Two of the most common arguments against Bitcoin I still hear fiat-proponents claiming is that Bitcoin’s price is “way too volatile” and the currency is “energy-intensive and wasteful” to produce.
So today I come bearing great news for those thinking these arguments make any sense.
Yes, from a certain point of view they might sound appealing. However, they couldn’t be further from the actual facts and truth. Bitcoin, in the medium to long term, will lose most of its volatility percentage-wise, and the amount of power needed to produce one Bitcoin won’t increase exponentially given an increasing number of users, as some analysts have wrongfully predicted.
Let’s start from the beginning.
‘Bitcoin is way too volatile’
"The volatility of Bitcoin has been breathtaking," @SenToomey says at U.S. Senate hearing on crypto and blockchain
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— Bloomberg Crypto (@crypto) October 11, 2018
Do you remember the epic performance of the one and only “Dr Doom”, the guy who missed out on three major Bitcoin bull runs and who keeps fighting for a dying system?
Me too. It was absolutely epic and, of course, full of bogus arguments like “the volatility of Bitcoin has been breathtaking”.
Not that Bitcoin isn’t volatile, because I would be lying if I said it isn’t. However, it is this volatility that sees more and more people enter the cryptocurrency market.
If Bitcoin was still worth $1 today, how many people would be interested? What about $100? Or $1,000?
Price volatility is absolutely needed to bring more people into Bitcoin. That’s just how developing economies work: through generalised greed, FOMO, and FUD.
Do you think for a second anyone needs to explain Bitcoin’s usefulness for someone living under a strict regime like people in Venezuela or Argentina?
Of course, never-ending price volatility eventually destroys a market. I cover some good examples in this piece I wrote last week. They all failed in the same epic way: deflation followed by massive hyperinflation.
If you haven’t guessed by now, I’m referring to all fiat currencies that ever existed. Yes, the same fiat currencies Mr Roubini so strongly defends. It’s interesting how he always fails to mention the more than 5,000 experiments we’ve had with government-backed currencies.
Which all failed, by the way.
‘Bitcoin wastes way too much energy’
"we show that Bitcoin mining is mainly located in global regions where there are large, unused supplies of renewable electricity available…making Bitcoin mining greener than almost every other large-scale industry in the world"https://t.co/n2hqhzqv4h pic.twitter.com/peUdQFnxJK
— Matt Odell (@matt_odell) November 29, 2018
If you search for “Bitcoin electricity” related news, especially from traditional media outlets like Forbes and CNN, you’ll soon find there’s way too many articles complaining how Bitcoin already wastes more energy than countries like Malta, or that it’s already using up to 1% of the world’s energy resources to keep its blockchain alive.
That’s just ridiculous.
Not that Bitcoin doesn’t waste energy, because it does. That is exactly the purpose of the protocol: to make people compete – by wasting electricity – to produce a block.
If there were no real costs to mining, how would Bitcoin be priced? That argument makes no sense at all.
Plus, if one quickly does the math and tries to add the energy requirements of all the banks, financial institutions, auditing firms, and other banking-related industries, one quickly realises there’s considerably more waste in these sectors than in a hyper-focused market like Bitcoin.
Energy is needed to produce work. Work is needed to guarantee decentralisation.
Energy will always be needed to run the world. Spending a hefty sum in actually securing my assets will never be a waste.
‘Bitcoin will never replace fiat currencies’
Bitcoin is already replacing fiat-based currencies. To prove that, one simply needs to look at the price charts of Bitcoin against your local currency.
I’ve used a global chart above showing the weekly volume on LocalBitcoins, a P2P Bitcoin exchange where users transact in person. As you can quite easily spot, the number of people exiting the current financial system and making their way over to a P2P Bitcoin exchange keeps increasing. Volumes usually prove this fact, simply because this type of P2P exchange is mostly used by individuals who can’t exchange fiat currency for Bitcoin on a digital exchange like Coinbase or Kraken – due to geographic location constraints, political environments, or the rule of man.
My point is: people are exiting the current fiat-based system, mostly in countries where USD is hard to come by.
Plus, most Bitcoiners I personally know and with whom I keep weekly correspondence would much rather prefer to receive paychecks in Bitcoin than in euros or pounds. That’s just the way of the world.
Why would you stick to a failing currency when there’s a much better version already available?
I hope I’ve made you think about the arguments against Bitcoin’s adoption, and how they’re usually hiding some flaw underneath their logic.
Don’t forget: Bitcoin is sound money, and sound money has proven to be the best money in the world – like gold.
Disclaimer: This article is an opinion piece by the author and does not necessarily reflect the views of Coin Rivet.