With cryptocurrency breaking the news almost every day, this is the best time to talk about the most common cryptocurrency myths and misconceptions people tend to have.
Chances are, some of these misconceptions about Crypto have hurt your trading / investing or maybe even stopped you from investing altogether. Comment below and let us know your experience!
Many people don’t want to invest in Crypto because they don’t trust the security that protects it, and the majority of people don’t trade Crypto simply because they don’t understand it.
So, let’s break down some of the myths and misconceptions you might have regarding cryptocurrency:
Crypto Myth 1:
Buying Crypto means you own (a share) of something tangible.
Cryptocurrency is not the same as owning a stock. Many people think owning a cryptocurrency is equal to owning a part of that share, just like in stocks… This notion is wrong because buying stock conveys ownership of a piece of a company (backed by the company’s assets and cash flow). In comparison, cryptocurrency is not backed by anything at all in most cases.
If you own cryptocurrency, you don’t own anything tangible; instead, what you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party. So, you can see that owning cryptocurrency is definitively NOT the same as owning stock. Cryptocurrency is a digital currency, so what you actually own is a “private key”.
Crypto Myth 2:
Youtube gurus can help you become “Bitcoin Billionaires”
Hell NO!… they are overnight experts/entertainers. Be very aware of who you allow to be your ‘educator’. Anybody can be easily influenced by Youtubers or influencers, especially if they are still new to Crypto. Have you also been guilty of buying crypto just because it was the ‘trend’ or everybody’s buying it? If you’re still researching about ‘Best Crypto Youtube Channels’ or ‘The Best 5 Crypto YouTube Channels You Want to Watch Daily,’ then STOP!
You must be responsible for your own money and how you handle it. Youtube gurus will not be accountable for your money when you lose it. Instead, invest in real crypto education and knowledge to empower yourself with the skills you need to become a confident, independent trader.
Crypto Myth 3:
HODL’ing is the best way to invest in cryptocurrency
HODL, a misspelling of hold, or more accurately standing for “hold on for dear life”, has become a famous strategy/mantra among discretionary traders and investors. It became a term commonly used that means refusing to sell regardless of the price falling or increasing.
You might be thinking, “What’s wrong with hodling? I’m not losing anything as long as I don’t sell.” Well, it’s wrong because if you bought Bitcoin at $69,000 and it is now $23,000 then like it or not your position is down 67%. The sad reality is many of the cryptocurrencies that people HODL will end up completely worthless.
What’s the solution to hodling? Developing profitable crypto trading systems that get you into cryptocurrencies that are going up, cut your losses quickly (when they are small) and diversifying your portfolio.
Crypto Myth 4:
Dollar-Cost Averaging (DCA’ing) will save you
Dollar-cost averaging means, instead of waiting for the perfect moment to buy a lump sum of Crypto, you would invest specific amounts at regular intervals. The idea is to profit from market downturns without putting too much money at risk.
DCA is meant to help counteract the negative impact of short-term market volatility on an investment and spread-out risk. Best case scenario is if the price of an asset falls while you are dollar-cost averaging, you profit once the price rises again, but there are a lot of downsides to consider…
Firstly, you will lose money in fees because of the frequent transactions you are making on the trading platforms. Secondly, you could purchase following a sharp surge in asset values and face a downward correction afterwards. Lastly, probably the most significant disadvantage of DCA is the risk of missing out on a huge gain that you could have made if you had invested in a single amount when the market was down, and with Crypto being a very fast-moving volatile market, missing a huge rally is inevitable.
Opening a position in one lump sum will provide better results than trickling out smaller amounts over time IF you have a solid strategy and set of rules. So, if you’re looking to reduce your risk, control your emotions, and are concerned about staying safe in volatile market conditions, systematic trading is the answer.
Crypto Myth 5:
More hype = More successful projects
NO! I’ve been on Facebook, and all I encounter is people asking, “what’s the best crypto to buy today?” or “which crypto will go to the moon next?”… Just because everybody is buying it, or because a celebrity endorsed it, doesn’t mean you need to buy it. This is just playing on your FOMO (Fear Of Missing Out)!
