Bitcoin is artificially supported and should not be legalized
In recent quarters, many central banks around the world expressed concern about the adoption of cryptocurrencies and the proliferation of transactions. Bitcoin was born to overcome the weaknesses of the existing monetary and financial systems. For supporters of Bitcoin, this apparent stability indicates that Bitcoin has a chance to take a breather on its way to a new height, and it is more likely to make Bitcoin "insignificant". The following content will answer for you.
1、 Bitcoin is rarely used for legal transactions
In recent quarters, many central banks around the world expressed concern about the adoption of cryptocurrencies and the proliferation of transactions. Shaktikanta Das, governor of the Reserve Bank of India, said earlier in 2022 that cryptocurrencies had no potential value, even "tulips" were not (i.e. the foam of the Dutch tulip market in the 17th century). On December 1, 2022, India just launched the retail digital currency pilot, one of the purposes of which is to protect citizens from the impact of private cryptocurrency fluctuations. Cryptocurrency, however, has many high-profile supporters.
Bitcoin was born to overcome the weaknesses of the existing monetary and financial systems. In 2008, a person with the pseudonym of Nakamoto Cong published this concept. Since then, Bitcoin has been marketed as a "global decentralized digital currency". However, the concept and technical defects of Bitcoin make it questionable as a means of payment - the real Bitcoin transaction is cumbersome, slow and expensive, and Bitcoin has never been used for legitimate real transactions to any extent.
In the mid-2010s, the expectation and judgment that "the value of Bitcoin will inevitably rise to a new high" began to dominate. But Bitcoin is also not suitable for investment. It neither generates cash flow like real estate nor dividends like stocks, nor can it be used for commodity production, nor can it provide social benefits like gold. Therefore, the market valuation of Bitcoin is entirely based on speculation.
Speculative foam depend on the inflow of new capital. Bitcoin has also benefited from waves of new investors. In the first wave of fluctuations, the manipulation of individual exchanges or stable currency suppliers was well documented, but after the foam burst, there were almost no stabilizing factors.
By the end of 2020, some companies will start to promote Bitcoin through corporate funding, and some venture capital companies are still investing heavily. Although the "winter of cryptocurrency" is continuing, as of mid July 2022, the total amount of venture capital in cryptocurrency and blockchain industry has reached 17.9 billion US dollars.
The value of Bitcoin peaked at $69000 in November 2021, and then fell to $17000 in mid June 2022. Since then, the value has fluctuated around $20000. For supporters of Bitcoin, this apparent stability marks a respite on the way to a new height. On the contrary, it is more likely to make Bitcoin "insignificant". It is foreseeable that before FTX goes bankrupt and Bitcoin price is far below 16000 dollars.
2、 Regulation may be misunderstood as approval
Large investors also subsidize lobbyists to sell their ideas to parliamentarians and regulators. In the United States alone, the number of cryptocurrency lobbyists has almost tripled from 115 in 2018 to 320 in 2021. This list sometimes reads like a Who's Who of American regulators.
But lobbying needs a sounding board to have an impact. In fact, legislators sometimes facilitate the inflow of funds by supporting the so-called advantages of Bitcoin and providing the impression that crypto assets are just another type of asset class. However, the risks of encryption assets are undisputed among regulators. In July 2022, the FSB called for effective regulation and supervision of crypto assets and markets commensurate with the risks they pose - following the principle of "same risk, same supervision".
However, in recent years, legislation on cryptographic assets has sometimes been delayed in approval and implementation. In addition, different jurisdictions have not progressed at the same pace and with the same ambition. Although the EU and the crypto asset regulatory market have agreed on a comprehensive regulatory plan, the US Congress and the federal authorities have not yet been able to agree on coherent rules.
The supervision of cryptocurrency is partly caused by misunderstanding - the belief that innovation must be allowed at all costs persists; Since Bitcoin is based on a new technology - distributed ledger technology/blockchain, it should have high transformation potential. However, I want to say that, first of all, these technologies have so far created limited value for society - no matter how much we expect of their future; Secondly, the use of a so-called "promising" technology does not add any additional value to the technology itself.
The traditional financial industry has also been induced to make Bitcoin more accessible to customers. This involves not only insurance companies and banks, but also asset managers and payment service providers. The entry of financial institutions shows small investors that Bitcoin investment is stable.
It is also worth noting that Bitcoin is an unprecedented polluter. First, it consumes energy equivalent to the volume of the whole economy - it is estimated that Bitcoin mining consumes electricity equivalent to Austria every year; Secondly, it will produce mountains of hardware garbage. One Bitcoin transaction consumes the same hardware as two smartphones, and the whole Bitcoin system generates as much electronic waste as the whole Netherlands. The inefficiency of this system is not a "defect", but a "feature". Of course, ensuring the integrity of the fully decentralized system is also one of its characteristics.
3、 Promoting Bitcoin will bring reputation risk to banks
Since Bitcoin seems to be neither suitable as a "payment system" nor a "form of investment", it should not be regarded as the legalization of both in terms of regulation. Similarly, the financial industry should be alert to the long-term damage of promoting Bitcoin investment - although they can make short-term profits. Once Bitcoin investors suffer further losses, the negative impact on customer relations and reputation damage to the entire industry may be huge.
To sum up, Bitcoin is artificially supported and should not be legalized. Bitcoin was born to overcome the weaknesses of the existing monetary and financial systems. For supporters of Bitcoin, this apparent stability indicates that Bitcoin has a chance to take a breather on its way to a new height, and it is more likely to make Bitcoin "insignificant".