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The 5 biggest misconceptions about cryptocurrency
Let's bust the major Bitcoin myths.
New technology is always something many of us approach with caution – it's just human nature. Fun fact: Despite being invented in the 1920s, television wasn't widespread until the 1950s or later in Australia but now it's impossible to imagine life without it.
Cryptocurrency looks like it's set for a similar path. When crypto arrived on the scene back in 2009, only a handful of those in the know were using the digital currency, but this year Finder research has shown that 1 in 4 Australians already own or plan to buy some cryptocurrency this year.
Misconception #1: You need a lot of money to start investing in cryptocurrency
Cryptocurrency is not just for billionaires. In fact, it's always been easier to invest small amounts of money in cryptocurrency than in traditional stocks and shares.
Most cryptocurrency investments don't have a minimum amount you can invest, and it's possible to get started with just $25 and then build from there. And, one of the major benefits of cryptocurrency is decentralisation, which means nobody is telling you what you can and can't invest in.
Misconception #2: Cryptocurrency is a worse investment than shares, savings or real estate
Cryptocurrency can be volatile, but this doesn't automatically mean it's worse than other forms of investment. It just means that prices move up and down more dramatically than other assets like shares or commodities. This is considered positive/highly attractive for day traders, although it can be a bit nerve-wracking for investors. The success of any investment strategy comes down to diligent research, experience and patience. While some people may feel safer putting their money into traditional shares or savings accounts, investing in cryptocurrency has some clear advantages too:
Typically lower fees than investing in shares
Permanent market uptime, so you can trade whenever you like
Not tied to a single government bank or regulator
Misconception #3: You can't use cryptocurrency like real money
While crypto hasn't reached the point where you can walk into a Maccas and pay for a Big Mac, there are still plenty of ways to use cryptocurrency as a currency. The world of decentralised finance (DeFi) is expanding every day. Big businesses such as Facebook and even national governments in Japan and El Salvador are getting involved, developing their own cryptocurrency coins. With cryptocurrency, you can also:
Pay for a holiday
Shop for clothes, appliances and electronics
Misconception #4: Buying cryptocurrency is hard and takes a long time to do
The way cryptocurrency works might seem confusing at first, but investing in crypto coins is pretty simple and can be done online in a few minutes.
When Bitcoin first started, it was a much more manual and time-consuming process, but these days you can get verified online and start buying cryptocurrency straight away. For example, the Finder mobile app allows users to be approved and trading in less than 3 minutes.
Misconception #5: Cryptocurrency is in a bubble and there is no right time to buy
Bubble is a very popular buzzword and some people argue that the cryptocurrency "bubble" will burst.
The reality is more complex. At the beginning of 2011, 1 Bitcoin was worth under AUD$1. By 2014, it was worth over AUD$400. By 2017 it had risen above AUD$20,000 and its 2021 peak so far is over AUD$70,000 for a single Bitcoin.
That doesn't mean there is zero risk. There will certainly be moments of panic for investors as the charts swing wildly – 2019 had a 71% drop in price. But no form of investment is risk-free.
One way to lower this risk is through dollar cost averaging. By placing a trade that repeatedly purchases a fixed amount of cryptocurrency no matter the price – say $100 each month – you can avoid some of the market's volatility and short-term instability.
You can easily trade Bitcoin and Ethereum in the Finder app, and set up recurring buys too. Just head to the Crypto tab to get started.
Disclaimer:
This information should not be interpreted as an endorsement of cryptocurrency or any specific provider,
service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and
involve significant risks – they are highly volatile and sensitive to secondary activity. Performance
is unpredictable and past performance is no guarantee of future performance. Consider your own
circumstances, and obtain your own advice, before relying on this information. You should also verify
the nature of any product or service (including its legal status and relevant regulatory requirements)
and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
Ben Knight is a contributing cryptocurrency writer for Finder. Having written for Alternative Assets, PianoDreamers and YeahAustralia in the past, his passion for language and creativity with words drives his work. Ben has a master’s degree in writing, editing and publishing, and a bachelor’s degree in creative writing.
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