Bitcoin

<p>In the everyday news, Bitcoin always takes the crown for being on the top of every breaking headline. As such, this is a perfect time to declare several of the most common myths and misconceptions surrounding the world’s first cryptocurrency. Now, let‘s explore whether these beliefs are true.</p><p>Also, if you have ever thought the value of Bitcoin is ‘based on nothing’ or that it is too volatile for real-world use, then this guide is for you. We attempt to demystify the most famous cryptocurrency and separate fact from fiction while acknowledging real risks.<br /></p><img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/c9913615ba9144eda4a1b3619935f097.jpg" /><h2 id="header-0">1. Why Bitcoin Isn’t Another Tulip Mania?</h2><p>One wrong assumption is that <a href="https://margex.com/en/blog/five-craziest-bitcoin-price-predictions-for-2025-will-at-least-one-come-true/" rel="noopener noreferrer nofollow">Bitcoin is just an investment bubble</a>. While some typical traders are looking for lots of worth in Bitcoin trading, this doesn’t imply that Bitcoin is a bubble. The bubbles that we have defined are extravagant market value increases that arise from unsustainable surges in the price of an asset not rising above its fundamental worth.</p><p>Bitcoin is often likened to old bubble traps like the 17th-century Dutch ‘tulip mania.’ Tulip prices in 1637 soared up to 26 times above their original value during six extraordinary months as the craze took hold of the country in intense speculation. Tulip prices had a big bubble that burst and never came back.</p><p>Bitcoin, of course, tells a very different story. It’s been around for 12&#43; years now and has gone through multiple price cycles. Unlike one-time speculative bubbles, this one has rebounded to all-time highs after each decline.</p><p>Bitcoin is like other breakthrough technologies, and it has experienced periods of fast growth and big crashes. For example, tech stocks ballooned in valuation during the dot-com boom of the late 1990s, only to fall like stones. The pattern of this may be how new asset classes, like cryptocurrencies, can be very volatile at first and then stabilize or start to grow for the long run.</p><p>Some important Bitcoin investors say Bitcoin’s market volatility is characteristic of rising markets. Ultimately, they say they expect Bitcoin to relieve its wild price fluctuations over time in more discreet and less elemental cycles until the daily grind finds Bitcoin much more stable. However, this is still a theory and only time will show.</p><h2 id="header-1">2. Is Bitcoin Not Practical?</h2><p>One criticism of Bitcoin is that it potentially can’t be used in any practical, real-world application or for anything other than illegal activity. These two claims are not accurate, however. Across the globe, Bitcoin has repeatedly proven it can be used as a utility-decentralized, peer-to-peer payment method. Institutional investors are increasingly embracing it as a hedge against inflation.</p><p>Collectively, Tesla, Square, and MicroStrategy have invested billions of dollars in Bitcoin to diversify and manage household assets. This is a reminder that Bitcoin is an increasingly legitimate financial instrument.</p><p>Gold is often seen as a stable asset with lower price volatility, but Bitcoin’s volatile price moves present unique risks and opportunities for money-making investors. Bitcoin’s digital nature also makes modern transactions much easier. Unlike gold, Bitcoin is cumbersome to transport and store, as opposed to smooth, efficient global financial dealings.</p><p>However, Bitcoin has been associated too closely with the dark web. But it did an unexpected thing when an early major illicit marketplace was taken off the blockchain — Bitcoin’s value soared and kept going up, showing resilience and a broader utility that made sense.</p><p>It is possible to misuse any currency, but illicit Bitcoin transactions are a negligible part of its volume. A 2019 report revealed that only 2.1 percent of the Bitcoin transactions are criminal. Additionally, Bitcoin’s open blockchain makes it easy to track and likely easier for authorities to monitor illegal activities than traditional financial systems.</p><p>The versatility and expanding use of Bitcoin illustrate its transformational character in personal finance and institutional investment.<br /><br /></p><img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/8d8d0bed3db54a13949b514d4f1eac20.png" /><h2 id="header-2">3. The Truth About Bitcoin’s Value</h2><p>Like almost all modern currencies, Bitcoin is not backed by a physical asset like gold. Bitcoin, however, does not have the mono characteristic of solvency; it is not the only cryptocurrency that does this; the US dollar and most major fiat currencies work without tangible backing.</p><p>The base scenario for this all hinges on Bitcoin’s lack of scarcity, which acts as a strong defense against inflation. Just as fiat currencies are subject to the erosion of their value by fiat, inflation does so with the supply growth of fiat when said fiat is continuously brought into play.</p><h2 id="header-3">Key Factors Driving Bitcoin’s Value</h2><p>The maximum supply of <a href="https://margex.com/en/blog/el-salvadors-bitcoin-returns-spike-as-btc-reaches-new-historic-peaks/" rel="noopener noreferrer nofollow">Bitcoin is capped at 21 million coins</a>, which makes it always scarce by design. Its role in determining its value is that fixed supply.</p><p>Additionally, Bitcoin issuance follows a predictable decline over time. Every ‘halving,’ an event that occurs every four years, reduces the block reward the miners are paid for validating a transaction by 50%.</p><p>By maintaining this systematic reduction of new Bitcoin supply, Bitcoins become available gradually, following the economic law of scarcity. That dynamic helps explain why Bitcoin’s long-term price growth has spanned fractions of a cent in its early days, then over $66,000 as of mid-April 2024.</p><p>This will further bolster Bitcoin’s value with the computational work underpinning its network. Mining is an awesome process, and powerful computers around the world do complex calculations to verify and secure the blockchain.