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Welcome to the second article in our new Bitcoin series. Previously, we talked about what a bull run is, and today we’re talking about common misconceptions surrounding Bitcoin.
Bitcoin, being the first ever cryptocurrency, has some pretty serious misconceptions and stigmas attached to it. It has had a rocky introduction to the finance world, it’s true. But that doesn’t mean we can’t debunk some common myths.
1. Isn’t Bitcoin a scam?
Short answer: no. Bitcoin is a digital currency and payment network that exists purely online. Other than centralised services offered by banks or fintechs there is a big difference in how Bitcoin operates: the whole thing lives on a decentralised network secured by cryptography (you may have heard of this as “blockchain”). The beauty of this is that there is no need of a third party or middleman to complete transactions.
The reason people may think of it as a scam could be because it is not run by a bank or government, and in its early days it was used in criminal activity, plus there have been cases of hackers and scammers stealing bitcoins.
This is enough reason for anyone to be sceptical. However, one could argue that cash, which is used around the world, also had a turbulent past (and present) in crime and money laundering - sometimes even from those who supply it to the public!
So no, Bitcoin itself is not a scam, however we must always be on the lookout for hackers, scammers and other online threats like malware (just as you should with real thieves). You can learn how to keep your funds safe here.
2. Isn’t it too late to buy Bitcoin?
Now we’ve got the scam question out the way, this is probably the most common myth: you feel that you are late to the game and that Bitcoin already reached its peak. Well, while we can’t predict the future and also would like to stress again that Bitcoin is a risky investment, it’s pretty clear that Bitcoin is still a very young asset compared to e.g. gold or stocks.
Also, as Bitcoin is well on its way to disrupt physical gold and is increasingly becoming known in the finance world as “digital gold”, we can say: it’s never too late to buy Bitcoin. Keep in mind that the price is volatile and ever-changing. At the time of writing we are entering a bull run, as the price of Bitcoin slowly increases to the former all-time-high of $20k. But this doesn’t mean to say that Bitcoin will stay at $20k, the price could plummet next week or even tomorrow just as quickly. Today’s price is not a reflection of future demand.
To make it clear, it’s definitely not too late to buy Bitcoin. In fact, you might even be a little early to the party. Buying Bitcoin is an investment, ideally a long-term one. A good strategy is to set up a savings plan and invest a small amount like e.g. €50 each month. With this strategy you take out the element of emotion when prices go up and down.
3. Isn’t Bitcoin super risky?
All investments have the element of risk - there is no getting around that fact. You must go into any investment choice with the mindset that you could possibly lose some or even all of your money. However, Bitcoin is over ten years old (a dinosaur asset in crypto years!) and on its way to becoming more and more perceived as digital gold and with similar characteristics to a store of value.
An element of risk is, of course, the possibility of hacks and scams. Most threats regarding security issues, such as hacks, are due to human error rather than computer error. For this reason, you need to have strict safety measures in place, including 2FA, and having a secure wallet (don’t worry, you’ll get one of these when you sign up to a broker) which are used to store the private and public keys needed for all types of transactions. You mustn't lose this key to your wallet, just like you shouldn’t lose your physical wallet with cash or your bank card in it.
So yes, Bitcoin holds risk, just like all investments. It’s an important rule of thumb that you should always only invest what you can afford to lose. Read more about keeping your cryptocurrencies safe in our Bitpanda Academy article.
4. Isn’t it super complicated to buy and hold Bitcoin?
Contrary to what you may think, Bitcoin is as easy as ordering a taxi! At least on Bitpanda it is. It usually only takes a few clicks and there you have it! You can be holding Bitcoin. We have a detailed step-by-step guide on how to buy Bitcoin on Bitpanda here, where we can walk you through it.
We promise you that you don’t need to be an expert or even very tech-savvy. Not to mention you don’t need a lot of money to get started, which brings us to our next point.
5. Isn’t it really expensive to buy Bitcoin?
This depends on the price at the time of buying. But the best thing about it, is that you don't have to buy a whole Bitcoin! I mean, good for you if you can afford to make that investment, but if you don’t have that kind of money lying around, you can actually buy, for example, €25 worth of Bitcoin (which also happens to be the minimum deposit amount on Bitpanda to get you started)!
Investing doesn’t have to be expensive, there are a lot of options for investing on a budget, cost average plans and investment savings accounts. Don’t make the mistake of thinking you need to become rich in order to invest. After all, our vision at Bitpanda is making investing accessible for everyone. So get started today, be patient and stay safe out there!