This newsletter is sponsored by PHEMEX, the only exchange that I use to trade crypto with leverage. Sign up with the link above and get some free Bitcoin. I really encourage you to check them out - you know that I never endorse a product that I do not use!As Bitcoin continues to climb, the same handful of criticisms linger in the minds of newcomers, preventing the curious from taking the leap of faith into crypto. Fidelity Digital Assets, a trusted researcher and contributor in the crypto space, wrote a detailed piece titled, “Addressing Persisting Bitcoin Criticisms.” I went ahead and condensed their work and added in my own insight to give you the best go-to-guide addressing common Bitcoin criticisms.Criticism #1 - Bitcoin is too volatileIt is true Bitcoin is volatile, but to achieve the status of a global store of value, it will take a lot of up and down movement. As more liquidity is injected into the market in both spot and derivative exchanges, price volatility should continue to decrease historically as the value of Bitcoin increases. The simple fact is that as the market cap grows, whales will have little to no impact on price. Bitcoin hasn’t been any more volatile than current large-cap tech stocks like Tesla or Nvidia. Another perspective for addressing this criticism is to look at gold in the 1970s. Gold’s narrative at the time was unclear when the gold standard was abandoned, and sure enough gold was very volatile. Be proud that Bitcoin is naturally volatile rather than propped up and price infused by greedy bankers. It is on a solo journey to discovery that is guaranteed to be rocky.Criticism #2 - Bitcoin has failed as a means of paymentAgain, there is some truth to this statement, but it fails to address the big picture for Bitcoin. Satoshi Nakamoto, the creator of Bitcoin, did originally intend for Bitcoin to be “a purely peer-to-peer version of electronic cash,” but the functionality of Bitcoin has evolved. Bitcoin has traded a high level of throughput for its best qualities - decentralization, and immutability. If you want a cheap and fast way to transact every day, there are options like stablecoins and Ripple, but they don't offer the decentralization and security that Bitcoin does. When presented with this criticism, this is a good time to tell the person about the role CBDCs will play in the future as a means of payment. It seems way more likely that buying a cup of coffee will be done with a digital dollar created by the government rather than your favorite altcoin. The Fidelity report offered great examples of where Bitcoin is being used as a payment mechanism and furthermore, Bitcoin seems to be becoming a digital gold rather than a digital everyday payment.Criticism #3 - Bitcoin is wastefulThis is probably one of the lesser discussed criticisms of Bitcoin, but still worth considering. Currently, Bitcoin’s carbon output is comparable to New Zealand and its power consumption is comparable to Chile. There are a lot of staggering statistics that raise reasonable concern to environmentalists, but the good news, as pointed out by Fidelity, is that miners are increasingly using eco-friendly hydroelectric power for their operations. A new developing trend is power production companies becoming miners, using their excess electricity rather than wasting it. As Fidelity argues in their report, Bitcoin can’t exist without mining, so from a cost-benefit analysis, the pros of an emerging global currency, far outweigh the costs.Criticism #4 - Bitcoin is used for illicit activity By now you have probably caught onto the fact that there is a sliver of truth in each of these claims. Fidelity frames this concern in the same way it views physical cash and the internet - both are neutral. There are always going to be good and bad people that want to deal in cash and Bitcoin, but that isn't the fault of the currency. The Fidelity report cited statistics that, “over the years, illicit activity has been on a downward spiral and has accounted for 1% of the total transactions.” Just recently, BuzzFeed conducted some investigative work on major banks and found that they were knowingly transacting trillions of dollars’ worth of suspicious money between 1999 and 2017. It can easily be argued big banks are far more criminal than Bitcoin ever has been.Criticism #5 - Bitcoin is not backed by anything It is correct that it isn't backed by the faith in a government, central bankers, or industrial utility. It's backed by something better - code. The code governing Bitcoin is available for anyone to observe and its core design is set in stone. Bitcoin’s entire record exists on a digital ledger, agreed upon by tens of thousands of network participants called nodes. Our very own U.S. dollar, which is backed by the government, has lost over 96% of its value since its inception. Bitcoin’s supply is limited to only 21 million coins. It is this simple fact that makes Bitcoin, in my opinion, the hardest money ever created. IF you ever have doubts, think about the fact that almost a fifth of all U.S dollars ever printed were created this year, just because the FED just felt like it.Criticism #6 - Bitcoin will be replaced by a competitorSome naysayers equate Bitcoin to the MySpace of money. Bitcoin seems unlikely to be replaced anytime soon. Yes, there are flashy altcoins that are offering different qualities that Bitcoin cannot offer, like higher throughput and extreme privacy, but they come at a cost. Institutions are just beginning to explore the digital asset space and they are looking to Bitcoin over any other asset. Fidelity argues that Bitcoin is way ahead of the pack because it is the first mover, has a strong network effect, the largest market cap, the longest history, the most institutional adoption, and the most miners. Bitcoin has become an unstoppable beast, only likely to grown in strength for the foreseeable future. It definitely has a lot more room to grow before I would consider the possibility of it being replaced.Criticism #7 - Bitcoin is too complicatedThis criticism wasn't included in Fidelity’s report, but I believe it to be arguably the most common comment that we hear. Refuting it is simple - SMTP and HTML are very complicated but we don't question their code and protocols - they are just universally accepted. We send emails every day using SMTP, which is arguably more complex than blockchain, and nobody cares because it's the norm. Bitcoin is simple if you make it so. It’s very easy to buy - all it takes is a PayPal or Venmo account. Lastly, when hit with this criticism, diverting to the macroeconomic aspects of Bitcoin like its “store of value” narrative or “hedge against inflation” narrative are far more beneficial to newcomers than getting lost in the weeds of its technicalities. If they are not convinced, the best remedy is time. They can just arrive at the party late.Fidelity does an excellent job of dispelling the myths and criticisms surrounding Bitcoin and cryptocurrencies. Having an institution of their size and stature in our corner is a boon for the entire space. They won't be the last to come around.The full Fidelity Report:https://www.fidelitydigitalassets.com/articles/addressing-bitcoin-criticisms***There are no altcoins charts in this issue, nothing is jumping out to me at the moment and the market is choppy. Let's see what happens when Bitcoin becomes easier to read.What’s In This Issue?Bitcoin Thoughts And AnalysisBitcoin Is Becoming More ValuableSurvivorship BiasCoinbase Files For IPOThreatening Rumors Continue Around Self Custody FreedomHighlights From Interview with Elrond CEO Beniamin Mincu My Recommended Platforms And Tools
The Wolf Den #139 - Fidelity Addresses Criticisms
The Wolf Den #139 - Fidelity Addresses…
The Wolf Den #139 - Fidelity Addresses Criticisms
This newsletter is sponsored by PHEMEX, the only exchange that I use to trade crypto with leverage. Sign up with the link above and get some free Bitcoin. I really encourage you to check them out - you know that I never endorse a product that I do not use!As Bitcoin continues to climb, the same handful of criticisms linger in the minds of newcomers, preventing the curious from taking the leap of faith into crypto. Fidelity Digital Assets, a trusted researcher and contributor in the crypto space, wrote a detailed piece titled, “Addressing Persisting Bitcoin Criticisms.” I went ahead and condensed their work and added in my own insight to give you the best go-to-guide addressing common Bitcoin criticisms.Criticism #1 - Bitcoin is too volatileIt is true Bitcoin is volatile, but to achieve the status of a global store of value, it will take a lot of up and down movement. As more liquidity is injected into the market in both spot and derivative exchanges, price volatility should continue to decrease historically as the value of Bitcoin increases. The simple fact is that as the market cap grows, whales will have little to no impact on price. Bitcoin hasn’t been any more volatile than current large-cap tech stocks like Tesla or Nvidia. Another perspective for addressing this criticism is to look at gold in the 1970s. Gold’s narrative at the time was unclear when the gold standard was abandoned, and sure enough gold was very volatile. Be proud that Bitcoin is naturally volatile rather than propped up and price infused by greedy bankers. It is on a solo journey to discovery that is guaranteed to be rocky.Criticism #2 - Bitcoin has failed as a means of paymentAgain, there is some truth to this statement, but it fails to address the big picture for Bitcoin. Satoshi Nakamoto, the creator of Bitcoin, did originally intend for Bitcoin to be “a purely peer-to-peer version of electronic cash,” but the functionality of Bitcoin has evolved. Bitcoin has traded a high level of throughput for its best qualities - decentralization, and immutability. If you want a cheap and fast way to transact every day, there are options like stablecoins and Ripple, but they don't offer the decentralization and security that Bitcoin does. When presented with this criticism, this is a good time to tell the person about the role CBDCs will play in the future as a means of payment. It seems way more likely that buying a cup of coffee will be done with a digital dollar created by the government rather than your