Crypto businesses pay influencers/celebrities to boost the value of their digital currencies, aiming to create the kind of online buzz that propelled the likes of Dogecoin, a joke currency based on a meme, to the top of the cryptocurrency market.
With all the hype and the people talking about what trending Crypto to buy, what do you do? The solution is to stop watching the news and stop getting caught up in the hype. Stop caring about the ‘hottest crypto today’ and simply follow your solid systematic crypto trading rules.
Crypto Myth 6:
10’s of thousands of projects will all be successful / change the world
The sad reality is that most new crypto projects will not amount to anything and will disappear completely worthless. All you need to do is look back at the early days of any technology… Automobiles… Planes… Internet etc.
When a new technology is invented, there is always a massive proliferation of companies trying to cash in on the new trend. Just like the initial inceptions developed in the industries above, most cryptocurrencies will fail and have no lasting impact whatsoever. There will be a select few who survive and make a real difference… which ones? Well nobody can predict the future, so you are best to just adopt a profitable crypto trading system instead of trying to predict the winners!
Crypto Myth 7:
Buy Low / Sell High – Buy the dip!!
There’s a huge misconception in the cryptocurrency markets that when the price of a token drops, you should buy more because the price always goes up. The trouble with this reality is that crypto is a very strongly trending market… so a token that is falling is highly likely to keep falling, and a token that is rising is very likely to keep rising.
You have probably seen the meme below. This is what happens to traders who buy the dip without a real trading strategy to back them up – they just throw good money after bad and eventually blow up their account.
You are far more likely to make money if you buy tokens that are trending up and hold them while they continue to rise. Trend following in cryptocurrencies is a brilliant and highly profitable. As is so often the case, doing the opposite of what the herd does is much more profitable!
Crypto Myth 8:
You need high leverage!!
Using borrowed funds to trade cryptocurrencies or other financial assets is referred to as leverage. It increases your purchasing or selling power, allowing you to trade with more money than you have in your crypto wallet. Sounds great doesn’t it, however leverage is a two-edged sword… the more leverage you use the greater your returns MIGHT be, but the higher your risk becomes.
Cryptocurrencies are the most volatile asset class on the planet. This means you don’t need leverage to profit from large moves. In fact, leverage in crypto is probably the biggest reason traders blow up their accounts and lose everything.
You will make far more consistent, reliable and higher profits if you use no leverage and follow a good crypto trading system.
Crypto Myth 9:
You don’t need a stop loss!
Most new traders lose money because they don’t control the size of their losses, that is why stop losses are considered so important. Stop losses address one of the primary causes of trader failure – letting losses grow too large.
After all, if you have a stop loss, it removes any FOMO and takes the pressure off, because you can’t keep holding and hoping as the stop will automatically get you out of your trade. This keeps your losses small and gives you a fighting chance of making money trading crypto.
Crypto Myth 10:
Influencers are trying to ‘help’ you
With the strong influence of social media platforms like Facebook, Tiktok, Twitter, and Instagram, many Influencers are taking advantage of this to promote Crypto. One example was when Kim Kardashian pushed the lesser-known coin EthereumMax to her 276 million Instagram followers in 2021. These crypto ads are everywhere, and your idols can endorse anything!
The bottom line is this… these influencers can never help you with your trading. Cryptocurrency influencers can make money in various ways, ranging from paid sponsorships, early access to crypto projects, and even just by running their own ‘pump and dump’ scams. So, in reality, they are only interested in helping themselves, and are just out to make more money and get more Likes.
The key is to stop believing in these influencers; Follow them for entertainment if you wish but recognise they have no expertise, care, or responsibility over whether you make money and are definitely not where you should be going for financial advice.
Crypto Myth 11:
Technical Analysis can predict the future price.
