Editor's note: Don't let the bitcoin skeptics lead you astray...

Bitcoin – the world's oldest and largest cryptocurrency – went on an impressive run in 2017 before plunging more than 80% the following year as cryptos entered a bear market. At the time, many analysts questioned whether bitcoin was truly a viable asset. And we're seeing the same thing happen today...

You see, crypto prices have taken a beating lately. And bitcoin is no exception. But Crypto Capital editor Eric Wade believes the negative narratives surrounding the leading crypto are simply untrue...

In today's Masters Series, originally from the June 21 Crypto Capital issue, Eric recalls the biggest criticisms bitcoin received in the last crypto bear market... explains why you shouldn't buy into those narratives amid today's chaos... and dispels the stigma surrounding the cryptocurrency...

Debunking the Biggest Myths About Bitcoin

By Eric Wade, editor, Crypto Capital

Bitcoin (BTC) has come a long way over the past few years...

You see, traders were dealing with a bear market in 2018. Cryptocurrencies took a lot of heat from pundits and analysts dancing on bitcoin's grave, and many began to view the popular crypto as an unreliable asset to own amid chaos.

Now, we're seeing a similar situation play out. With inflation rising, geopolitical tensions heightened, and the global supply chain in disarray, folks are scared to put their money to work.

But some crypto skeptics still remain from the last time we entered a bear market. So let's take a look at how far we've come since 2018 with some of the biggest bitcoin criticisms...

Bitcoin is not real money.

Many critics of cryptocurrencies are quick to say that bitcoin shouldn't be considered real money. But let's take a look at what money is and why bitcoin meets the criteria today...

The fundamental characteristics an asset must have to be considered money are:

Uniformity: In other words, every unit – be it a dollar, a coin, or a satoshi – is the same as the next one. When you're talking about using seashells or cows as currency, uniformity is hard to achieve.

Divisibility: A currency needs to be divisible (capable of being broken up into small increments to cover a wide range of value transactions). Cows? Not so much, unless you're hosting a barbecue.

Portability: Your currency must be easy to transfer and store.

Durability: Older, agriculturally based forms of money had a shelf life. Gold is the ultimate when it comes to durability. Paper notes deteriorate.

Limited Supply: A currency is worthless if there's no scarcity to it. Just consider the hundred-trillion-dollar note issued by the Zimbabwean government... It's a simple reminder of what ultimately happens when governments try to endlessly print their way to prosperity.

Acceptability: To be considered money, the asset has to be widely accepted. People all over the world will take U.S. dollars. They won't, however, take the Turkish lira, especially after the currency's recent 24-year high 73% inflation rate.

In 2018, bitcoin was missing one of these characteristics – acceptability. But today, it's rapidly excelling in all these areas.

While it's true that countries like China have banned cryptos, other countries like El Salvador and the Central African Republic have adopted bitcoin as an official currency, making it legal tender. Bitcoin can also be held by banks and in retirement accounts.

And the digital element of bitcoin? Well, more than 90% of all money that exists today around the world is not even physical... It's purely digital, existing only on computer servers at the bank. If everybody in the world went to their bank branch, do you think the banks would be able to honor every dollar of deposit with a physical dollar held in a vault? The answer is no.

Bitcoin can be hacked.

In certain circles, bitcoin and cryptocurrencies in general are synonymous with hacking. This is thanks to some high-profile attacks on cryptocurrency exchanges – like Mt. Gox in 2014 or Bithumb in 2017. We've also recently seen smart-contract exploits, like with the Wormhole and Ronin bridges, where hundreds of millions of dollars of value were stolen by hackers.

In an area so nascent, of course there are hackers looking to exploit individuals' inexperience or find technological loopholes. Hackers have always been – and will always be – a risk to ANYTHING where value resides on a computer network.

But bitcoin is one of the most secure assets an individual can own – it's just that the onus is on the individual to secure it themselves.

You see, holding bitcoin and other cryptocurrencies in noncustodial wallets makes them virtually hacker-proof, unless you leave your recovery phrase on your computer or give it away to someone online. With a self-custody wallet, such as a hardware wallet like Ledger or Trezor, you're the only one who has access to your recovery phrase – and your funds.

Centralized cryptocurrency exchanges have been hacked. They are third-party custodial platforms where you have no visibility as to how your digital assets are being secured. That's why it's ideal to have self-custody of digital assets. When your assets are on an exchange, you're relying on a third party to secure them. And there is often no recourse if they are hacked.

Similarly, decentralized applications and bridges can be hacked or exploited. These platforms run on smart contracts whose security lays in the hands of the developers who write them. Although many of these contracts are open-source and audited, they still carry the risk of human error.

At least with crypto, you can take full personal control and accountability for securing it yourself.

Bitcoin is used by criminals.

The suggestion that bitcoin's core use is for buying drugs and extortion is nothing new – and it's part of the media's ongoing narrative. It's understandable.

After all, there have been recent ransomware hacks and virus attacks that demand users pay a small ransom in bitcoin to unlock their computers. And who can forget the FBI's 2013 takedown of Silk Road?

Silk Road was an online marketplace used to sell illegal drugs, dirty pictures, and stolen plastic. These criminals thought that because bitcoin operated independently of the U.S. government, their activity couldn't be traced. But they were proved wrong once the government shut Silk Road down and made an example of this illegal marketplace. You see, it turns out bitcoin is nowhere near as anonymous and untraceable as cash.

Bitcoin is pseudonymous. A bitcoin address can be tied to a particular user. You may not know who that user is, but that user has an identity. Think of it like a username on a website. You may not know who's behind it, but that username is tied to a particular person – and their actions are tied to that username.

