Five myths about cryptocurrencies

Cryptocurrency trading is associated with sharp ups and downs and is considered hazardous. So let’s find out if this is the case.

Some coins take off sharply and bring their holders multiple profits. But conversely, there are many cases when currencies lose almost 100% of their value and reset the capital invested in them.

This article will focus on common myths about cryptocurrencies. We will also determine whether a stable investment in cryptocurrency is possible in profitability.

Myth 1. Cryptocurrencies are very volatile

Every day you can see on social networks many stories that a particular coin has grown by hundreds and sometimes thousands of per cent and reports that a specific currency has lost 99.99% of its value. Of course, such colossal volatility is inherent in the cryptocurrency market. But in addition to coins that are subject to sharp ups and downs, which can be caused by the messages of famous personalities or the actions of large investors, there are also more stable coins. For example, there are so-called stablecoins, the value of which is tied to a specific currency. For instance, Binance USD (BUSD) or Tether (USDT), their value is pegged to the US dollar and ranges from $0.99 to $1.01 per coin.

Storing funds in stablecoins can generate income through staking operations (like bank deposits, only in cryptocurrency). Also, stablecoins are well suited for temporarily storing profits from investments and fixed capital. Instead of withdrawing cryptocurrency assets into fiat money through a bank, you can just as well keep them in stablecoins inside a cryptocurrency system. And in the event of a market decline, you can easily use them to buy cheaper assets.

Myth 2. Luck plays a significant role

There is a widespread opinion that cryptocurrencies are like a lottery, and someone is just lucky to buy the right coin at the right time before its rapid growth. But suppose you look at the long-term results of investors. In that case, it becomes clear that stable positive returns result from accumulated experience and education in the cryptocurrency field.

It is essential to understand many issues – complex and straightforward. For example, how and which crypto wallet to open; how and on which crypto exchange for registering; what is NFT; what is the gas fee; in which network is the transaction fee cheaper; where is it more profitable to buy, sell and exchange cryptocurrency; what are airdrop and allowlist and many others.

It is also essential to understand the fundamental foundations underlying a particular coin – the total valuation of the currency, what processes affect its pricing, who is behind this project, how to use futures and options contracts, and other issues.

Experienced investors, as a rule. They are better versed in all these issues and can adequately manage their position, hedging it if necessary.

Myth 3. The advertised coins will continue to grow

An essential component of trading on the crypto market, along with analytical analysis, is the belief in the coin the participant invests or is going to invest in. It is easy to succumb to the general euphoria about the sharp growth of a particular currency. As a rule, when all media outlets begin to pour information about the remarkable growth of any coin, this signals its imminent completion. People who have invested their funds in such advertised projects, as a result, remain without a significant part of their investments.

An example of such a situation is the SHIB and DOGE coins advertised by Elon Musk.

Therefore, conducting your coin analysis and sticking to your original trading plan is essential.

Coins with high capitalization, such as Ethereum, can sometimes rise or fall sharply. But if we analyze the long-term trends of Ethereum or Bitcoin, we can ensure that the trends are growing. And investors often buy these coins at every drawdown because they believe in the future of cryptocurrencies and blockchain technology.  

Myth 4. You can catch the whole movement and get rich

An investor often analyses, selects a coin and invests in it. The currency starts to grow and make a profit. The investor is in no hurry to fix the profit and expects the cash to continue to grow further. Such stories usually end because the currency plummets, all profits are burned, and even a loss appears.

The universal advice here is that you don’t have to chase to catch all the coin’s movement. Instead, it is necessary to plan a profit-taking plan and adhere to it. For example, the program may sell 25% of the portfolio with a coin increase of every 25%. Or another example is to sell the entire portfolio invested initially when the coin grows by 50%, leaving only the revenue part to continue working in the currency.

You can’t capture the entire movement. But, in the long term, stable results are shown by those investors who fix their profits according to a pre-thought-out plan. 

Also, there should be a plan in case of unfavourable movements in the coin price. For example, it can be a total sale of a coin if it decreases its price by more than 25%.   

The percentages are given here as an example. Everyone should determine the specific amounts of profitability and loss independently. Novice investors can operate with smaller numbers. 

Myth 5. Take out a loan, invest in cryptocurrencies and become richо

The value of cryptocurrencies is determined by market mechanisms and depends on the supply and demand for a particular coin. And supply and demand, in turn, is the degree of trust and faith in the currency, which can vary significantly depending on the surrounding circumstances. In the crypto world, there are sharp collapses, and often the price does not return to its previous high values for a long time (in some coins, this never happens). Therefore, only those funds should be invested in cryptocurrencies, the loss of which will not affect the investor’s life.

There are many stories of people selling their homes and cars or even taking out loans to invest in cryptocurrencies and losing their investments. In addition, hundreds of sad stories about failed acquisitions and bankruptcies for every successful level of getting rich thanks to cryptocurrencies have become widely known.

It is necessary to take a severe and balanced approach to the issue of investing in cryptocurrencies.

The central myths about cryptocurrencies look like this.

When trading cryptocurrencies, it isn’t easy to get rid of emotions and hopes for the rapid growth of your capital. But in the long run, disciplined traders who have accumulated work experience and do not depend on emotional factors win. Remember that you must exercise extreme responsibility and prudence when investing in cryptocurrencies.

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