The crypto market is a complex mechanism with thousands of players and experts involved. Investing in digital currencies is becoming increasingly popular not only among experienced investors but also among newcomers in trading. However, there are still many misconceptions many traders still believe. We are here to help you clarify the situation in the global crypto market and come up with proven information regarding some facts you might have heard of. Discover the list of the most common misconceptions about cryptocurrencies below.
Blockchain Is A Database In A Cloud
Blockchain is not a traditional database, as many might think of. In fact, it is a decentralized public network with data distributed over many computers that are in the network. Its main function is to keep the records of the transactions made. To put it short, it is a solution that ensures that all cryptocurrency operations are safe and transparent by storing the transaction history code in each “block” of the “chain”. It is not developed for storing files but only for keeping the transaction codes.
There Is Only One Blockchain Technology
This myth is still common for many newbie traders. The truth is that blockchain is just an innovative technology, but there are many different blockchain technologies, which crypto coins are based on. Some of them are open-sourced, while the others might appear to be private. The most straightforward example would be Bitcoin and Ethereum, both use blockchain, but the inner operational protocols differ considerably.
Cryptocurrencies Will Soon Disappear From The Global Financial Arena
Despite the fact many people believe that cryptocurrencies are another temporal financial buble,
all in all, the world of cryptocurrencies keeps booming. Regardless of tons of criticism, it offers many brilliant perspectives to investors, making it possible to earn good money, come up with secure investments, and become a successful trader within the shortest terms.
According to most experts, crypto coins will remain on the rise in the nearest future. Furthermore, the cryptos are likely to improve the processes of digital payments, elevating the entire financial world to a completely new level. This is supported by the fact that many central banks of different countries are now experimenting with their official digital money. Using physical wallets and having cash might soon become an old-school solution that is no longer used by most people. Digital tokens representing various assets can significantly simplify online transactions in different fields.
Investing In Cryptocurrencies Is For Financial Experts Only
Crypto trading is open to all enthusiasts. Even if you don’t have a strong technical or financial background, you can still become a successful investor. The only thing you need to start making deals on the crypto market is to have a basic understanding of how it works in general. Since the niche is constantly growing, you will need to constantly learn and keep in touch with the latest tendencies even if you are an experienced trader. Fortunately, there is tons of information and learning materials freely available on the web. So it is just a matter of your strong desire and available time to plunge in the sphere.
Crypto Markets Are Majorly Speculated by Bot Trading
There is a strong belief that the prices on the cryptocurrency market are easily manipulated with automated wash trading, e.g. buying and selling your own orders with intention to boom the trading volume. In fact, it is not exactly so. First, this practice is present not exclusively on crypto markets, but also on traditional markets, like stock or Forex.
Secondly, there is no denying that some players might try to speculate on the crypto market with the help of crypto trading bots. This way, the bots perform simple trading operations, for instance to increase the trading volumes. However, trading automation and bots in the common sense are designed to achieve the opposite. Most trading bots are advanced trading algorithms, developed by quantitative traders for high-frequency trading activities. By analyzing current market data, indices, signals and trends, bots find market disproportions and perform trading orders. As a result, they smooth the price volatility of a particular asset, making it less appealing for speculation. Check this article, if you are interested to learn more about the bots.
Crypto Coins Can Be Easily Hacked
The modern crypto exchanges use the most innovative security features to allow traders to perform deals in a fast and safe way. Moreover, the crypto wallets that offer an opportunity to store your digital assets are also incredibly secure solutions designed for preserving your money from hackers. Therefore, the processes of both saving and trading crypto coins are reliable, as long you follow the basic rules to stay secure.
Trading Crypto Coins Might Be 100% Anonymous
Many traders believe that the processes of buying and selling cryptocurrencies are untraceable. However, this is not true. Just like many other platforms, crypto exchanges have user anonymity but it is never absolute. In certain extreme cases, it is possible to identify both buyer and seller of the digital coin. Still, it is not common for crypto trading.
Crypto Coins Are Not Taxed
Making transactions on the crypto markets doesn’t require involving any third party, such as central authorities or banks. However, it doesn’t mean the crypto niche remains untaxed. The fact is that if you want to legally use crypto as a payment means for your business operation, you are always taxed whenever you buy/sell your digital coins. The tax burden varies across countries. Fortunately, there are many solutions which can help you manage crypto tax reports.
Crypto Coins Might Displace The US Dollar
The rumors about Bitcoin becoming an alternative to the dollar are still on the air. Some experts believe that crypto coins will finalize the era of traditional currencies. However, these types of money are completely different and can hardly be substituted by one another.
On one hand, crypto money has no physical backup. It is only supported by people who believe in it. On the other hand, the dollar is backed up by the country’s government. This is a world-known traditional currency highly valued by thousands of investors in all the countries all over the world. Moreover, the number of cryptocurrencies continues to grow, making the market more flexible. It is impossible to predict which digital coin could revolutionize the global financial market. While the dollar is gradually losing its role in making online payments, it remains a reliable store of value.