Crypto Myth that Frustrate Most People: Debunking the
Crypto myth: Currently, there are over 19,000 crypto security tokens. DeFi and Web3 seem to be all the rage. It attempts to displace and dislodge the current banking system. The current system has been around since World War I due to the ascension of the United State Dollar as the world’s reserve currency.
Unfortunately, the supply of US Dollar has been increasing -- that is, the presses at the U.S. Federal Reserve has been working non-stop. Many reasons drive the US Fed towards increasing the money supply – such as hitting its 2% inflation target. I know that this word, inflation, has new meaning in 2022 thanks the amount of fiscal and monetary support the United States government has provided since 2020, start of the Covid-19 Pandemic.
This endless increasing supply of FIAT money drives inflation and drives devaluation.
In this article, I will debunk some of the misconceptions around crypto currencies. Also, I will discuss ways in which you can invest in Bitcoin.
The Crypto Myths:
Crypto Myth #1: Crypto is digital gold
Early 2022, we learned that crypto is closely correlated to the NASDAQ. As such, it moves in tandem with interest rates anerall sentiment of the market. So, the fact that Gold is stable while Bitcoin has dropped in price hardly makes it digital gold.
I’m not saying that Gold is unassailable. What I am saying is that you shouldn’t bet everything you have. Instead, invest what you can afford to lose. Do not stress having to put food on the table or struggling paying for day-to-day living expenses.
Crypto Myth #2: Bitcoin not confiscatable
If you’re storing your crypto in a hardware wallet and you are traveling, there is the possibility that a custom or TSA officer confiscating your hardware wallet.
If you’re are trying to evade taxes, scam or to steal crypto, it is possible for the police and the FBI to capture and recover funds. They can by watching your public wallet address. As soon as you move funds, they will be able to locate and to recover funds.
If you have been trading crypto, you have to disclose your crypto trades to the Canada Revenue Agency (CRA), IRS or your country’s tax collector. They are working very hard to track every tax payer who has not paid taxes. For instance, since 2016, the CRA requires that anyone who has been trading crypto and if the amount of invested capital (i.e. cost) is larger than $100,000 CAD, you must declare said holdings by using Form 1135.
Crypto Myth #3: More accepted at restaurants, hotels, etc. than a gold brick
I have not seen one restaurant, hotel or any store that accepts Bitcoin.
Crypto Myth #4: Crypto will stop government reckless money printing
While Bitcoin has a maximum of 21 Million mintable coins, other tokens have an unlimited ability to mint. It’s possible any developer to start a new crypto token. Opening the door for fraud and Ponzi schemes. If you invest in any new crypto token, be sure that you take appropriate safety steps. You also need to understand the cryptocurrency tax situation in Canada as well as your own country.
Crypto Myth #5: Government cannot regulate crypto
Governments are working to regulate by ensuring the crypto on and off-ramps are tracked while protecting investors.
The open nature of the blockchain allows governments to track criminal activities. Tools are available and enhanced to track more criminal activity.
Crypto Myth #6: But Bitcoin cannot be censored. Decentralization guarantees that.
At the heart of the 2022 Luna Terra-UST crypto crash was DeFi, or Decentralized Finance. Luna-Terra was known as a algorithmic stable coin. In the case of Luna-Terra-UST, one pair was the stablecoin, Terra-UST. While Luna would fluctuate based on crypto market trade, Luna would mint, or destroy coins to keep the Terra-UST peg against the USD. Without any hard asset backing Terra-UST, it was easy for traders to game it. It drove a mass "bank run". Within four days, Luna and Terra-UST were bankrupt. The pair was backed by Bitcoin. Bitcoin is not a hard asset like Gold or even US Treasuries. The founder, Do Kwon, immediatley, sold all Bitcoin associated with Luna and Terra-UST. He immediately proposed the creation of Luna V2. This time, it would not have any Terra and no backing like Bitcoin. The new coin was relaunched on May 28, 2022. It crashed as those who were airdropped the new token based on ownership of the original Luna, immediately sold.
Backing of a Fiat currency today is based on human faith and demand. Fiat USD has demand because the U.S. Dollar is the world's reseved currency. It's backed by the power of the United States Army, its economy and by countries that use it as a storage and trading currency. In the past, currencies were backed by physical Gold reserves.
Yes, while DeFi may be not censored, bad actors can sketch scams and Ponzi schemes such as Luna Terra-UST.
Now that I have debunked some major misconceptions, may be you are still interested in investing in Bitcoin.
Is Now the Best Time to Buy Bitcoin?
When should I buy Bitcoin? Should I invest in Bitcoin today, or tomorrow?
It is very hard to time any market. In early 2022, the crypto market was down a lot. Was that the best time to buy? Instead, here are a few helpful strategies:
- Buy when adoption is low
- Buy when price is low
- Buy before major updates
- Buy before the next “halving” of Bitcoin
Buy when adoption is low
In 2010, adoption is low. In 2022, Web3 is the new buzzword. Web3 attemps to embed Bitcoin and Ethereum into new apps that will power the third wave to technology innovations.
According to Wikipedia, Web3 is:
“Web3 (also known as Web 3.0 and sometimes stylized as web3) is an idea for a new iteration of the World Wide Web based on blockchain technology, which incorporates concepts such as decentralization and token-based economics.”
Buy when price is low
“low” is a relative word. It may be low for me but not low enough for you. My point is: don’t buy when the price has been rising every single day for a month. Instead, buy when the price has been low for a long time.
Buy before major updates
Similar to Apple or Tesla announcing a new product category or entering new markets, buying into equities or Bitcoin ahead is a sure way to profit. The key question is that there’s still a healthy amount speculation. Do your research before you placing your best bet.
Buy before the next “halving” of Bitcoin
The halving is when BTC miners get paid half as much Bitcoin as before. This happens like clockwork -- once every 4 years. Because supply is trimmed down -- and demand stays the same or increases -- the price is bound to go up!
Table of Contents
- The Myths:
- Myth #1: Crypto is digital gold
- Myth #2: Bitcoin not confiscatable
- Myth #3: More accepted at restaurants, hotels, etc. than a gold brick
- Myth #4: Crypto will stop government reckless money printing
- Myth #5: Government cannot regulate crypto
- Myth #6: But Bitcoin cannot be censored. Decentralization guarantees that.
- Is Now the Best Time to Buy Bitcoin?