FUD – Fear, Uncertainty and Doubt
Bitcoin FUD has been the most prominent of all the crypto FUD in the cryptocurrency market. Primarily because Bitcoin is the most well-known and talked about crypto thanks to it being the first crypto and the astounding price gains it has had.
In this article we go through a list of the most popular FUD narratives that have been touted and debunk.
Bitcoin FUD on Energy Consumption
The most recent Bitcoin FUD has been about Bitcoin’s energy consumption and how it is going to boil the ocean. It has been around for some time but it just got more attention lately.
However, the good news on that front is that those that are touting this argument against Bitcoin’s energy consumption are not looking at the data. The argument has been debunked in the article 39% Bitcoin energy consumption comes from renewables + more statistics. The statistic below are all covered in that article.
Bitcoin energy use is not linear
An assumption is that Bitcoin energy use is linear, but this is not the case. Just because there is 100 times more demand does not equate to 100 time more energy consumption. In fact Bitcoin’s carbon footprint will decrease by time because of several factors.
Currently mining is what uses 85% of the energy used to power the network. Miners are constantly chasing the best conditions for them to make the most profit. As a result they move to all sorts of places in the world where energy is cheap. This also means places provide cheap renewable energy that would otherwise be wasted.
A lot of people make the assumption that miners use dirty energy sources like coal to power their operations. However this is not the whole story as 76% of miners use a mix of renewables and other energy sources. The drive to make Bitcoin more sustainable will push miners to set up shop in places where they can offset their carbon footprint even more.
Additionally at the moment Bitcoin only uses 8.5% of the energy used by the banking system. True that there are less people using Bitcoin as a means of exchange, but people will adopt it more and more given some time.
Other factors such as the efficiency of mining computers which is exponentially increasing and the fact that by 2035 99% of Bitcoins would have been mined all have an impact on energy.
To sum up Bitcoin is the most energy efficient system that have been invested to date.
China Controls Mining
There is some truth to this in the sense as there are quite a lot of miners based in two provinces in China. However, there are lots of other miners that set up shop in other countries. That is to say mining is not centralised and controlled by China.
Additionally this Bitcoin FUD is going to become even more irrelevant as China is going to get tougher on crypto activities. This is by no means new news since China has been saying this since 2013. However, this time China intends to implement what they are saying and are going after miners.
As a results miners will have to exit China and will go to other jurisdictions that are more friendly. Over time this will become even less of an issue and lead to Bitcoin mining become even more decentralised.
Drugs and Money Laundering
A debunked and buried FUD narrative was of Bitcoin being used for drugs and money laundering. For example this BBC article stated how virtual cash helps cyber-thieves launder money, research suggests.
Whenever there is money involved there will always be some nefarious activity. That is to say Bitcoin and other cryptocurrency would be affected as well, but the problem has been vastly exaggerated.
Certainly most money laundering activities still occur in the legacy banking system. Leaked documents called the FinCEN files have tied wall street banks to possible money laundering.
The banks in question are some of the most prominent such as JPMorgan, HSBC, Deutsche bank and others. They are suspected to have moved trillions of dollars in suspicious transactions for suspected criminals. Consequently banks in the past were fined billions for facilitating money laundering.
The United Nations estimated that money launder activities amounted to 2-5% of global GDP. However they believe this is a conservative estimate and most probably 90% of money launder activity goes undetected.
On the other hand, Bitcoin is transparent and nefarious activity can be easily tracked. As a result researches identified that 55% of money laundering activity comes from 270 wallet addresses in 2020. It was estimated in 2019 that 1.1% of crypto transactions are illicit.
So far Bitcoin has less nefarious activity being conducted with it than in the legacy banking system. The nice thing about it is that the numbers will be monitored more rigorously in future.
Government Bitcoin FUD – They Are Going to Ban It
At the beginning when Bitcoin was still new, governments had a time window of several years when they could have taken action and gotten rid of Bitcoin. Governments needed to co-ordinate together to do so since Bitcoin is decentralised.
However, governments do not coordinate well with each other and at this point it is far too late to ban it. The SEC Commissioner Hester Peirce compared banning bitcoin to shutting down the internet and concluded it is impossible.
Of course governments could always try to ban Bitcoin anyway, but it would be futile. The reality is anyone that has an internet connection could always circumvent the rules one way or another.
Additionally some government officials like Bitcoin and hold it themselves so they would not imagine a world without it. Above all people understand Bitcoin and building crypto related businesses with lots of jobs being created in the sector. Bitcoin and crypto in general are a parallel system to our current banking system and it is becoming entrenched in society.
Bitcoin is Not Backed by Anything
There are quite a few people that have said this argument. The reasoning behind this Bitcoin FUD is that because it is backed by nothing then it is worthless or going to zero.
Subsequently it is even compared to the tulip mania where the prices of tulip bulbs rose sky high during the 1600’s. From start of the mania through to the price bubble bursting and price collapse only lasted a few years. Likewise people with this reasoning expect Bitcoin would do the same.
On the other hand just because something is not backed by anything it does not mean it does not have value. The St. Lousi Fed mentioned that even sovereign currencies like for example the euro, dollar, yen and so on do not have any intrinsic value either. At the end of the day, money derives its value from the demand in the market.
Above all money is partly valued by its limited supply. Like sovereign money, there should never be too much of it, it needs to be scarce so it can retain its value. Bitcoin will only ever have a maximum supply of 21 million coins making it very scarce and desirable.
The concern about quantum computing is that it will become powerful enough to crack the encryption in crypto wallets and blockchains. However quantum computing algorithms can be implemented on the network and wallet funds would need to be moved to an updated wallet address.
The problem is some private keys are lost so quantum computers will be able to get hold of the unmigrated wallet funds. Quantum computers are still far off from being a threat to Bitcoin and blockchain. So far quantum computers are used solely in laboratories and their capabilities are still far from being an existential threat to blockchain.
Bitcoin FUD Conclusion
There has been a long list of other Bitcoin FUD which has not even been mentioned in this article. For example like Bitcoin is a Ponzi scheme, the tether manipulation and that it is a casino game for wall street. All of these have been disproved and are false.
Bitcoin is a store of value that could become a means of exchange. Until then people are having a hard time adjusting and accepting a world that is changing. It does not help them that it is changing at a very fast rate.
Regardless even though there are so many people that push out FUD the is no changing the inevitable that Bitcoin will increasingly become more relevant on the world stage. The Bitcoin FUD can tamper adoption in the short term. However no amount of FUD will be able to stop it in the long term.