Bitcoin criticism continues to be a hot topic, even though the world has witnessed its exponential growth in value. Despite these challenges, this pioneering cryptocurrency still holds a prominent place in the financial markets.
Do these critical statements against Bitcoin hold any weight? Let’s explore of some of them and we will also provide logical counterarguments.
Additionally, we will also take a look into Bitcoin’s relative slower transaction times as compared to competing cryptocurrencies. While cryptocurrencies such as Solana thrives on speed and Ethereum’s slow network is a cause of concern, it seems the ‘slowness’ of Bitcoin presents no adverse effect on its value.
Environmental Impact
Bitcoin Criticism #1:
Bitcoin mining consumes a significant amount of energy, leading to concerns about its environmental impact. Critics argue that this makes Bitcoin unsustainable in the long run.
Counterargument:
While Bitcoin mining is energy intensive, the industry is increasingly shifting towards renewable energy sources. According to University of Cambridge – 3RD GLOBAL CRYPTOASSET
BENCHMARKING STUDY, researchers at the Cambridge Center of Alternative Finance (CCAF) found that a whooping 62% of global miners relied on hydropower. As for the rest, 38% used coal, and 39% used some combination of wind, solar or geothermal energy.
To be fair, we should also contextualize Bitcoin’s energy consumption within the broader financial system. The traditional banking systems after all require a vast volume of intermediaries that collectively also require high usage of energy.
In relative, Bitcoin’s so-called “intermediaries” are mining computers operating in warehouse that require minimal setup. These mining computers are far fewer than the banks and intermediaries’ computers. Bitcoin’s miners also require minimal manpower to run efficiently but that is certainly not the case for banks housed in big fancy buildings.
Price Volatility
Bitcoin Criticism #2:
Critics often cite Bitcoin’s price volatility as a major drawback. They criticize the asset as unsuitable as a store of value or medium of exchange.
Counterargument:
Bitcoin’s volatility is a characteristic of its status as a nascent asset class. Over time, as market liquidity increases and more institutional investors participate, we can expect to see the volatility to decrease.
For example, the recent approval of Bitcoin ETFs in January 2024 is a significant step towards improving accessibility to Bitcoin for institutional investors. This is a major indication that market players are beginning to regard Bitcoin as a legit asset. In addition, at the time of writing, Bitcoin’s market cap is close to being equal to silver’s market cap.
We should note that silver has been used as a currency and asset for centuries. In relative, Bitcoin has only existed for less than two decades and its market cap is already nearing silver’s market cap! So does not Bitcoin’s rapid acceleration in value indicates that people and institutions are storing up this digital asset? The fact is, Bitcoin has consistently shown a long-term upward trend despite its price fluctuations. Therefore, it is a profitable investment for long term holders.
This pioneering cryptocurrency is also increasingly being regarded as digital gold. This means Bitcoin can be classified as a commodity that is capable of acting as a good hedge against inflation.
We are now witnessing how even advanced countries can be plagued with economic uncertainties and political issues. As these problems persist, we can expect more people to regard Bitcoin as a safe haven as it cannot be manipulated by governments.
Bitcoin (BTC) Price Chart
Used For Illegal Activities
Bitcoin Criticism #3:
Bitcoin’s anonymity has led to its association with illegal activities such as money laundering and drug trafficking.
Counterargument:
Bitcoin criticism as a currency that is used for illegal activities is a valid point. However, its usage for criminal purposes only represents a small fraction of its overall use. In fact, a report by Chainalysis indicates that 2023 saw a significant drop in value received by illicit cryptocurrency addresses.
Ironically, Bitcoin’s blockchain which is transparent and traceable actually makes it easier for law enforcement to track illegal activities. It is wonder why criminals will choose to use Bitcoin for dodgy activities. After all, cash is also widely used for illegal activities but transactions are more difficult to trace. It is thus the movements of huge volumes of cash that need to be more strictly monitored.
Many governments around the world have actually made it easy for people to invest in Bitcoin legally. In the countries where it is legal to hold Bitcoin, there are cryptocurrency exchanges that make it very easy for people to buy Bitcoin or other cryptocurrencies. These exchanges are regulated by their respective governments and they require all their customers to undergo strict KYC (Know-Your-Customer) processes. If you are a customer of these exchanges, you can be assured that all your cryptocurrencies transactions that occur through the exchanges are tracked and monitored. All these measures mean Bitcoin is legal in the eyes of governments and the people.
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No Intrinsic Value
Bitcoin Criticism #4:
Some critics argue that Bitcoin has no intrinsic value since it is not backed by physical assets or government authority.
Counterargument:
Bitcoin’s value is derived from its scarcity, decentralization, and utility. With a capped supply of 21 million coins, the scarcity creates a digital gold-like asset. As for Bitcoin’s decentralized nature, it ensures it is free from government control and censorship. A decentralized currency is regarded by Bitcoiners to be a positive injection into the global economy, simply because many currencies that are controlled by central banks have proven to cause economic crises.
Moreover, Bitcoin’s growing acceptance as a medium of exchange and store of value underscores its practical utility in the financial ecosystem. The very fact that Bitcoin adoption is growing around the world indicates that it holds a value in the minds of consumers.
In plain simple sense, it is ultimately the people who decide what holds value in the market. After all, even the simple minded layman can understand the basic law of supply and demand i.e. if many people demand for something in the market and supply is short, its price will increase.
On the other hand, a product or service that is becoming irrelevant or over-supplied will drop in monetary value. Since Bitcoin has exponentially shot-up in monetary value since its inception in 2009, it is thus clearly a very desirable product in the markets and supply is increasingly running short!