Technical analysis is trading approach that uses historical data in an attempt to forecast future price movements. The trouble with technical analysis is that it is hugely subjective, takes a lot of time and most traders are just no good at it. Due to technical analysis being so subjective, it is impossible to determine if your analysis will actually be profitable in the long run (it probably won’t!).
If you’re still trading using chart pattern analysis, discretionary analysis, or indicators, it’s time to take the next step into systematic crypto trading. It will reduce the amount of time you spend on your trading and increase consistency. In addition, it will reduce your stress and increase the number of good trades you can find because you can scan the entire market in the blink of an eye once you’ve got the systems set up in your trading software.
If you’re not yet trading systematically and want to learn how, click here to learn how The Crypto Success System can help you get up and running with a portfolio of profitable crypto trading systems in as little as 1-2 weeks!
Crypto Myth 12:
Signals Groups are an excellent way to make money!
Many of these crypto signal groups come from Telegram or Facebook, wherein they announce what Crypto to buy and sell. The crypto signal provider will send you trading tips throughout the day – subsequently telling you what orders to place at your chosen broker.
All of this is just WRONG! You won’t have a clue why they came up with this signal in these groups, as they do not disclose any historical data, charts or even patterns that they are basing their predictions from.
Scam signal groups have been around in the stock market and forex markets for years, then crypto came along and they found a whole new market of suckers. Signal groups just don’t work – no matter how amazing their claims are.
Take control of your own trading with proven, backtested trading systems and never let anyone take advantage of you again.
Crypto Myth 13:
You don’t lose until you sell!!
The belief here is that if you bought bitcoin at $69,000 and it is now $23,000 but you are still holding it you haven’t really made a loss. While you have not made a loss from the Tax Office’s perspective, the reality is your account value is down 67%. THIS IS A LOSS!!!!!!!!!!!
Just because you haven’t realised the loss by selling it does not mean it doesn’t exist. This belief just drives you to keep holding and hoping that it goes back up so you don’t have to bank the loss.
Hope is not a trading strategy… it is a way to the poor house!
This is a risky mindset that goes hand in hand with HODLing (see #4)
If you had sold that crypto token when is first started falling you would have more money now to invest in other tokens that are moving up rather than falling. So not only are you deluding yourself that you haven’t really got a loss (You have), but you are also missing out on the chance to buy other, better investments that are generating real gains!
Never HODL! Trading crypto systematically allows you to let your winners run and cut your losses short, and always be making your money work while keeping it safe.
Crypto Myth 14:
You don’t have to pay taxes on crypto profits.
I often get asked, “Is the income I gain from crypto taxable?” The answer is YES. Even though Cryptocurrency is largely unregulated, it is classified as property by the IRS (and the ATO in Australia… and the tax office in most other countries), and transactions are taxed just like any other property transaction. When you sell, trade, or dispose of crypto in any manner and make a profit, you must pay taxes.
Of course, if you live in an awesome country like Singapore which does not have capital gains tax then it is probably a different story, but unless you are lucky enough to live in a low / zero tax country then you are stuck with paying taxes on your crypto trading profits.
The next time you trade with Crypto or even stocks, always expect that there will be taxes involved. Your broker should have the ability to supply tax reports at the end of financial year for you to easily report your earnings.
Crypto Myth 15:
Crypto is only used for illicit activity.
With Crypto in the trend for the past years, there’s no denying that there are people who think negatively about it. For example, some people believe that Crypto is just used for illicit activities or money laundering.
Although there have been incidences and allegations of cryptocurrency being used in terrorist financing and other nefarious dealings, the reality is that most digital assets are not exploited for illicit purposes. There will always be those trying to take advantage of loopholes in any system, but cryptocurrency transactions with legitimate brokers happen through centralized exchanges which can be traced, and which help to keep Crypto safe and legit.
Crypto Myth 16:
Crypto mining is bad for the environment.
There have been assumptions that crypto mining uses huge amounts of electricity and will cause global temperatures to rise. However, according to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining operations utilize roughly a hundred and twenty terawatt-hours of electricity each year. This figure represents Sweden’s total yearly household power usage.
