Bitcoin’s volatility and impracticality coupled with its environmental hazard makes owning the asset similar to owning 60 cars said the researcher
Francisco Blanch, a Bank of America analyst and economist, has taken the hardline stance against cryptocurrencies in a report, calling Bitcoin “exceptionally volatile”, “impractical” and an environmentally disastrous asset that’s useless both as a store of wealth and an inflation hedge.
The Bank of America analyst’s stance is in stark contrast to other traditional banks like Goldman Sachs and JPMorgan which have warmed up to the idea of a crypto economy in the recent years.
To put thing into perspective, it is crucial to note that Blanch controversially asserted that cryptocurrency can handle only 1400 transactions per hour vis-a-vis the 236 million transactions processed by Visa, and is hence impractical.
The analyst contradicted the notion that the fixed supply of 21 million BTC will inevitably drive up the price of the asset over time by pointing out that since Bitcoin’s supply is limited, fluctuating demand is the only thing driving the price. This volatility makes it unfit to function as a safe haven asset, he added.
“As such, the main portfolio argument for holding Bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation, a factor that depends on Bitcoin demand outpacing supply,” the researcher explained.
However, the fact that most investors are concerned with returns and Bitcoin is the best performing asset in the last ten years refutes Blanch’s claim.
The BoA researcher then turned his attention towards the environmental impact of Bitcoin mining, pointing out that Bitcoin has the highest carbon footprint of all human activities in terms of dollar-for-dollar inflows with reports suggesting that that Bitcoin’s energy usage has grown more than 200% in the past two years.
While the crypto community often points out that about 75% of Bitcoin mining uses renewable energy, BoA’s report shows that most of BTC mining occurs in China where more than half of electricity is produced by coal.
“The rising complexity of the system creates ultimately a vicious environmental cycle of rising prices, rising hashpower, rising energy consumption and, ultimately, rising CO2 emissions,” the BoA report stated.
Such perceptions about the negative environmental impact of Bitcoin mining can discourage corporates and climate-conscious shareholders from promoting institutional adoption of cryptocurrencies
Blanch left no criticism unsaid. He noted that about 181 companies faced risks linked to Bitcoin around “money laundering, corruption, bribery, fraud, and breaches of data privacy” and also identified that Central Bank Digital Currencies could pose tremendous long term threats to Bitcoin.