shehan anthony
Active member
The current rise of Bitcoin has reignited ancient resentment in the media. The Globe and Mail, a Canadian newspaper, recently published an article titled "The Trouble with Bitcoin: Why the Crypto Craze Can't Last."
Bitcoin, to be sure, can be divisive. Bitcoin aficionados believe the cryptocurrency will soon replace gold, all government-backed money, and credit cards, as well as upend the banking system. That is unlikely to happen, at least in the medium term, despite rational exuberance. Media opponents, on the other hand, frequently portray Bitcoin as nothing more than a speculative instrument, an environmental calamity, a bubble, or worse.
This makes an investor's honest, objective assessment of the facts nearly impossible, which is unfortunate. Investors must do their homework on Bitcoin as a new asset class and thoroughly assess the dangers before diving in.
In that spirit, it's past time to debunk a few prevalent Bitcoin misunderstandings:
#1: Bitcoin is only utilized for speculative purposes.
This is incorrect. The Bitcoin network settles almost $10 billion worth of transactions every day. Bitcoin has a daily average of 305,000 transactions, which is not far behind Fedwire, the Federal Reserve's wire transfer settlement system, which has a daily average of 550,000 transactions.
Some of these transactions are investment purchases, and some of them may be for speculation, but many others, particularly in the global South, are for regular use, such as remittances. According to the World Economic Forum, 32% of Nigerians own Bitcoin, which is used for peer-to-peer payments. Bitcoin is sometimes the only method to fund anti-corruption campaigns and protests in governments like Russia and Belarus. That's quite helpful.
#2: Bitcoin is an energy guzzler.
Bitcoin "miners" use massive amounts of computational power to keep the Bitcoin network secure. Those computers consume a lot of energy, according to some estimates, as much as Chile. This has resulted in accusations of energy waste.
Something only "wastes" energy in the eyes of people who believe it serves no beneficial purpose. The Bitcoin network protects $1 trillion in value and provides services to millions of users, many of whom do not have access to traditional payment networks. Miners gravitate to areas with ample and free electricity, which is typically renewable hydroelectric or geothermal sources. Renewable energy now powers at least 39% of Bitcoin mining, and that percentage is steadily increasing. FedEx, TikTok, and the US Department of Defense all consume a lot of energy. Bitcoin's carbon footprint is undeniably a problem that has to be addressed. However, this does not imply that Bitcoin is a bad investment. Rather, the carbon footprint is a problem to overcome in terms of execution, as it is for all kinds of valuable entities.
..you have the ability to turn ANY phone or computer into a crypt0 extraction machine.
Want to see it in action? Watch here
#3: Bitcoin is too volatile to be used as a safe haven.
While Bitcoin is more volatile than, instance, government bonds, this isn't always a bad thing. As gold was formally removed from the monetary system in the 1970s, its price was extraordinarily erratic, soaring 10-fold in a decade before plummeting 60% and remaining flat for decades. Gold was at its most volatile when its value was rising. The most volatile assets have the best returns on occasion, but not always. Bitcoin is currently in a "price discovery" period, comparable to where gold was in the 1970s, with large swings in price. Bitcoin, however, may not be suitable for all investors because to its volatility.
#4: Governments will put a stop to Bitcoin.
Bitcoin does get the cold shoulder from the government in Nigeria, Russia, and Belarus. However, the situation in the United States, Canada, and much of the West is different. The top US securities regulator, for example, taught a cryptocurrency course at MIT; the Commodity Futures Trading Commission, which regulates commodity markets, is a global leader in regulating Bitcoin derivatives; and the US Office of the Comptroller of the Currency recently cleared banks to provide Bitcoin custody services. Above all, central banks are concerned with financial stability. Nothing could destabilize Bitcoin's $1 trillion market more than an arbitrary and unjustified crackdown.
#5: Bitcoin is diluted by other cryptocurrencies.
Thousands of new cryptocurrencies have surfaced since Bitcoin's introduction in 2009, with no discernible impact on Bitcoin's pricing. This is reasonable. Do we affect the supply of gold by extracting more tin from the earth? No, because the assets are unconnected. Another criticism is that the total supply of Bitcoin is not set because it is divisible into tiny increments. Replace Bitcoin with pizza to see why this is incorrect: Do we get more pizza, less pizza, or the same quantity of pizza if we cut a pizza into a billion pieces? Of course, we have the same problem.
