Cryptocurrency: What is it?
The crypto space is becoming more and more crowded. With more currencies coming to the market each day, means more investors. Those who wish to invest in crypto must understand how crypto works. Here are five common misconceptions about crypto that you need to know before you invest.
1. Cryptocurrency is Only For Illegal Dealings/ Criminals
This is probably one of the most common misconceptions in crypto. The association between crypto and various shady operations, such as dark-web services, gives crypto a bad name. Although this is a misconception, it is partially true because of illegal transactions made with crypto in places like the dark web. However, crypto transactions are traceable and possible to track.
Crypto makes these transactions transparent for both the sender and the receiver. The only drawback is that not all crypto exchanges ask for KYC or AML when you register on their platform.
2. Crypto is Trying to Replace Money
Crypto has not come to replace fiat currency. It has merely given people an alternative to money, which is fast and secure. However, crypto can be more appealing than paper money since crypto transactions are processed faster than traditional ones. Although, it is safe to say that crypto will never completely replace the dollar. Crypto still needs regulation by governing authorities, banks, and other financial institutions before crypto can replace anything.
Instead of trying to replace the dollar, crypto is trying to provide an alternative option that is faster, more secure, and cheaper.
3. Cryptocurrency is Not Taxed
This belief that crypto is not taxed is simply not true. Any kind of crypto transaction that results in a gain will have to be declared on one’s income tax. Many countries have started regulating crypto activities.
Taxing crypto makes it legitimate and reduces the risk of crypto being used as a money-laundering tool. However, crypto taxation depends on each country’s regulations and might vary.
4. Crypto is Separate from the Blockchain
It is wrong to think of crypto as separate from blockchain technology. Blockchain and crypto go hand-in-hand. You cannot have crypto without having a blockchain platform like Bitcoin, Litecoin, and Ethereum. Crypto is an inherent part of blockchain technology. Blockchain allows crypto enthusiasts to trade crypto without any third-party interference.
There are over 1,500 coins now, and there are blockchains that enable them as mining rewards and in-platform tokens behind each coin. While blockchains do have other uses other than minting crypto, blockchains are essential for crypto to exist.
5. Learning Crypto is too Complicated
Crypto may seem too complicated for beginners. However, crypto is not so difficult if you know what it takes to trade crypto successfully. Cryptocurrency trading is similar to stock trading, however, crypto trading does not close like traditional exchanges.
Another important thing crypto beginners need to realize is crypto is not available on traditional exchanges. Instead, crypto enthusiasts must access cryptocurrency exchanges to trade crypto.
Price fluctuations of crypto will always happen, whether there are crypto beginners or not. You can reduce the risk of this happening if you know what to look for in an exchange before investing. Knowing the different types of crypto wallets is also important to crypto beginners, as crypto wallets are the only way crypto can be stored.
Visit the Brennan Balzi website and contact me with more questions about cryptocurrency and investing. I gained most of my knowledge of cryptocurrency from my curiosity in technology and learning how a blockchain operates. I love sharing my knowledge with others while learning new things. The crypto realm is always evolving, take your time and happy investing.