Some concerns arose regarding the environmental repercussions of cryptocurrencies, mainly due to the energy-intensive consensus mechanisms some cryptocurrencies use for transaction validation.
Bitcoin, a widely adopted and valuable token, has led to the emergence of large-scale mining operations, contributing to a significant environmental footprint.
These mining farms demand substantial energy, collectively consuming as much as some small countries. The environmental impact hinges on the energy source of these mining operations and the consequential effect on the power grid.
When mining operations heavily rely on electricity from fossil fuel-based grids, it results in heightened carbon emissions for a digital asset whose future benefits to humanity remain uncertain.
However, consistent work is being done to address these environmental concerns. Notable blockchain platforms are transitioning from energy-intensive Proof-of-Work (PoW) consensus mechanisms to more sustainable alternatives.
Ethereum, a prominent blockchain, shifted to Ethereum 2.0, which utilizes Proof-of-Stake (PoS), significantly reducing energy consumption for transaction validation. Similarly, other established cryptocurrencies are exploring or implementing less energy-intensive consensus mechanisms, acknowledging the need for environmental responsibility.
These developments indicate a proactive industry response to mitigate the ecological impact of digital currencies, fostering a trend towards more eco-friendly blockchain technologies.
Final Thoughts on Myths Surrounding Cryptocurrency
This article aims to provide information regarding the most common myths associated with cryptocurrency. It is up to you to infer from this information whether these are myths or if they hold any substance to them. This information should be considered something other than investment advice, and you should do your due diligence and research before diving into the exciting world of crypto trading.
