Bitcoin criticisms

Here I’ll address some of the criticisms brought against Bitcoin. This is not an attempt to claim that Bitcoin is infallible (nobody can predict the future), but rather to debunk some of the common myths perpetrated by its detractors. A section that is yet to be completed and will be added to over time!

Volatility

Bitcoin’s notorious price volatility is often pointed at by those arguing that it is nothing but a risky and speculative asset. The Bitcoin price can indeed vary dramatically in the short and medium term, but what does the trend look like over longer periods of time? The graph below shows Bitcoin’s price since 2011. The logarithmic scale illustrates that despite large fluctuations, price has steadily increased by several orders of magnitude.

Short and medium term price volatility are to be expected in an asset that is young and has relatively little adoption, because big players can more easily influence the price by buying or selling large amounts of the asset. As adoption grows, and, simultaneously, volume is redistributed amongst users (i.e. ownership is not as concentrated amongst big players), volatility is expected to drop. What is clear is that anyone who has ever bought bitcoin and held it for more than 5 years has not lost money, and has likely made multiples of their initial investment. 

On intrinsic value: beauty is in the eye of the beholder

Another argument brought against Bitcoin is that it has no intrinsic value. This statement is often presented in tandem with the fact that bitcoin is not a tangible, physical object. The short answer to this critique is that there is no such thing as intrinsic value. All value is perceived and subjective. In this dispute, Bitcoin is often contrasted to gold. Gold possesses physical qualities which have caused humans to value it historically, but this value comes from humans, not gold itself. If intrinsic value existed and gold had it, then a colourblind alien life form with a telepathic monetary system that landed on Earth might fight us for it, instead of regarding it as a useless grey rock, which they undoubtably would. 

Once we understand that value is not intrinsic, who are those who do not value Bitcoin to judge its value to others? In effect, arguing that Bitcoin has no intrinsic value is similar to saying that a van Gogh has no value, and expecting this to be true for everyone.  

To follow…

  • Criminal use
  • Bitcoin’s energy use
  • Government can shut it down
  • The threat of quantum computing 
  • Bitcoin will cause wealth inequality through concentration in the hand of early adopters
  • Scalability and transaction speed
  • A newer cryptocurrency could easily replace Bitcoin