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March 23, 2022

Bitcoin Academy

Demystifying Bitcoin’s Greatest Myths

Through sheer originality and record-breaking market movements, Bitcoin has gained some pretty colourful coverage in its youth, so we figured it's about time to uncover the facts from the fairytales.

Bitcoins wrapped in a question mark to signify ambiguity, mystery, and questions around Bitcoin

Over the years, Bitcoin has faced its share of criticism, which has often painted a pretty daunting picture for anyone thinking about buying some. So before we dig deep into Bitcoin’s greatest myths let’s address this elephant first. Buying Bitcoin without knowing what you’re doing is risky, and as an unregulated financial product, like stock investments - there’s always capital risk associated with it.

With that being said, hold on to your red flags just a little longer, because it’s not all doom and gloom. If it were, we probably wouldn’t be here, would we?

Whether you’re an expert or a total newbie in the ever-growing crypto space, you’ve likely stumbled across at least one Bitcoin tale at some point. Without knowing the facts from fiction, it’s easy to get confused - so we’re on hand to help you decipher some of Bitcoin's (not so) greatest myths.

1. Bitcoin isn’t “real money” 😯

Of all the weird and wonderful misinformed messaging from the offline world about the online one, this is right up there. This myth is probably one of the more painful for crypto enthusiasts to come across, as its fear-inducing abilities among less tech-savvy audiences can be crippling - especially at family gatherings (slice of turkey with a side of debate, anyone?). 

The issue this question poses is much bigger than Bitcoin. Although Bitcoin isn’t issued by a government or a federal reserve, its value and validity come from the same concept that a good portion of fiat currencies (like USD, GBP, EUR) depend on in today’s economy: people's trust.

You see, back when most of the major reserve currencies we know today were established, they were ‘backed by gold’ (known as the Gold Standard). Although they were created using materials infinitely available for production, this backing meant they were pegged against something of value that had a finite supply, which inherently gave them value. As time progressed and a demand for more money in circulation increased, governments made the decision to drop the Gold Standard, rendering their currencies, in essence, worth only what we deemed them to be worth economically. Most of us in today’s world have now only ever lived with circulating currency based on economic activity. 

Similarly, the more people who back Bitcoin, the stronger its market becomes, and, it’s safe to say that backing is well underway. Many major companies like Microsoft, PayPal and Tesla have already started embracing the use of cryptocurrencies through various routes, like holding Bitcoin on their balance sheets and integrating tools to be able to transact digital tokens, both online and in physical stores.

Even entire countries are starting to adopt Bitcoin within their economies. El Salvador - a place that has been suffering from inefficiency in its financial system for years - announced new plans last year to accept Bitcoin as legal tender.

2. Bitcoin is “difficult” 😣

Bitcoin and financial technology have come a long way since the early days. Many tech newbies might be surprised by the optimisation and quality of user experience some of today's leading crypto platforms have, with apps like ourselves striving to offer a reliable and understandable route into crypto for those who are less focused on keeping up with the ever-evolving world of tech (If you managed to transition from DVDs to Netflix ok, we’ve got a feeling you’ll be just fine).

With the likes of Open Banking and peer-to-peer transaction features, a lot of crypto owners are experiencing crypto-based products becoming as efficient, effective, and secure as their trusted banking app.

The crypto economy has a variety of awesome tools to use too, that make owning crypto a little more frictionless than back in the day - like Bitcoin Rewards offerings that create ways to accumulate Bitcoin without putting any capital at risk.

3. Bitcoin is “worthless” 🤲

To uncover the origins of Bitcoin’s value, we have to dip into the realm of tech for a second and turn to the foundation it’s built on. Many cryptocurrencies today, including Bitcoin, rely on the proof-of-work mechanism that simply allows people to ‘mine’ the ‘digital gold’ by having computers solve mathematical problems. This consumes electricity, which has led researchers to base its intrinsic value on the marginal cost of producing the asset. 

What's more, there’ll only ever be 21 million Bitcoins in existence, meaning there’s a finite amount available in comparison to fiat currencies like GBP and USD that struggle with inflation due to having infinite supplies (a result of quantitative easing, like money printing).

4. Bitcoin is “only for wealthy people” 💸

If you’re looking to buy a whole Bitcoin, you’ll likely need a few ton in the bank. But, you don’t need to buy a whole Bitcoin to own some. In fact, Bitcoin is fractioned into smaller quantities known as ‘satoshis’ - 100 million of them to be exact - which have a solid case use on their own.

With Mode, you can buy as little as £50 worth of Bitcoin to start playing around and learning more about it.

5. It’s too late to buy Bitcoin ⏳

As a relatively new and fast-emerging opportunity, Bitcoin can be seen to have immense price hikes as well as some pretty prompt dips - like recently, the asset’s value in GBP has been seen jumping a few thousand pounds across the £30,000 border on a daily basis. As soon as its price hits an all-time high, people are often quick to assume it’s “too late” to buy Bitcoin. When the price is down you might hear words along the lines of “Bitcoin was just a fad”, or, “Bitcoin’s finished” - naturally, though, as soon as we see new price movements this dialogue shapeshifts once again, creating a constant hype-cycle with each grand proclamation denounced by the next.

The price of Bitcoin is unpredictable, meaning there really is no ‘best time to buy’. Bitcoin has gained a pretty big following across the globe, with a lot of owners applying investment strategies like dollar-cost-averaging to their purchases, or even waiting to buy more Bitcoin once price growth slows down (which in turn should stabilise its value)

 In other words, if you’re looking at buying now - you’re still early

And, if you need further reassurance that you’re not too late, Bitcoin is far from finished making moves. Remember how we mentioned that there’s a ‘finite’ source of Bitcoin, meaning there’ll only ever be 21 million mined into circulation? Yep, well, a bunch of them aren’t even available yet. With a system built for the final Bitcoin to be mined around the year 2140 (DW - we’ll save getting into this one for another time), unless you’re a time-traveller or I’ve woken up in the wrong year, you’ve got plenty of time to get ahead of the game.

Conclusion 🤝

With so many different sources of information out there, it's easy to get lost - or even overwhelmed - and start your crypto journey on the wrong foot. It’s always important to do your own research before making any investments or purchasing any crypto, be sure that you believe in the asset or cryptocurrency you’re looking to buy, and seriously weigh up the risks that are potentially involved.

All that said and done though, it’s not as scary a world out there as you might have heard, and we hope we’ve cleared up some misconceptions here for you.

Happy Hodling!

Fibermode t/a Mode is FCA registered as a Cryptoasset firm (FCA 928786). Bitcoin is not regulated in the UK. The value of Bitcoin can go up or down (or can drop to zero), and there can be a substantial risk you lose money. No FSCS/FOS protection. Capital gains may be subject to CGT. 18+ UK residents only. KYC required.We do not offer financial advice. More on risk associated with Bitcoin trading 👉 https://www.modeapp.com/protection.

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