The whole point about bitcoin is that it's transparent. Every transaction is recorded on the blockchain and visible to everyone.

So yes, bitcoin has been a method of payment used by some criminals in the past. But a 2022 report from Chainalysis found that just 0.15% of all cryptocurrency transactions performed in 2021 were used in illegal activities like money laundering, cybercrime, and terrorist financing.

Bitcoin is not regulated.

A lot of people are worried about bitcoin because the government hasn't come out with an official policy about how it should be run.

As a Forbes article warned, "There is no 'good faith and credit' of the government standing behind the currency."

But think about it... does a government's promise that something is "money" protect its value? The U.S. dollar can be printed at will... and only has value because the government says so.

Plus, more regulation is quickly being established. President Joe Biden signed an executive order in March requiring government agencies to research the benefits and risks of cryptocurrencies to come up with a regulatory framework for cryptos moving forward.

Meanwhile, the U.S. Securities and Exchange Commission recently approved an exchange-traded fund ("ETF") to track the price of bitcoin for the first time. The ETF doesn't hold physical bitcoin itself, but it's still a good start for more institutional and mainstream adoption.

But what about the rest of the world?

Last year, China announced a ban on bitcoin mining operations and all cryptocurrencies. But even with China's official ban on cryptos, the cat's already out of the bag. Bitcoin doesn't answer to any government. There is no bitcoin head office, CEO, or board of directors.

And bitcoin mining is still going strong in China. Before the ban, the Cambridge University Centre for Alternative Finance showed that China made up around 34.3% of the world's hash rate for bitcoin mining. One month after the ban, China's bitcoin mining fell to 0%. But it rose back to 22.3% just two months later.

Today, it stands at around 21.11%. So more than one-fifth of bitcoin mining comes from a country where it's banned.

China isn't the only country to "ban" bitcoin. Morocco, Egypt, and Bangladesh all have bans on the crypto. But it's estimated that Morocco is currently leading bitcoin trading in North Africa, Egypt has around 2 million investors in cryptocurrencies, and Bangladesh's finance minister recently highlighted the need for virtual currencies because of rising e-commerce in the country.

Other undecided countries, like India, have shown mixed feelings on crypto adoption. In April, Coinbase announced the integration of India's popular payments system UPI (which stands for "Unified Payments Interface").

But just three days after the announcement, Coinbase was forced to suspend all crypto payment systems in India by the National Payments Corporation of India. Despite that, 15 million to 20 million investors in India have accumulated around $5.3 billion in crypto over the past five years.

In short, there's no incentive for any major economy to "ban" bitcoin. Any governments that ban it are simply saying, "We don't want innovation, technology jobs, new companies, or enterprise in general." That's why governments around the world are racing to craft favorable regulations to lead bitcoin innovation.

Bitcoin is too volatile to invest in.

Most people look at bitcoin's daily price changes and write it off simply because it's more volatile than your typical blue-chip stock. But it has still delivered better risk-adjusted returns than stocks, bonds, gold, and real estate since 2013.

Plus, the crypto industry is building an impressive array of tools designed to let some investors reduce their exposure to volatility while allowing other investors to capture the value of that volatility and profit from it.

For example, Stake DAO and Ribbon Finance offer ways to passively sell put and call options against bitcoin and other cryptos, harvesting the premiums of those options weekly.

And Beta Finance offers decentralized bitcoin shorting for investors with a bigger risk appetite.

And the Crypto Volatility Index ("CVI") allows investors to profit from volatility or hedge a portfolio against it by correctly timing a trade buying or shorting the index.

Investors are waking up to the potential the CVI offers... There has been nearly $200 million in combined volatility-trading activity on the platform's Ethereum (ETH) and Polygon (MATIC) apps.

So unlike 2018, investors now have numerous ways to manage volatility.

Even though the recent sell-off might seem similar to 2018, we're in a different situation today. Bitcoin is more mainstream. We've seen everything from Super Bowl commercials to adoption by nations, states, and cities. Plus, lawmakers and regulators around the world are racing to craft laws for bitcoin development while protecting the coming wave of new investors.

This has all contributed to a higher number of people who refuse to sell their bitcoin no matter what the market throws at them.

Look at these two statistics from Glassnode Studio's HODL Waves depicting what percentage of bitcoin has been held for more than a year, through soaring rallies and crushing sell-offs:

Even after the dramatic selling in 2018, nearly half of bitcoin out there never changed hands. In 2022, that figure is significantly higher... Nearly two-thirds of bitcoin hasn't changed hands. Yes, the prices are down... But fewer bitcoin are in the hands of people willing to sell.

So we don't expect to see a bunch of investors give up this time around. The risk of getting out and not being able to buy back in is growing.

And don't forget that historically, selling bitcoin after short-term volatility has meant missing out on massive long-term gains.

For example, look at this chart from April 2021 to November 2021...

The price of bitcoin fell more than 50% in just three months, before rallying back to an all-time high of $69,000 in November.

That's why in the coming months, we'll be looking for opportunities to take advantage of these low prices and the inevitable rally to come.

We believe bitcoin is, and will likely remain, the king of cryptocurrencies for the foreseeable future. So if you believe in the success of cryptocurrencies, you believe in the success of bitcoin.

Good investing,

Eric Wade

Editor's note: If you're looking for more details about how to take advantage of today's volatility, be sure to check out Eric's research...

Eric has helped subscribers earn returns of 100% to 5,000% 60 different times since the beginning of 2020. And one of Eric's subscribers even shared with us how he used Eric's strategy to turn his last $50,000 into a $54 million fortune... Get the details here.