Bank bashes Bitcoin: “Slow, impractical and anti-environment” – scolds Bank of America
According to a Bank of America research report, there is “no good reason to own Bitcoin.”
Bitcoin (BTC) is “exceptionally volatile”, “impractical” and extremely harmful to the ecosystem, a Bank of America (BofA) analyst said in a research report.
The report, titled “Bitcoin’s Dirty Little Secrets,” explains that “there’s no good reason to own Bitcoin unless you see prices rise.” And prices rise especially when Bitcoin Circuit large companies gobble up large amounts of Bitcoin. That’s because while the supply and issuance of the cryptocurrency is fixed, the demand for it can fluctuate, causing massive waves in the market.
“Bitcoin is also correlated with risk assets, it is not linked to inflation and remains exceptionally volatile, making it impractical as an asset store or payment mechanism,” the report said.
Indeed, large institutional firms such as Tesla, Square, MicroStrategy, Grayscale and others have bought billions of dollars worth of bitcoin in recent months. These purchases, the analyst said, became the main driving force behind Bitcoin’s ongoing price rally.
“Therefore, the main argument for holding Bitcoin is not diversification, stable returns or inflation protection, but the sheer price appreciation that depends on Bitcoin demand outstripping supply,” the report continues.
The analyst also claims that net inflows of around $93 million are enough to push the bitcoin price up 1%. In comparison, it takes $1.86 billion to similarly move the price of gold.
Not environmentally friendly
Apart from price volatility, bitcoin (go to Plus500 bitcoin buying guide) is also extremely harmful in terms of its impact on the ecosystem, the analyst argues. According to him, the verification of Bitcoin transactions results in the same amount of CO2 emissions as that of the whole of Greece – about 60 tonnes.
“And a fresh influx of $1 billion in Bitcoin can increase CO2 emissions by the equivalent of 1.2 million ICE cars,” the report says, adding, “Since most of the electricity for Bitcoin today comes from coal-fired power plants in Xinjiang, a link between prices, energy demand and CO2 means that Bitcoin is tied to Chinese coal. If prices rise to $1 million, Bitcoin could become the world’s fifth largest emitter, surpassing Japan.”
Bitcoin’s complex infrastructure and high environmental impact also lead to slow transaction speeds, the analyst added. While the blockchain is capable of validating only 14,000 transactions per hour, Visa, for example, can process over 236 million.
Finally, Bitcoin is a highly concentrated asset, with 95% of currently existing coins held by just 2.4% of BTC addresses, the report said.
“In our view, the fact that such a small percentage of Bitcoin accounts hold the majority of BTC in circulation makes this instrument impractical as a payment mechanism or even as an investment vehicle. It can also cause social and governance problems,” the analyst concluded.
Jon Danielsson, a lecturer at the London School of Economics, also argues that Bitcoin and fiat currency cannot co-exist and the concept of BTC as money makes no sense.
Meanwhile, Bitcoin, despite the criticism, continues its triumphant march unabated.