- Fidelity Digital Assets has published a rebuttal to six “criticisms and misconceptions” about Bitcoin
- These range from Bitcoin’s volatility to its use case and its operational costs
- Fidelity does a good job of arguing against these common misconceptions
Fidelity Digital Assets, the cryptocurrency wing of the Fidelity investment group, has published what it calls a response to “persisting Bitcoin criticisms”. The piece lists seven “criticisms and misconceptions” that Fidelity Digital Assets say “continue to come up in our conversations” regarding Bitcoin. Here we outline each criticism and Fidelity Digital Assets’ response.
Bitcoin Is Too Volatile to Be A Store of Value
Fidelity Digital Assets counters that Bitcoin is an “emerging store of value” and as such its path is “unlikely to be linear.” They argue that the day-to-day volatility “should come down over time”, with the Bitcoin price probably stabilizing in the future as ownership dilutes, leading to the reduced ability of whales to move markets.
Bitcoin Has Failed as A Means of Payment
Fidelity Digital Assets notes that, while Bitcoin is “portable, fungible, and divisible”, it has “limited throughput” which it argues is the trade-off it makes for decentralization. They argue that Bitcoin’s use case is not suited to the ubiquitous coffee shop purchase but is instead better suited to transactions that are “inefficient and/or costly using traditional rails”, such as global settlement.
Bitcoin Is Wasteful
Fidelity Digital Assets admits that it is “undeniable that bitcoin mining does consume energy”, even though estimates on usage vary widely, and the increased use of renewable energy is underreported.
They suggest that those who appreciate what Bitcoin offers the world will consider the energy cost worthwhile, while those who do not will not. There is no simple answer to this, they say, as “Bitcoin would not be able to fulfill its role as a secure, global value transfer and storage system without being costly to mine and maintain.”
Bitcoin Is Used for Illicit Activity
Fidelity Digital Assets likens the criticism of Bitcoin as a tool for criminals to criticizing cash or the internet for their roles in perpetuating criminal enterprises. Bitcoin is not a perpetrator of illegal events, they argue, but is rather a neutral entity that has been used by some for illegal activity.
They also argue that illegal activity involving Bitcoin is reducing year on year, noting various reports including one from the U.S. Treasury Department which stated that Bitcoin’s illegal usage is a drop in the ocean compared to the crime committed through traditional financial services.
Bitcoin Is Not Backed by Anything
Fidelity Digital Assets argue that Bitcoin is backed by code and stakeholder consensus, compared to the “cash flows, industrial utility, or decree” of fiat currencies. They cite the various examples throughout history when a fiat currency has collapsed due to hyperinflation or other mismanagement, something that cannot happen with Bitcoin.
They argue that Bitcoin’s strength lies in its lack of a principal orchestrator, a ruling body that can make decisions on its creation and usage. Some see this as a weakness, but Fidelity Digital Assets see this as its core strength
Bitcoin Will Be Replaced by A Competitor
Fidelity Digital Assets say that, during its 12 years on the planet, no cryptocurrency has come close to eclipsing Bitcoin, for a number of reasons. Other iterations that have sought to “improve it” through, for example, increasing throughput, have sacrificed its “core properties”.
They also argue that in almost every way, Bitcoin is impossible to improve upon, and so it is highly unlikely that a coin will ever come along that improves Bitcoin and gains as much recognition and acceptance as the world’s oldest cryptocurrency.
Fidelity Digital Assets Makes a Good Case
Fidelity Digital Assets have clearly nailed their colors to the mast with this piece, which is in the most part a convincing argument against the criticisms that Bitcoin still faces. Only time will tell if the arguments will be enough to sway the court of popular opinion as Bitcoin increases its exposure to the masses.