#6: Bitcoin will be crushed by central bank digital currencies (CBDCs) and corporate currencies.
It's a big bet to expect governments to be technology innovators. While numerous central banks have proposed CBDC efforts, only a few have progressed beyond proof-of-concept. The only exception is China, where the government is eager to develop its own digital currency in order to have better control over spending and expand its reach beyond its boundaries. That, if anything, is a positive for Bitcoin, as many people would rather not be under the Communist Party's careful eye. Stablecoins, or corporate digital currencies, will not pose a threat to Bitcoin. In fact, they're much than likely to do the exact opposite. Although the value of all stablecoins in circulation has increased by 40 times since 2017, Bitcoin continues to rise in popularity as more people become familiar with digital assets.
#7: 'Easy money' is driving Bitcoin to the brink of a bubble.
All risk assets have profited from the Bank of Canada's, the Federal Reserve's, and other central banks' accommodative interest-rate policies. Some low-rate beneficiaries, such as tech-sector high-fliers like Shopify, Zoom, and Peloton, have corrected 30% or more from their epidemic highs as bond yields have increased and capital flows have moved into more economically sensitive stocks of banks, energy companies, and so on. Bitcoin could follow suit at some point, and investors should exercise caution with any investment whose value has surged by more than 500 percent in less than a year, as Bitcoin's has. However, because many investors regard Bitcoin as a hedge against growing consumer prices, a tightening of monetary policy might help Bitcoin if it suggests faster inflation.
Bitcoin, in my opinion, is a catalyst for innovation and has the potential to become a crucial participant in the future of our global financial system. Money, which has developed from cowrie shells to clay tablets to precious metals, bank notes, and bank balances over millennia, is taking another step forward. Money is becoming increasingly digital. Investing in Bitcoin could be a way to obtain a piece of that future. Bitcoin's success, however, is not guaranteed, and it may not be a good investment for everyone. There are dangers and uncertainties associated with any new paradigm. Start with the basics to grasp Bitcoin.
Bitcoin, to be sure, can be divisive. Bitcoin aficionados believe the cryptocurrency will soon replace gold, all government-backed money, and credit cards, as well as upend the banking system. That is unlikely to happen, at least in the medium term, despite rational exuberance. Media opponents, on the other hand, frequently portray Bitcoin as nothing more than a speculative instrument, an environmental calamity, a bubble, or worse.
This makes an investor's honest, objective assessment of the facts nearly impossible, which is unfortunate. Investors must do their homework on Bitcoin as a new asset class and thoroughly assess the dangers before diving in.
In that spirit, it's past time to debunk a few prevalent Bitcoin misunderstandings:
#1: Bitcoin is only utilized for speculative purposes.
This is incorrect. The Bitcoin network settles almost $10 billion worth of transactions every day. Bitcoin has a daily average of 305,000 transactions, which is not far behind Fedwire, the Federal Reserve's wire transfer settlement system, which has a daily average of 550,000 transactions.
Some of these transactions are investment purchases, and some of them may be for speculation, but many others, particularly in the global South, are for regular use, such as remittances. According to the World Economic Forum, 32% of Nigerians own Bitcoin, which is used for peer-to-peer payments. Bitcoin is sometimes the only method to fund anti-corruption campaigns and protests in governments like Russia and Belarus. That's quite helpful.
#2: Bitcoin is an energy guzzler.
Bitcoin "miners" use massive amounts of computational power to keep the Bitcoin network secure. Those computers consume a lot of energy, according to some estimates, as much as Chile. This has resulted in accusations of energy waste.
Something only "wastes" energy in the eyes of people who believe it serves no beneficial purpose. The Bitcoin network protects $1 trillion in value and provides services to millions of users, many of whom do not have access to traditional payment networks. Miners gravitate to areas with ample and free electricity, which is typically renewable hydroelectric or geothermal sources. Renewable energy now powers at least 39% of Bitcoin mining, and that percentage is steadily increasing. FedEx, TikTok, and the US Department of Defense all consume a lot of energy. Bitcoin's carbon footprint is undeniably a problem that has to be addressed. However, this does not imply that Bitcoin is a bad investment. Rather, the carbon footprint is a problem to overcome in terms of execution, as it is for all kinds of valuable entities.
