Seven Misconceptions About Bitcoin: Speculation? Waste of Energy? Too Volatile?

This article is from Fortune magazine and has been translated by Chain Catcher.
The recent surge in Bitcoin has rekindled old fantasies in the media. A recent news piece from Canada's Globe and Mail stated: "The Trouble with Bitcoin: Why the Crypto Boom Can't Last."
It is certain that Bitcoin may polarize opinions. Bitcoin die-hards claim that this cryptocurrency will soon replace gold, all government-backed currencies, and credit cards, crippling the banking system. Aside from a rational boom, this possibility is unlikely to happen at least in the short term. On the other hand, media critics often seriously misunderstand Bitcoin as nothing more than a speculative tool, an environmental disaster, a bubble, or worse.
This makes it almost impossible for investors to conduct an honest and sober analysis of the facts, which is shameful. As a new asset class, investors must do their homework on Bitcoin and carefully consider the risks before getting involved.
Therefore, in this spirit, it is time to fact-check some common misconceptions about Bitcoin:
1: Bitcoin is only used for speculation
This is inaccurate. The Bitcoin network settles transactions worth about $10 billion every day. The average daily transaction volume of Bitcoin is 305,000, not far off from the 550,000 transactions settled daily between Federal Reserve financial institutions via Fedwire.
Some of these transactions represent investment purchases, some may be for speculation, but many others are regular uses, such as remittances, especially in developing countries. For example, according to the World Economic Forum, 32% of people in Nigeria own Bitcoin for peer-to-peer payments. In regimes like Russia and Belarus, Bitcoin is sometimes the only way to fund anti-corruption efforts and protests. This is useful.
2: Bitcoin wastes energy
Bitcoin "miners" use powerful computing power to secure the Bitcoin network. These computers consume a large amount of energy: it is estimated that their usage is equivalent to that of Chile. This leads to energy waste.
The Bitcoin network secures a value of $1 trillion and serves millions of people, including many who cannot access traditional payment networks. Miners often reside in areas with abundant and cheap electricity, which typically means renewable hydropower or geothermal energy.
Today, at least 39% of the Bitcoin mining industry is powered by renewable energy, and this share is rapidly growing. The carbon footprint of Bitcoin is undoubtedly a problem that needs to be addressed. But this does not mean that Bitcoin is a bad idea. On the contrary, the carbon footprint is a challenge to overcome, just like all useful entities.
3: Bitcoin is too volatile to store value
Admittedly, Bitcoin is more volatile than government bonds, but this is not inherently a bad thing. In the 1970s, as gold was officially detached from the monetary system, its price was extremely volatile, rising tenfold over a decade, then falling 60%, and leveling off decades later. The value of gold has continuously risen, with the highest volatility. Sometimes the most volatile assets can yield the best returns, and sometimes they do not. Today's Bitcoin is in a "price discovery" phase, similar to gold in the 1970s, where large fluctuations are common. Nevertheless, due to its volatility, Bitcoin may not be suitable for all investors.
4: Governments will kill Bitcoin
Indeed, in Nigeria, Russia, and Belarus, Bitcoin has been met with indifference from the government. However, in the United States, Canada, and most Western countries, the situation is different. For example, the U.S. Securities and Exchange Commission has taught courses on cryptocurrency at MIT; the Commodity Futures Trading Commission, which regulates commodity markets, is a global innovator in regulating Bitcoin derivatives; and the U.S. Office of the Comptroller of the Currency recently approved banks to provide custody services for Bitcoin. Central banks are most concerned with financial stability. Nothing undermines a $1 trillion Bitcoin market more than some arbitrary, unfounded crackdown.
5: Other cryptocurrencies dilute Bitcoin
Since Bitcoin's launch in 2009, thousands of new cryptocurrencies have been introduced to the market, but they have had no significant impact on Bitcoin's price. This makes sense. When we mine more tin from the earth, does it affect the supply of gold? No, because they are unrelated assets. A related criticism is that the total supply of Bitcoin is not fixed, as Bitcoin can be subdivided into tiny increments. To understand why this is incorrect, think of a pizza instead of Bitcoin: if we cut a pizza into a billion slices, do we have more pizza, less pizza, or the same amount of pizza? We certainly have the same amount.
6: Central Bank Digital Currencies (CBDCs) and corporate currencies will crush Bitcoin
Indeed, many central banks have announced CBDC plans, but few have gone beyond the proof-of-concept stage. The only exception is in China, where the government is eager to launch its own digital currency to better monitor spending and extend its reach beyond its borders.
Corporate digital currencies (also known as stablecoins) will also not threaten Bitcoin. In fact, they may do the opposite. Since 2017, the value of all circulating stablecoins has skyrocketed 40 times, but as more users gradually adapt to digital assets, Bitcoin continues to thrive.
7: "Easy money" is pushing Bitcoin into bubble territory
Indeed, all risk assets have benefited from the loose monetary policies of the Bank of Canada, the Federal Reserve, and elsewhere. With rising bond yields and a shift of funds to stocks of banks, energy companies, and other sectors more sensitive to the economy, some low-yield beneficiaries (including high-flyers in the tech sector like Shopify, Zoom, and Peloton) have experienced fluctuations of over 30%. Bitcoin may follow suit at some point; certainly, it is wise for investors to be cautious about any investment that has grown over 500% in less than a year like Bitcoin. That said, it is worth noting that Bitcoin may benefit from tightening policies if it signals that inflation is accelerating, as many investors view Bitcoin as a hedge against rising consumer prices.
I believe that Bitcoin is undoubtedly a catalyst for innovation and may play a key role in the future of our global financial system. For thousands of years, currency has evolved from shells to clay tablets to precious metals, banknotes, and bank balances, taking steps toward the future. Money is becoming digital. Buying Bitcoin may provide a way to gain access to that future opportunity. However, Bitcoin does not guarantee success and may not be the right investment for everyone; it carries risks and uncertainties like any new paradigm. To understand Bitcoin, start with the facts.