The Most Common Misconceptions About Bitcoin (and Their Corrections)
The Most Common Misconceptions About Bitcoin (and Their Corrections) This post was originally written in late 2017.
Lets get right into it.
Obviously, there are a lot of misconceptions out there about bitcoin. To say that people are confused is an understatement. Every day I get questions that three people are asking at the same moment.
The media did a bit of a screw job filling peoples minds with nonsense over the past few years, as it usually does.
But now that the price has grown so radically over the past few months and the media cant help but talk about it, now everyone wants to know if they should jump in with both arms and feet, or wait and see if people lose their money..
Let’s clear up some of the misconceptions for people who were unable to get to the truth.
(All of this information is available out there and you can find it on your own.)
Misconception # 1: “It’s too expensive. I cant afford it at this price.”
This is based on the misconception that you need to buy one bitcoin to have any. That is not true. You do not need to buy one Bitcoin to get started. It’s not like one stock. One Apple stock is $170 USD. One Bitcoin is worth $16,000 USD. But the great news is, Bitcoin is divisible, which means, it can be purchased with increments of 0.01 or 0.0001 or 0.0000001 or .324789 as well. It is divisible up to 8 decimal places. Which means you can buy Bitcoin with $50 or $500 or $5000 and you will receive an equal amount of Bitcoin in return.
Ie: If Price of Bitcoin = $16,000 USD and you invest $500, then you’ll have .03215 in Bitcoin.
So there you go, anyone can afford Bitcoin.
(When I originally thought to write this post a few months ago, the price was $7000 USD).
Misconception # 2: “It’s not worth anything.”
This one I love. Its just so rich.
Go to any of these three websites and find out what one bitcoin is worth. Value and worth go hand in hand. Value meaning what people are willing to pay for it. RIGHT NOW. People just like you and me are buying Bitcoin for that price right now.
That institutes value. Still not convinced?
Let’s look at the definition of the word:
val·ue
noun
- the regard that something is held to deserve; the importance, worth, or usefulness of something.
synonyms: worth, usefulness, advantage, benefit, gain, profit, good, help, merit, helpfulness, avail;
2. a person’s principles or standards of behavior; one’s judgment of what is important in life.
If you are spending hours a day talking about it, researching it and spending money on it, investing it, and inventing new models for distribution and technology around it… it’s not worthless. It has value.
If you are still not convinced, please fast forward to Misconception #6 now.
That’s right.
Misconception # 3: “It’s a pyramid/ponzi scheme.”
To understand this, you need to understand what a ponzi scheme actually is. (See Netflix Documentary, “Betting On Zero”).
In the first minutes of this great doc it says, “An organization is deemed to be a pyramid scheme, where the primary method of compensation is made through recruiting other people, without providing some form of valuable good or service.”
— Senior Economist at the US FTC.
(A general statement but still a good one.)
No one is recruiting anyone in Bitcoin. Its not possible.
It doesn’t work that way.
People are making thousands to millions of dollars trading Bitcoin in a matter of months. (You know, trading… like the stock market?)
If you go out and buy some Bitcoin right now because you read this article, that’s nice. I make no money from it. But the exchange or person you buy it from, will.
Of course, the founder is someone artificially named Satoshi Nakomoto. But that’s another story.
Misconception # 4: “It’s a scam.”
Something with trillions of dollars in market capitalization, meaning, money available and being used in the market, is not necessarily a scam.
Mortgages could be called a scam since you have to pay all that interest for all those years. But it’s not a scam, is it? No. Its a time tested financial product distributed by agents and banks for over 100 years.
(In 100 years, I’m sure Bitcoin will be too.)
There are of course scams associated with Bitcoin, sure. But they are separate from Bitcoin. For additional info, see points 2, 3 and 6.
Also, there’s this image below that shows Japan made Bitcoin legal tender.
Bitcoin is legal tender in Japan as of April 2017.
Misconception # 5: “I looked for it on my banking exchange platform, but I can’t find it. Where is it?”
Yes… And you wont find it there, yet!
Bitcoin is not a stock. It is a Crypto Currency. One of over a thousand right now.
