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Investment giant Fidelity responds to Bitcoin’s main criticisms

  • Pro-crypto investment firm Fidelity have outlined their responses to the main concerns discussed about Bitcoin
  • In the blog post, they offer perspectives in six key areas most commonly debated by market commentators
  • The financial services firm launched their Bitcoin-friendly cryptocurrency trading platform back in October 2018

Debating Bitcoin

After a growth of interest in Bitcoin’s price movements over the past few weeks, billion-dollar investment firm Fidelity Digital Assets have opened a public conversation offering their insights into the truths and falsehoods of the most well-documented flaws of the leading cryptocurrency.


Director of Research for Fidelity, Ria Bhutoria outlined six key areas of common ‘criticism and misconception’ surrounding Bitcoin – including its utility as a currency and environmental impact – answering those statements with a new perspective.


The six statements discussed are as follows:


       “Bitcoin is too volatile to be a store of value.

       Bitcoin has failed as a means of payment.

       Bitcoin is wasteful.

       Bitcoin is used for illicit activity.

       Bitcoin is not backed by anything.

       Bitcoin will be replaced by a competitor.”


Store of Value?


For those who argue that Bitcoin is too volatile and cannot be a store of value, Fidelity defend with the response: “Bitcoin’s volatility is a trade-off for a distortion-free market. True price discovery accompanied by volatility might be preferable to artificial stability if it results in distorted markets that may break down without intervention.”


They also draw parallels to the US gold market in the 1970’s following the abandonment of the gold standard and the consequent volatility. At 11 years old, Bitcoin is still a youthful participant in the economic market and has yet to truly embed itself within the well-established, industrial model. Its potential has yet to be realised, unlike many of its fiat competitors.


Environmental Impact?


Bitcoin’s reliance on large-scale GPU mining spaces to create new value makes it an energy-exhaustive model. Many have doubted the environmental sustainability of the currency, pointing to its status as a mid-level country in terms of carbon footprint and energy output as examples of its failure on the geo-economic front.


To this, Fidelity note that: “Bitcoin’s most valuable features – it’s perfect scarcity, its immutability and its security – are tied directly to real-world resources used in mining.”


They mention the growth in mining operations fuelled by green, renewable energy sources and investments that companies such as En+ Group and Crusoe Energy Systems have made in the sector.


Bitcoin was born into an economic system inherently reliant on greenhouses gases for global production. However, as it establishes itself in the economic landscape, a vision to a more sustainable model is welcomed, including the underlying technology of blockchain.


Fidelity also offer insights within this blog on Bitcoin as a viable payment option, concerns raised about encouraging and/or promoting illegal activities, lack of economic backing, as well as strong market competition.


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