</p><p>Miners are generously rewarded with newly minted Bitcoin for their efforts, and that provides the pool of Bitcoins from which the highest priority work comes, creating a beautiful marriage of utility and incentive that helps secure the network and its value.</p><h2 id="header-4">4. Can a Competitor overtake Bitcoin?</h2><p>Bitcoin is the first truly successful digital currency, and efforts of newer cryptocurrencies, which have developed innovative features or enhancements to overtake it, have not yet been successful.</p><p>Thousands of alternative cryptos have been introduced in the past decade, but Bitcoin is still the largest player. It has the highest market cap, consistently, by such a margin.</p><p>In addition, Bitcoin takes up a significant share of the cryptocurrency market, which amounts to approximately 60 percent, which makes it one of the most recognizable and widely used digital assets. Bitcoin has a “first movers” advantage, and its vision is a decentralized and open financial system.</p><p>That said, the competitive spirit of the crypto space is encouraged. Bitcoin is a distributed network where transactions occur on a global network of miners and nodes instead of a central authority, which means it’s completely decentralized.</p><p>The Bitcoin architecture can be modified with new features, protected from vulnerabilities, or even make the Bitcoin network more functional. Community consensus achieves this process. At least 51 percent of the network participants must propose changes before implementation.</p><p>In 2017 the Segregated Witness (SegWit) upgrade enabled Bitcoin to be more scalable and efficient and demonstrated how this network could be adapted to a new software upgrade.</p><p>Since Bitcoin is open source, developers who haven’t reached a consensus over their proposals have created a ‘hard fork’ creating a new cryptocurrency based on the Bitcoin blockchain. One example of this is Bitcoin Cash. Nevertheless, no competing fork and no version forked from the original Bitcoin has managed to unseat the original Bitcoin.<br /><br /></p><img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/049ab063c9a4495d8d79f0f836ed1eba.png" /><h2 id="header-5">5. Is Bitcoin Investment Still a Gamble?</h2><p>Bitcoin’s history of price fluctuations is well known and indeed marked by significant volatility during the past 10 years just on that basis. That is to say, it’s a young, nascent market. Since its first block creation in 2010, Bitcoin has been increasingly showing long-term value growth, reaching a $1.95 trillion market capitalization by November 2024.</p><p>As the world’s largest cryptocurrency by capitalization, it has been growing at the same time that regulatory frameworks have tightened and institutional interest has risen with major players such as Tesla and hedge funds launching.</p><h2 id="header-6">6. Will Bitcoin Be Banned?</h2><p>This is the misconception that is making people say that “Bitcoin will be banned” this fear is occasioned by the inability of Bitcoins to conform to the existing financial structures in the market. Some governments have imposed bans or restrictions where bitcoin is partly effective since the currency is not fully controlled and regulated centrally due to decentralized networks across the world. The distributed computation nature of the blockchain means that no single entity can govern or discard it. In this case, many governments instead of trying to ban the use of Bitcoin are instead trying to draft legal frameworks that can govern use of the cryptocurrency as it gains more use in the world. Where there are very tough laws against the use of bitcoin, the people resort to P2P networks or DEX to be able to buy and sell Bitcoin. Could there be any hope of banning it when a perfectly scientific, highly systematic product has no borders?</p><h2 id="header-7">The Investment Perspective</h2><p>Rather than games of chance, Bitcoin investment is based on expecting a Bitcoin to appreciate in value based on the bullish trend in its history. While future performance is uncertain, Bitcoin’s decade-long trend points to promising long-term times for investors.</p><p>Dollar-cost averaging is a popular way of addressing Bitcoin’s inevitable volatility — investing a fixed amount at regular intervals, regardless of the market. By taking this approach, you’re going to smooth out any price fluctuations, and when it comes to investing in a volatile asset, this will help smooth out the emotional decision-making we are often prone to do.</p><h2 id="header-8">Declining Volatility</h2><p>Over the last few years, Bitcoin’s volatility has been down. However, a Bloomberg analysis weighing Bitcoin’s current bull market against the 2017 surge shows that the cryptocurrency is already <a href="https://margex.com/en/blog/five-craziest-bitcoin-price-predictions-for-2025-will-at-least-one-come-true/" rel="noopener noreferrer nofollow">proving substantially</a> less volatile. The growth of institutional investors and mainstream adoption of cryptocurrency aid this stabilization.</p><h2 id="header-9">The Impact of Bitcoin Spot ETFs</h2><p>The approval of Bitcoin spot ETFs in the United States earlier this year marked remarkable progress in Bitcoin investment. Bitcoin’s exchange-traded funds offer a regulated and structured route for investing in the asset, alleviating some of the concerns that have been mounted around Bitcoin and that made it feel like a pure gamble.</p><p>The introduction of spot ETFs can potentially attract broader investor horizons among those who value traditional investment vehicles as safer investments. Bitcoin is expected to be further integrated into conventional investment portfolios, helping the latter mature as a financial asset.</p><p>Having transitioned from being high-risk speculative to being ‘on the radar’ to add to your portfolio and within all the famous billionaires who watch and regulate assets, Bitcoin continues to evolve. While these are uncertain, signs of institutional adoption and regulatory clarity are promising for Bitcoin.</p>

The Top 6 Bitcoin Myths that Need to Disclosed

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Margex

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