Although, similar to a stock and the stocks that you would trade on NYSE, NASDAQ and the TSX, it is not a stock. It is its own class, its own currency. Digital Currency.
If anything you would find it on the ‘Forex’ market. Forex is ‘Foreign Exchange’ which a method people use to trade and leverage global currencies against each other for profit. People do it all the time to the tune of $60 Billion dollars a year.
The Big Banks have not yet invented a way to trade Crypto Currency using their platforms. But you can bet they are working on it.
You can however buy it from these three exchanges that are well known, trusted, and deal with millions of dollars (and people) on the daily.
Misconception # 6: “It’s not backed by anything.”
This misconception is a personal favourite as well.
Bitcoin is not backed by anything, except the same thing as fiat money.
What is fiat money? It’s ‘paper money’ that most consider real money. Fiat means fake. It is the term used to describe the paper money which we all use on a daily basis.
Fiat money is not backed by anything. I can’t say for all countries, but Canada and the United States dollars are not backed by anything. (The amount of times I have had this conversation where people still think their currency is backed by gold is in the dozens.)
In the 1960s, both the US president Ronald Raegan and then Canadian Prime Minister took their nation’s money off the gold standard.
Money used to be backed by gold, yes. One day it was and the next day after passing said legislation, it wasn’t. They simply removed it from the Gold Standard and just like that, it was no longer attached to anything.
Therefore, although hard to believe, our paper money system, is worthless. Such as the same for Bitcoin.
Now we trade money for cars, food, gas, etc. So what really holds the value in place?
Our belief in it.
HOWEVER…
Now we begin to ask some good questions…
What makes Bitcoin valuable and worthy?
It is decentralized, transparent, anonymous, digital currency made for the people by the people. It also invented the block chain, which is going to completely change the way we do everything.
But don’t take my word for it, check with this guy who has way more credibility than me.
Misconception # 7: “I heard it was for terrorists.”
Well, I guess one thing we CAN thank the mainstream media for, is that they’re not saying this anymore.
When Bitcoin first came out, this is all the media was saying about it “Its used by terrorists to launder money”. This is one of the strategies the government uses when they don’t want you to know the truth about something.
Funny, because the one country that has invaded the most countries on the planet is… You guessed it!
Enter male chanting voices shouting, “USA! USA! USA!”
“People are afraid of what they don’t understand.” A quote I heard many years ago that always stuck with me.
Nobody understood Bitcoin when it first came out.
People still don’t understand obviously that’s why you’re reading this article. (It’s a credit to you for doing your own homework, by the way).
But no, it’s not just for terrorists. Terrorists may have used Bitcoin, at one point. And they may still be. It was never the intention as shared in the original white paper by Satoshi Nakamoto, but that is possible, but the American government and American media has history of working hand in hand.
And I’ll leave it at that.
Final Notes:
I wanted to clear up the biggest misconceptions that are out there about bitcoin. I hope I’ve done that.
Just a few last points, some things to consider.
What Is Bitcoin?
Bitcoin is:
a) A digital, decentralized currency. The world’s first. First of many.
b) An investment vehicle.
c) A soon to be rare commodity.
d) A powerful tool, that could potentially free the human race.
e) A technology that will go down in history as one of the most disruptive, life changing, globally connecting, essential tools we have ever invented as humans.
I could add on other pieces of important information about Bitcoin but then this article would go on forever.
Instead, if you’d like to learn more, feel free to join our growing Financial Education Club on Facebook or Subscribe to our Newsletter here.
Me?
I personally use bitcoin as an investment vehicle to create wealth for myself and my family, where, I will humbly admit, there wasn’t much before.
Thankfully, over the past 12 years I have invested in Real Estate, Stocks, Gold, Silver, Bitcoin and other Cryptocurrencies. And I am happy to be in this market, and I think you should be too.
I am excited about Bitcoin and Crypto Currency to see how it evolves and becomes a part of our lives in the near future.
But just in case you do decide to go out and buy some…
The # 1 Rule of Investing:
Only invest what you can afford to lose.
The # 2 Rule of Investing:
Do your own research/due diligence. Every investment has risk.
The # 3 Rule of Investing:
Buy Low, Sell High.
This post was originally written in late 2017.
Thanks for reading,
Michael Santonato
