Demystifying Cryptocurrency

It is a norm for human beings to try to come-up with lies, half truths and truths when they are faced with an incomprehensible situation. This results in the creation of myths that distort the truth about something. Cryptocurrency is a relatively new puzzle to many people, its genesis is thought to be around 2009 when Bitcoins where invented; Ethereum followed later. Most of the global population feel lost in darkness when it comes to the mechanics and dynamics of this new digital era creation.

The unfortunate rise to publicity due to the use of cryptocurrency in a myriad of vices, is yet another source of myths. Initially, cryptocurrency was known to be used by human and drug traffickers, money lauders and illegal arms dealers among others. The reason they capitalized on cryptocurrency was that they could exchange and move their ill earned money without governments raising eyebrows. However, this has totally changed! Cryptocurrency business is now fully legit.

Popular Myths about Cryptocurrency

Cryptocurrency Business is Never Regulated

Today, due to the influx of digital assets' sales online, all virtual companies are subject to federal laws. The companies have to be registered and comply with all laws and rules set by the authorities in all locations they operate. We cannot deny that there are rogue cryptocurrency dealers somewhere, but most of the reputable ones are genuinely regulated and registered. It is a requirement that all companies issuing and distributing ledger or blockchain technology oriented securities register with the FIRA (Financial Industry Regulatory Authority) and SEC (Securities Exchange Commission).

You Don't Have to Pay your Cryptocurrency Income Taxes

Despite the fact that the IRS does not recognize cryptocurrency as currency, but rather as a property for tax purposes, they still demand the reporting of capital gains from it. This means that all revenue gained from any cryptocurrency business is taxable. The IRS notice of 2014-21 clearly states that any payments to employees or contractors, made through virtual currencies are subject to Federal Income Tax and payroll tax. These payments made through virtual currencies are also subject to reporting, just like any other form of payments.

You can Abuse Cryptocurrency the Way you Desire

The use of cryptocurrency can hardly be abused. The reason for this is that its use is limited to specific transaction in contrast to legal tender. The reasons that cryptocurrency is not primarily used for daily expenditure include but are not limited to;

i) The currency fluctuates constantly in both value and price thus it would be hard to peg fixed prices for goods.

ii) There is no closed loop economy where members constantly use cryptocurrency for routine expenditures.

iii) There is a higher transacting cost in cryptocurrency such as Bitcoins due to increased demand for blockchain space.

iv) For a transaction to go through it has to be validated by several nodes in the blockchain; this is cumbersome but very secure.

Cryptocurrency Thrives on Anonymity

The myth mongers insist that cryptocurrency leans towards anonymous transacting. What this means is that it is difficult to know the identity of people involved in the trade, implying they could be criminals. Some cryptocurrency platforms allow anonymity to some level through the use of pseudonymous addresses. However, real identities are revealed during purchases. It is also possible to link a person's pseudonym with his name, amount, origin and destination if need be.

The Cryptocurrency Investment Value is Always Increasing

This myth is totally false, for the cryptocurrency market is very volatile. The volatility results due to;

i) Differing perceptions on its actual value.

ii) Fluctuating supply and demand rates due to changing influence from the media.

iii) It's hard to liquidate large amounts of cryptocurrencies without breaking the equilibrium.

iv) The circulating myths make people rush to liquidate their investment thus increasing the ratio of supply to demand. When the supply is larger than the demand prices fall.

You should never believe any of these myths lest you get impoverished both financially and mentally, not to mention getting on the wrong side of the law. Today, cryptocurrency business is a legal investment avenue that is proving to be very profitable. However, caution must be taken not to be scammed by unscrupulous criminals who prey online. You should research thoroughly on the available cryptocurrency companies before making any investments.

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