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According to Francisco Blanch, a Bank of America analyst, Bitcoin is a “exceptionally risky,” “impractical,” and environmentally catastrophic currency that is worthless as a store of capital or an inflation hedge.
Blanch also said that cryptocurrency is an inefficient mode of payment since it can only accommodate 1,400 transactions per hour, compared to Visa’s 236 million transactions.
The research, which parallels conventional financial institutions’ hardline position against crypto in the past, stands in stark contrast to other major banks, such as Goldman Sachs and JPMorgan, which have since accepted Bitcoin as an asset.
In comparison to the idea that Bitcoin’s limited supply of 21 million will ultimately push price inflation over time, Blanch contends that the price of BTC is determined by supply and demand, arguing that since the supply is fixed, fluctuating demand is the only force driving the price.
Blanch also scoffed at the fact that Bitcoin is a safe haven currency. “Bitcoin has now been associated to risk assets, it is not linked to inflation, and it remains extremely unpredictable, rendering it inefficient as a store of capital or payment mechanism,” the Bank of America researcher said.
“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.”
Given that many investors are primarily interested in returns, Bitcoin’s track record of appreciation as the best performing asset over the last ten years can lead them to dismiss such criticisms.
However, views of Bitcoin’s negative environmental effects could pose a barrier to increased corporate and institutional acceptance, as they contradict the ‘triple bottom line’ accounting that climate-conscious shareholders are increasingly focusing on.
According to the Bank of America, Bitcoin has a larger carbon footprint than any other human enterprise in terms of dollar-for-dollar inflows, with the study stating that Bitcoin’s energy demand has soared more than 200 percent in the last two years and is now equal to the Netherlands, Greece, and the Czech Republic.
While Bitcoiners often quote estimates claiming that between 39 and 76 percent of Bitcoin mining is done with green energy, the BoA study claims that three quarters of BTC mining is done in China, where coal accounts for more than half of all electricity production. Furthermore, it says that half of all Chinese mining takes place in Xinjiang province, where coal accounts for 80% of power production.
(This does not take into consideration the seasonal movement of miners to Sichuan to take advantage of cheap hydroelectric resources during the rainy season.) According to Coinshares, mines in the Sichuan province account for 50 percent to 66 percent of global hashrate.)
According to BoA, increasing costs raise mining difficulties, which in turn raises Bitcoin mining’s carbon footprint.
“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.”
According to BoA, a $1 billion investment in Bitcoin generates the same glasshouse emissions as 1.2 million gasoline-powered vehicles over the span of a year — which means Tesla’s $1.5 billion investment is equal to bringing 1.8 million gasoline-powered cars to the highways per year, weakening the electric car maker’s environmental credibility.
Retail’wholecoiners’ were also singled out for environmental criticism, with the researcher saying that “a single Bitcoin buy at a price of $50,000 has a carbon footprint of 270 tonnes, the equivalent of 60 ICE [petrol] vehicles.”
Blanch did not stop there, noting that 181 firms posed dangers associated with Bitcoin such as “money laundering, abuse, bribery, theft, and violations of data privacy,” and that Central Bank Digital Currencies often pose significant long-term challenges to Bitcoin.
It is important to note that the BoA study represents the viewpoint of a single expert, and views differ across broad organisations. Even at Goldman Sachs, which is mostly pro-Bitcoin, some divisions have made similar critiques of Bitcoin, although others have lauded it as the future.
Its clients may disagree with the study as well. According to Bank of America’s January fund manager poll, going “long Bitcoin” was the “most crowded exchange” of the month.