..you have the ability to turn ANY phone or computer into a crypt0 extraction machine.
Want to see it in action? Watch here
#3: Bitcoin is too volatile to be used as a safe haven.
While Bitcoin is more volatile than, instance, government bonds, this isn't always a bad thing. As gold was formally removed from the monetary system in the 1970s, its price was extraordinarily erratic, soaring 10-fold in a decade before plummeting 60% and remaining flat for decades. Gold was at its most volatile when its value was rising. The most volatile assets have the best returns on occasion, but not always. Bitcoin is currently in a "price discovery" period, comparable to where gold was in the 1970s, with large swings in price. Bitcoin, however, may not be suitable for all investors because to its volatility.
#4: Governments will put a stop to Bitcoin.
Bitcoin does get the cold shoulder from the government in Nigeria, Russia, and Belarus. However, the situation in the United States, Canada, and much of the West is different. The top US securities regulator, for example, taught a cryptocurrency course at MIT; the Commodity Futures Trading Commission, which regulates commodity markets, is a global leader in regulating Bitcoin derivatives; and the US Office of the Comptroller of the Currency recently cleared banks to provide Bitcoin custody services. Above all, central banks are concerned with financial stability. Nothing could destabilize Bitcoin's $1 trillion market more than an arbitrary and unjustified crackdown.
#5: Bitcoin is diluted by other cryptocurrencies.
Thousands of new cryptocurrencies have surfaced since Bitcoin's introduction in 2009, with no discernible impact on Bitcoin's pricing. This is reasonable. Do we affect the supply of gold by extracting more tin from the earth? No, because the assets are unconnected. Another criticism is that the total supply of Bitcoin is not set because it is divisible into tiny increments. Replace Bitcoin with pizza to see why this is incorrect: Do we get more pizza, less pizza, or the same quantity of pizza if we cut a pizza into a billion pieces? Of course, we have the same problem.
#6: Bitcoin will be crushed by central bank digital currencies (CBDCs) and corporate currencies.
It's a big bet to expect governments to be technology innovators. While numerous central banks have proposed CBDC efforts, only a few have progressed beyond proof-of-concept. The only exception is China, where the government is eager to develop its own digital currency in order to have better control over spending and expand its reach beyond its boundaries. That, if anything, is a positive for Bitcoin, as many people would rather not be under the Communist Party's careful eye. Stablecoins, or corporate digital currencies, will not pose a threat to Bitcoin. In fact, they're much than likely to do the exact opposite. Although the value of all stablecoins in circulation has increased by 40 times since 2017, Bitcoin continues to rise in popularity as more people become familiar with digital assets.
#7: 'Easy money' is driving Bitcoin to the brink of a bubble.
All risk assets have profited from the Bank of Canada's, the Federal Reserve's, and other central banks' accommodative interest-rate policies. Some low-rate beneficiaries, such as tech-sector high-fliers like Shopify, Zoom, and Peloton, have corrected 30% or more from their epidemic highs as bond yields have increased and capital flows have moved into more economically sensitive stocks of banks, energy companies, and so on. Bitcoin could follow suit at some point, and investors should exercise caution with any investment whose value has surged by more than 500 percent in less than a year, as Bitcoin's has. However, because many investors regard Bitcoin as a hedge against growing consumer prices, a tightening of monetary policy might help Bitcoin if it suggests faster inflation.
Bitcoin, in my opinion, is a catalyst for innovation and has the potential to become a crucial participant in the future of our global financial system. Money, which has developed from cowrie shells to clay tablets to precious metals, bank notes, and bank balances over millennia, is taking another step forward. Money is becoming increasingly digital. Investing in Bitcoin could be a way to obtain a piece of that future. Bitcoin's success, however, is not guaranteed, and it may not be a good investment for everyone. There are dangers and uncertainties associated with any new paradigm. Start with the basics to grasp Bitcoin.
