3 Common Cryptocurrency Myths Busted by Pro Investors
On Thursday, April 19, at 2 p.m., I’m going to stream an urgent Skype call with my team — the same team that created the first and only cryptocurrency ratings in the world.
(If you haven’t registered yet to attend this free event, go here. You only have a few hours left before registration closes tonight.)
The call is urgent because cryptocurrencies have hit rock bottom and started to bounce.
Moreover, the ones earning our grades for the best new technology have started to jump again like they did in 2017 — far more sharply than older cryptocurrencies like bitcoin.
When that started happening in early 2017, if you could have used our ratings, you could have grown $10,000 to more than $599,000 in 14 months flat.
Of course, not every year can be like 2017. And as you know, cryptocurrency markets can be very volatile.
But those numbers give you an idea of the tremendous profit opportunities from using our crypto ratings, especially starting at a time like now when cryptos are bouncing off a big bottom.
One other good thing about a big bottom is that nearly all the irrational exuberance has been washed out of the market.
And as our cryptocurrency expert, Juan Villaverde, explains below, it’s also a time when crypto critics come out in droves with a series of misleading theories…
3 Misleading Theories About Crypto
By Juan Villaverde
The critics are putting forth a whole series of misconceptions about cryptocurrencies. Here are just three of the most common.
Misleading Theory No. 1. “Cryptocurrencies can’t be used as
money because their limited supply makes them deflationary.”
True, bitcoin is deflationary.
Yes, beyond the 21 million bitcoins created, there will never be any more.
Plus, it’s also a fact that some 20% of the existing bitcoin supply (over 3 million) has been lost forever.
The “deflationary money theory” is not new, of course. It goes back to the old idea that “you’ll never buy shoes with gold, because gold is too scarce to be used as money.”
Instead, goes the theory, people will spend money that’s more readily available and hoard the money that’s scarcer.
Why this is a misconception: Bitcoin is just one cryptocurrency, the only widely used crypto that was designed to be scarce.
Other cryptos don’t follow that model. In fact, cryptocurrencies can be engineered to any specification.
They can be deflationary; they can be inflationary.
They can be pegged to population growth, the growth of the economy or any combination.
Developers could fine-tune the creation of money so that it becomes scarcer in times of economic booms (when the risk of inflation is higher) and more abundant as the economy turns down (when the risk of deflation is higher).
Cryptocurrencies can even be hard-coded to follow the economic cycle without the need for regular intervention or decision-making by policymakers.
So whenever you hear the argument that “crypto doesn’t work, because you can’t have a finite supply of currency,” you can know with near certainty that the author is mostly unfamiliar with the technology.
Cryptocurrency can be made to do all the things that traditional fiat can do, and much more.
The big difference: It’s borderless, flagless money that can’t be tampered with by corrupt governments. And that’s precisely what makes it so appealing as a solution to the ills that have periodically afflicted the world’s monetary system.
Misleading Theory No. 2. “Cryptocurrencies are a fad because no one has created any practical use for them.”
No practical use?!
How about the many millions of the secure, private transactions already confirmed?
How about a global, decentralized, borderless, neutral, censorship- resistant monetary system that no one can control?
These aren’t practical uses?!
“Why not just use systems likes PayPal?” comes the typical retort.
Because PayPal is a different animal entirely. It’s a centralized database. It exists on top of the banking system. And it forces users to go right back to the banking system to spend their money.
This means that the folks at PayPal can refuse to accept your account.
Even after you’ve opened an account, they can reject your transaction. Or they can shut down your account entirely. Plus, they offer no new currency system, using exclusively government-controlled money issued by a central bank.
To say that cryptocurrencies are useless because we already have companies doing payments is akin to saying the internet is useless because we already have fax machines.
Misleading Theory No. 3. “Cryptocurrencies will never catch on because the complexity of the financial and legal system is too great to go on the blockchain.”
This is an age-old anti-tech argument that likely began with the first tools invented by our ancestors.
You can imagine them asking: “How could you possibly do that with a stick or a stone? What you really need is just your own bare hands, knuckles and noggin!”
In the evolution of technology, the technical term I’d refer you to is “infrastructure inversion.” It’s the idea that new technology always struggles to gain acceptance in the current world.
Because, by definition, the existing infrastructure is always built for the older technology.
The first automobiles, for example, were forced to run on dirt (and often muddy) roads built for horses and carriages.
“These machines will never catch on,” was the common refrain. “They can’t run properly on our roads!”
Somewhat true, until, of course, the infrastructure itself — such as asphalt roads and highways — caught up with the new vehicles.
So, yes, the financial and legal systems are too complicated today. But that’s largely due to inefficiencies in these systems and issues of trust. These inefficiencies create multiday lags before settling transactions, and far longer delays in resolving disputes.
In contrast, cryptocurrencies settle accounts in real time. It’s all built into the transaction process itself.
There are many more misconceptions, misunderstandings and false claims made by critics who think they’ve understood this technology well enough.
But in virtually every case, if you dig just beneath the surface, you will find evidence of intellectual laziness, bias or both.
This doesn’t mean cryptocurrencies have resolved all their issues. But they are here to stay. And they will change the world in ways that we can only begin to imagine.
Martin D. Weiss, Ph.D., and Juan Villaverde