Cryptocurrency’s Reputation And How It’s Changing
Not too long ago if anyone mentioned cryptocurrency in a conversation or suggested being interested in cryptocurrencies, other people would ask questions like these:
“Is cryptocurrency legitimate?”
“Isn’t that something that criminals use?”
“Isn’t cryptocurrency fake?”
It was also not uncommon to hear statements like:
“Cryptocurrency is fraudulent.”
“Cryptocurrency isn’t a real currency.”
“Cryptocurrency is only used for illegal purposes,” and
“Cryptocurrency is a SCAM!”
Although there has been a growing group of cryptocurrency supporters since the invention of bitcoin, the general public and many in traditional finance have been skeptical. This is starting to change, however, as the crypto market grows in size and influence and more people begin to recognize the benefits of cryptocurrencies.
In order to understand how cryptocurrency has been viewed, how it is viewed now, and how it might be viewed in the future, it’s important to analyze the different points made by those who have been or continue to be skeptical. Cryptocurrency’s reputation both historically and currently must be studied if mass adoption of cryptocurrencies is going to have a chance at succeeding.
Historically cryptocurrency’s reputation among the general public has not been great. Even the strongest supporters of bitcoin and other cryptocurrencies wouldn’t disagree that most of the general public has been distrustful and skeptical of cryptocurrencies or indifferent to them. Many people who have changed their opinion have done so only recently.
A study conducted in 2018 found that at the time only 8% of Americans owned cryptocurrencies. The study by finder.com also covered the 92% of Americans who didn’t own cryptocurrencies and asked them why they weren’t buying cryptocurrency, and these were the reasons:
The “it’s a scam”, “it’s too high risk”, and “it’s a bubble” responses are all related to cryptocurrency’s reputation. It’s “a scam” has traditionally been a common response because of cryptocurrency’s reputation as a currency used by scammers. It’s too high risk related to its reputation as an extremely volatile asset as well as its reputation of being a target for hackers. Finally, it’s a bubble related to its reputation of not being a sound investment and the fear that it may end up like the housing bubble of 2007–2008.
Here’s a closer look at some of the reasons that cryptocurrency’s reputation has often been viewed negatively.
Target Of Hackers
For a long time, only major stories related to cryptocurrencies appeared in the mainstream news. As a few hacks of cryptocurrency exchanges took place and a lot of money was lost, naturally these were the types of stories that the mainstream media covered about the cryptocurrency market. This made it appear to people who got their news from mainstream news sources and not cryptocurrency news sources as if the cryptocurrency market was particularly susceptible to hacking, when in reality centralized companies have experienced data breaches and hacks on a way more regular basis.
Since the time of the well-known Mt. Gox hack in which 850,000 bitcoins were stolen, data breaches of centralized databases have occurred on a much more frequent basis. Government hearings have occurred related to centralized data breaches of some of the world’s most recognizable companies. The decentralized nature of blockchain technology and the fact that data on the blockchain is distributed rather than being stored in one place adds an extra layer of security that centralized databases don’t have.
It is inaccurate to brand the crypto market as being a target of hackers, when centralized databases are even less secure. As more members of the general public continue to enter the cryptocurrency market, the benefits of blockchain technology and decentralization have become more widely known, and cryptocurrency’s reputation of being a target of hackers has been modified and has become less of a focus among the general population.
Target Of Scams
The belief among the general public that cryptocurrency is a scam or that specific cryptocurrencies are scams has developed for a few different reasons. One is that due to cryptocurrency’s use in illicit and illegal activities, it has unfairly been connected with them. Another reason is that there have been a number of cases, especially during the ICO craze, where scammers have sold cryptocurrency tokens with the promise of developing an innovative company, only to run off with the funds raised during the token sale.
The most well-known cases of scams like this were OneCoin and BitConnect, although OneCoin was technically not a cryptocurrency and did not operate using a blockchain. It is important to note that scams tend to exist in any operation where money is involved, because there is always someone who tries to get rich quickly by stealing from or taking advantage of other people. This is not unique to digital currencies and people have been victims of scammers trying to gain access to their fiat money as well.
Association With Illegal Activities
Cryptocurrency’s reputation has also been hurt by the fact that it has been used for illegal activities. Cryptocurrency has become the currency of choice for illegal operations due to the fact that it’s secure, criminals don’t need to use their name to access it, and it operates outside of any centralized institution. It has also, until recently, been largely unregulated by governments and still remains largely out of the control of any government, unlike government central bank fiat currencies.
Until it was shut down, bitcoin was known to be used on the Silk Road, an online black market founded in 2011. The Silk Road was best known as a platform where users could buy illegal drugs, with transactions being carried out using bitcoin so that sellers and buyers could remain anonymous. It operated on the dark web as a Tor hidden service, but was shut down by government agents when its founder and operator was identified.
Cryptocurrency’s only true association with anything illegal has been that it was used for illegal transactions due to its status as a secure type of currency that allows users to conduct transactions anonymously. However, all currencies have at some point been used by certain people who are making money by selling illegal products.
The Crypto Market As A Bubble
As cryptocurrency has gained more mass appeal, more people have begun to view it as a legitimate asset class. Additionally, as more institutions have begun adding bitcoin to their balance sheets and viewing cryptocurrencies in a positive light, the public has begun to pay attention and cryptocurrency’s reputation among most people has begun to change. Bitcoin has even been described as a replacement for gold by leaders in traditional finance, signaling its reputation as a great store of value.
The newfound support from more institutions has caused fears among members of the public that the crypto market might be a bubble to diminish.
Cryptocurrency’s Reputation Of Being Too Volatile
It’s true, cryptocurrencies are very volatile. The extreme volatility of cryptocurrencies and their price changes are caused by a variety of factors, but cryptocurrencies are expected to be less volatile over time as more people and institutions enter the market. Investing in cryptocurrencies carries some risk, but so does investing in the stock market or any other type of investment.
Cryptocurrency’s Reputation Is Changing
As more people have entered the cryptocurrency market, cryptocurrencies have begun to be mentioned more often in the mainstream media. The cryptocurrency narrative covered by the mainstream media has also started to change, thanks to increased support of cryptocurrencies from institutions, including from some of the world’s largest financial institutions.
The potential that decentralized finance has to enable a better financial future for people all over the world and the increased popularity of NFTs have also begun to change cryptocurrency’s reputation as more people now recognize the extent of the cryptocurrency market’s impact.
2020 and 2021 have marked a more positive trend for cryptocurrency’s reputation, and this positive trend is likely to continue into 2022 and beyond.
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