Because there is no central authority, each cryptocurrency relies on a distributed network of computer users. Each network maintains a record of all transactions involving its money. A new block is made up of a collection of new transactions and each block is recorded in a large database. A blockchain is the collection of data in that virtual ledger… Crypto miners maintain this distributed ledger.
But is crypto mining a bad use of energy? Not necessarily, energy consumption is normal, every household consumes energy just by using our gadgets and basic technology.
Crypto Myth 17:
Cryptocurrencies are all a scam.
There are a lot of cryptocurrency scams, such as fake apps, fake websites, phishing scams, pump and dump schemes, giveaway scams, and the list goes on, but here’s the real deal… not all crypto-related things are scams.
The solution to this mire of ambiguity is to protect yourself from scams by only downloading apps from official platforms. Do your research, ignore cold calls, take control of your crypto trading (go systematic) and don’t get suckered by people approaching you to manage your money for you, promising to give you 3 BTC for every 0.3 BTC you invest or any such garbage. Just trade systematically on a large exchange like Binance or FTX and you should be fine.
Crypto Myth 18:
Everybody is making millions!
Crypto influencers make investing in cryptocurrency seem very easy, and unfortunately, they perpetuate the notion that once you buy Crypto, you become a millionaire overnight. Don’t get me wrong, in the beginning a few people fluked it and made a ton of money but remember:
Nobody has a crystal ball.
Cryptocurrency doesn’t just go up; it just doesn’t work that way.
You can trade/invest in Crypto but keep your expectations in check, you’re not likely to become a millionaire overnight, and ensure that the only money you put in is money you can risk losing.
Crypto Myth 19:
Fundamental analysis is required to make money.
Fundamental analysis assesses an asset’s intrinsic value, it is an objective estimate of its value. The major purpose is to determine if an asset or organization is overpriced or undervalued by examining various internal and external criteria, it then uses that knowledge to enter or exit positions strategically. Realistically, the vast majority of crypto projects have no real value and so any attempt to value them is spurious at best.
Your best bet to make money is to trade with a cryptocurrency trading system that has been backtested on several years of data across a broad range of tokens to ensure it is profitable.
Closely related to the fundamental analysis myth is the notion that “Tokenomics” can be used to assess projects. “Tokenomics” is a phrase that refers to all the aspects of a crypto token that make it desirable to investors. The “Tokenomics” for a specific crypto token are generally detailed in the project whitepaper (most of which are fluff and baseless), but in reality, this is just another attempt to justify taking investor’s money.
Again (yes, I know I am sounding like a broken record) your best bet to make money in cryptocurrency is to buy tokens as they start trending up strongly and hold them until the up-move is finished. The best way to do that is with a cryptocurrency trading system!
Crypto Myth 20:
You need in-depth knowledge of blockchain to make money
It is always advisable to understand how things actually work to a certain degree and not just blindly throw money at it, but as a systematic trader there is no need to have an in-depth knowledge of blockchain to make money in crypto. What you DO need are solid strategies, safe rules, and reputable brokers, and leave the rest to the die-hard crypto enthusiasts (who are likely not making any money trading crypto anyway).
Debunking the myths and misconceptions about Crypto is important help you be open to the REAL and SUBSTANTIAL opportunity you now have by trading cryptocurrencies the right way. Using proven trading strategies that have been rigorously backtested on a large universe of crypto tokens is a HUGE opportunity right now.
You can make money trading crypto systematically regardless of whether the market is going up or down and systematic crypto is a great way to add diversity to your stock portfolio.
Even if you are not trading stocks, Crypto is a great place to kick off your trading journey if you approach it systematically.
If you have more questions or concerns about cryptocurrency, please comment below, and I’ll help you move forward.
If you are ready to start trading cryptocurrencies profitably and consistently, then join The Crypto Success System and discover how much of a game changer a systematic approach to the market is!