favorite altcoin. The Fidelity report offered great examples of where Bitcoin is being used as a payment mechanism and furthermore, Bitcoin seems to be becoming a digital gold rather than a digital everyday payment.Criticism #3 - Bitcoin is wastefulThis is probably one of the lesser discussed criticisms of Bitcoin, but still worth considering. Currently, Bitcoin’s carbon output is comparable to New Zealand and its power consumption is comparable to Chile. There are a lot of staggering statistics that raise reasonable concern to environmentalists, but the good news, as pointed out by Fidelity, is that miners are increasingly using eco-friendly hydroelectric power for their operations. A new developing trend is power production companies becoming miners, using their excess electricity rather than wasting it. As Fidelity argues in their report, Bitcoin can’t exist without mining, so from a cost-benefit analysis, the pros of an emerging global currency, far outweigh the costs.Criticism #4 - Bitcoin is used for illicit activity By now you have probably caught onto the fact that there is a sliver of truth in each of these claims. Fidelity frames this concern in the same way it views physical cash and the internet - both are neutral. There are always going to be good and bad people that want to deal in cash and Bitcoin, but that isn't the fault of the currency. The Fidelity report cited statistics that, “over the years, illicit activity has been on a downward spiral and has accounted for 1% of the total transactions.” Just recently, BuzzFeed conducted some investigative work on major banks and found that they were knowingly transacting trillions of dollars’ worth of suspicious money between 1999 and 2017. It can easily be argued big banks are far more criminal than Bitcoin ever has been.Criticism #5 - Bitcoin is not backed by anything It is correct that it isn't backed by the faith in a government, central bankers, or industrial utility. It's backed by something better - code. The code governing Bitcoin is available for anyone to observe and its core design is set in stone. Bitcoin’s entire record exists on a digital ledger, agreed upon by tens of thousands of network participants called nodes. Our very own U.S. dollar, which is backed by the government, has lost over 96% of its value since its inception. Bitcoin’s supply is limited to only 21 million coins. It is this simple fact that makes Bitcoin, in my opinion, the hardest money ever created. IF you ever have doubts, think about the fact that almost a fifth of all U.S dollars ever printed were created this year, just because the FED just felt like it.Criticism #6 - Bitcoin will be replaced by a competitorSome naysayers equate Bitcoin to the MySpace of money. Bitcoin seems unlikely to be replaced anytime soon. Yes, there are flashy altcoins that are offering different qualities that Bitcoin cannot offer, like higher throughput and extreme privacy, but they come at a cost. Institutions are just beginning to explore the digital asset space and they are looking to Bitcoin over any other asset. Fidelity argues that Bitcoin is way ahead of the pack because it is the first mover, has a strong network effect, the largest market cap, the longest history, the most institutional adoption, and the most miners. Bitcoin has become an unstoppable beast, only likely to grown in strength for the foreseeable future. It definitely has a lot more room to grow before I would consider the possibility of it being replaced.Criticism #7 - Bitcoin is too complicatedThis criticism wasn't included in Fidelity’s report, but I believe it to be arguably the most common comment that we hear. Refuting it is simple - SMTP and HTML are very complicated but we don't question their code and protocols - they are just universally accepted. We send emails every day using SMTP, which is arguably more complex than blockchain, and nobody cares because it's the norm. Bitcoin is simple if you make it so. It’s very easy to buy - all it takes is a PayPal or Venmo account. Lastly, when hit with this criticism, diverting to the macroeconomic aspects of Bitcoin like its “store of value” narrative or “hedge against inflation” narrative are far more beneficial to newcomers than getting lost in the weeds of its technicalities. If they are not convinced, the best remedy is time. They can just arrive at the party late.Fidelity does an excellent job of dispelling the myths and criticisms surrounding Bitcoin and cryptocurrencies. Having an institution of their size and stature in our corner is a boon for the entire space. They won't be the last to come around.The full Fidelity Report:https://www.fidelitydigitalassets.com/articles/addressing-bitcoin-criticisms***There are no altcoins charts in this issue, nothing is jumping out to me at the moment and the market is choppy. Let's see what happens when Bitcoin becomes easier to read.What’s In This Issue?Bitcoin Thoughts And AnalysisBitcoin Is Becoming More ValuableSurvivorship BiasCoinbase Files For IPOThreatening Rumors Continue Around Self Custody FreedomHighlights From Interview with Elrond CEO Beniamin Mincu My Recommended Platforms And Tools