Despite how bitcoin is now worth substantially more than when the cryptocurrency initially attracted attention from investors, naysayers exist that assert it’s only a matter of time before it plummets to zero. Some of the associated myths are particularly pervasive.
1. Bitcoin Will Struggle to Remain the Dominant Currency
Some analysts say that although bitcoin reigns supreme in the cryptocurrency market now, that won’t be the case forever. They say that as more cryptocurrencies come on the scene, the likelihood rises that a better one will replace bitcoin, resulting in its plunge to zero.
Why That’s a Myth: Even people who aren’t very familiar with cryptocurrencies have heard of bitcoin. That kind of name recognition imparts trust, particularly among those who are ready to dip their toes in the market for the first time.
Also, when asked how they’d invest $10,000 into cryptocurrencies, 76 percent of millennials said bitcoin would be their option of choice, whereas the next most popular possibilities only received 12 percent of the total votes. That result doesn’t indicate a struggle ahead for bitcoin.
2. Bitcoin Represents a Bubble That Will Burst
Representatives from Capital Economics, a London-based economics research consultancy, are among those that assert bitcoin is a bubble at risk of bursting soon. They say it has “all the hallmarks of a classic speculative bubble,” and that people are buying it only because they expect it to rise in value. If so, a bursting bitcoin bubble could make the cryptocurrency’s value sink to zero.
Why That’s a Myth: Various factors indicate the world is increasingly accepting bitcoin, and not just because investors have gotten themselves into frenzies over its soaring prices. For example, more merchants are accepting bitcoin as a kind of payment, while a growing number of nations view it as a legal tender currency.
3. Poor Economic Conditions Will End the Bitcoin Fad
Some people bank their futures on Bitcoin, even going so far as to take out mortgages on their homes to purchase it or otherwise investing in ways they can’t afford. So, what if global economic conditions become so challenging that people can barely keep themselves fed, let alone invest in bitcoin? That’s an argument individuals might hear about why bitcoin’s price is headed for zero.
Why That’s a Myth: Bitcoin arrived in 2009, and since then, the world’s economies have gone through their share of hard times. The cryptocurrency can handle those temporary slumps, just like the collectible coin industry has done.
People also point out that bitcoin trends won’t necessarily move linearly to the economy. Depending on the circumstances of each crash or recession period, people may decide they’re putting flat currencies aside and want to invest in cryptocurrencies instead. That already occurred in places like China and Cyprus. Bitcoin saw a popularity boost rather than going down.
4. Excessive Energy Consumption Will Be Bitcoin’s Permanent Downfall
Numerous news articles warn how bitcoin mining uses enormous amounts of energy, sometimes as much as entire countries require for a year. The argument is that bitcoin is an extremely energy-intensive currency, making it unsustainable for widespread use, and the massive energy consumption means its value will eventually drop to zero when people realize how much it’s contributing to the Earth’s human-caused issues.
Why That’s a Myth: Research shows that bitcoin only uses one-eighth of the energy data centers use each year, making it less draining on resources than people think. Plus, several bitcoin mining companies are going green by looking at ways to tap into renewable resources. If people continue to be concerned about bitcoin’s energy consumption, this trend will continue.
5. Market Manipulation Will Lead to Artificially Inflated Prices
Economist Nouriel Roubini warned that bitcoin would drop to zero when some people in the market use tactics to prop up prices, and the bitcoin “whales” — those that possess huge amounts of the cryptocurrency — eventually dump their holdings and get out of the market.
Why That’s a Myth: Although there have been some cases of whales selling off large percentages of their holdings, there’s a growing trend of them deciding to store their bitcoins in underground vaults.
One company in Hong Kong that offers such a service reportedly holds nearly $10 billion worth of bitcoin in its vaults. If whales were getting ready to sell, there’d be no reason for them to hold onto their wealth so tightly and fear theft.
Besides, the U.S. Justice Department launched a probe of potential manipulative practices in the bitcoin market. That investigation makes it harder for market manipulators to fly under the radar, reducing the chances they could pull off a stunt that causes bitcoin’s price to go to zero.
Keep Calm and Carry On
It’s easy for people to get caught up in these pervasive myths and ultimately decide to sell their bitcoins or never invest in them at all.
However, the accompanying information that debunks them emphasizes why investors should not get rattled by what they hear, but continue to assess various facets of the market when choosing how much or when to invest.