FUD or Facts? The Crypto Winter shows the value of asking questions.

Starting a new business can be exciting and tricky, especially in a highly volatile and competitive sector. You need to have the desire, marketing prowess and dedication to stay on track during great and tough times.

Tough periods usually demand more effort in terms of asking the right questions and knowing what works or not. Similarly, the crypto market follows this pattern.

Imagine yourself as a crypto investor who only a few months ago was excited about the prospects of the bullish market. Then the dip came and the narrative changed overnight. Suddenly, your portfolio reduced by more than 50% and there’s fear in the market.

You turn on the TV and surf around the web to reports of skeptics questioning the long-term future of crypto. Instead of getting overwhelmed by the negative reports, the right thing to do is to ask the questions to verify if what you’re getting is the fact or FUD.

Firstly, what’s FUD?

FUD stands for “fear, uncertainty and doubt”. This is a term used by the crypto community to describe falsehoods or exaggerations spread by opponents of cryptocurrencies to scare off investors and the general public.

One of the most infamous examples of FUD was when Elon Musk tweeted against Bitcoin’s high energy consumption which coincided with the news of China’s ban on crypto mining in its country.

With more than 50% of Bitcoin’s mining rigs located in China, this brought the price of Bitcoin down by more than 10% in a few days. It later emerged that more than 70% of the total Bitcoin mining energy was from renewable sources and that the effect of the Chinese crypto mining ban was overstated.

Miners simply moved their equipment to other crypto-tolerant countries and the mining levels of bitcoin increased in the subsequent month. The price of Bitcoin would later recover, which meant that those who sold during this period missed out on potential gains.

With that being said, we’ve decided to explore some of the key questions that have dominated the cryptoverse during the dip. We’ll be categorizing each of them into fact or FUD. Let’s get started.

1. Does the volatility of crypto make it a risky investment?

Crypto’s volatile nature is a topic that has gotten more attention lately due to the dip. Given crypto’s nature, the question is not without controversy. This is because volatility is one reason why crypto is an attractive investment option for many people. During strong market runs, it is not uncommon for tokens to increase multiple folds in a few days.

Conversely, the opposite happens during the dip and your investment could easily turn to zero. A great example, which is not regularly discussed by crypto enthusiasts, is the case of Terra Luna which showed the dark side of crypto.. Therefore the risky nature of crypto is actually a fact and not a fud.

Did you miss out on Terra’s gist? You can get the full story from our previous Breach Daily newsletter episode.

2. Crypto is mostly used by criminals

This is a narrative that has been around since the invention of Bitcoin. There seems to be competition among government officials who regularly claim that crypto is mostly used by criminals for transactions.

These people usually point out that the decentralized and anonymous nature of crypto makes it a perfect tool for criminals to transfer money globally. However, what they fail to say is that crypto transactions are transparent and can be tracked on the blockchain.

This is interesting when you consider that most high-profile money laundering and criminal cases usually involve fiat currencies — e.g. dollars, pounds, euros. This is because physical money is harder to track once it leaves the digital financial system.

Recently, Chainalysis, a crypto analytics firm released a report that revealed that less than 1% of all crypto transactions are fraudulent.

Nevertheless, we can’t deny the fact that there are criminal elements using crypto, however, the percentage is tiny when compared to traditional finance. Therefore, this assertion is a FUD.

3. Should I sell or hold during the dip?

This is one of the biggest questions that has dominated the crypto space in recent weeks. The crypto dip has surpassed initial expectations from crypto experts who thought it would be a temporary dip.

This prompted initial rallying cries from crypto influencers urging their community members to buy the dip and hold. However, the reality is that the crypto market is currently unstable and buying the dip is not the best decision at the moment.

To illustrate, Bitcoin was trading for $60k at some point before its subsequent fall to its current level of $20k. Individuals who bought the dip at different stages are obviously at losses since the market has continued to dip.

Therefore, deciding to sell or hodl during the dip is tricky and one where you need to explore different options. Thankfully, we have an interesting article that explores this question in-depth.

4 What’s the use of crypto beyond investment?

Despite the vast amount of information about crypto on the web, the core reason why many people venture into crypto is the lure of making instant gains from holding crypto. This has led to some skeptics labelling crypto as just an investment tool without valid use cases.

If you’ve been reading Breach’s newsletters, you’ll know this is untrue and that crypto has different applications in real life. The advent of decentralized finance paved the way for crypto to have core applications in financial services such as lending, savings, yield farming and more.

The rise of NFTs took this a step further by highlighting the usefulness of crypto-assets in arts, sports and entertainment. GameFi also generated buzz by enabling users to earn rewards from gaming. Additionally, Move-2-Earn brought about the phenomenon of earning rewards from engaging in physical exercises.

These are only a few examples of the use cases of crypto outside of trading. Therefore, the question that crypto is limited to investment is a FUD.

In conclusion, today’s newsletter has been able to categorize the top questions in crypto into facts or FUD. You should, however, know that some questions still remain such as the impact of regulatory changes, and applications of NFTs which we’ll explore in future episodes.

If you truly enjoyed today’s article and have questions that you need answers to, reply to this email letting us know your thoughts. Also, don’t forget that the best way to learn crypto is to stay informed and share knowledge with those around you. Therefore, we recommend joining the Breach Community to get the best experience with crypto-curious friends.

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