CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Top 5 Misunderstandings About Cryptocurrencies

By Capital.com News

12:31, 13 November 2018

Crypto is new and exciting. The latest financial offering on the market is packed with potential, however it’s also surrounded by misconceptions that put traders off getting involved.

Here we’ll discover if there’s any truth to the rumours, dispel the myths surrounding cryptocurrency and explore how charts, such as the bitcoin chart, can help you understand which way the market will move.

Myth #1 – It’s just a fad

Although it has been almost a decade since Bitcoin released its White Paper, marking the start of the digital currency age, cryptocurrency hasn’t yet managed to establish itself as mainstream. But that doesn’t mean it’s just a fad.

Across the world more and more countries are establishing regulations for digital assets. Starting with the former Soviet Republic of Belarus, who were the first country to introduce crypto legislation into law, and followed by Malta whose Prime Minister Joseph Muscat believes the new technology is the ‘inevitable future of money’. Crypto is expanding its hold worldwide.

If we turn to the charts, we can see that the bitcoin chart illustrates not only the well-known volatility of the asset but also that it currently appears to be stable.

What is your sentiment on ETH/USD?

3247.37
Bullish
or
Bearish
Vote to see Traders sentiment!

Myth #2 – Crypto is primarily used by criminals

In its early days, cryptocurrencies were often used for illicit transactions on websites such as the Silk Road. However as mainstream adoption progresses, the illicit share of the market will only decrease. This originates from crypto being more anonymous than traditional payment methods. While it is anonymous to an extent, crypto transactions are digital and are also entirely traceable through the relevant ledger, like a digital fingerprint.

Blockchain technology stores transactions in blocks that are built using information from the previous block. In doing so, it creates a transaction history of every previous transaction.

This could be considered more secure than cash transactions, which after being passed from person to person a couple of times become entirely untrackable.

Myth #3 – Getting into crypto is difficult

Wallets, blockchain, Bitcoin, Ethereum, digital contracts – what does it all mean? Many traders looking to get into crypto get too caught up in the details of the new technology and forget to focus on the trading.

If you’re looking to mine bitcoin or another crypto, of course you’ll need the technical know-how to do it. Luckily for you, if you’re just looking to trade the asset, it doesn’t require such computer skills.

Gold

2,154.70 Price
-0.250% 1D Chg, %
Long position overnight fee -0.0188%
Short position overnight fee 0.0106%
Overnight fee time 22:00 (UTC)
Spread 0.30

XRP/USD

0.59 Price
-3.550% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 22:00 (UTC)
Spread 0.01168

US100

17,866.70 Price
-0.600% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 1.8

Oil - Crude

82.20 Price
-0.060% 1D Chg, %
Long position overnight fee 0.0269%
Short position overnight fee -0.0488%
Overnight fee time 22:00 (UTC)
Spread 0.030

To start trading crypto, you can get to know more about it with technical analysis (bitcoin chartethereum chart, etc.) and by reading guides and glossaries to learn the key principles of the market.

Once you’ve understood the basics, trading crypto is very similar to trading any other type of market.

Myth #4 – It’s too late to invest

In December 2017, the bitcoin price soared to highs of $20,000, but since then the crypto bubble seems to have burst, giving way to more tolerable prices around the $6,000 mark.

For those naysayers who believe crypto is kaput, previous market rallies, observed in the bitcoin chart, contradict that fact. In its history, bitcoin has experienced 4 major rallies – in 2011, 2013, 2014 and 2017 – which marked rises in the cryptocurrency’s price following sharp market falls.

If history is to repeat itself, then we can expect bitcoin to rise again. The only question is when.

Myth #5 – You need a lot of money

If we look to the bitcoin chart,and other cryptocurrency charts, we can see that cryptocurrencies can be pricey assets. A single bitcoin sells for around $6,435 (September 2018), for an Ethereum ether you can expect to spend $211, for litecoin $54.

It’s not a cheap market and it is extremely volatile, market price can move enormously within just one day. For some traders, this suits their risk appetite, for others it just proves the instability of the currency.

Yet, there is another way to get in on crypto, without spending such substantial amounts up front. CFDs, contracts for difference, allow traders to add such markets to their portfolio by trading the assets’ price movements – selling when the market goes down, buying as the market rises.

CFD trading uses leverage to amplify exposure to the market, allowing you to access more ‘pricey’ assets like bitcoin. With CFDs, traders never own the actual asset they are trading, so are free to switch between which asset they think will perform best.

The last word

Now you’ve uncovered some of the myths surrounding cryptocurrencies, perhaps you’re ready to start trading and dive into the markets. But be warned, no trading comes without risk. Before you being be sure to do your research and trade wisely.

Markets in this article

BTC/USD
Bitcoin / USD
62877.25 USD
-4400.75 -6.530%
ETH/USD
Ethereum / USD
3247.37 USD
-256.45 -7.310%

Rate this article

Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 580.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading