Bitcoin FUD: 6 common arguments from BTC skeptics during bull markets

I have been observing and participating in the cryptocurrency market for over a decade now, and through all the ups and downs, one thing remains constant – the FUD (Fear, Uncertainty, and Doubt) surrounding Bitcoin. As someone who has seen Bitcoin survive crises like Mt. Gox, the Silk Road shutdown, the Chinese mining ban, and the Bitcoin Cash civil war, I can confidently say that it is not only resilient but also a game-changer.

The FUD around Tether’s stability, for instance, seems to be a recurring theme in the crypto world. While it’s essential to maintain transparency and ensure the integrity of stablecoins like USDT, it’s important not to let fear overshadow the potential benefits they bring to the table. After all, even if Tether were to collapse one day, Bitcoin would survive – it has proven its mettle time and again.

On a lighter note, I remember when people thought the internet was just a passing fad. Today, we can’t imagine life without it. Similarly, while the FUD surrounding Bitcoin may seem daunting at times, I believe that in the future, we will look back at these moments as mere speed bumps on the road to a more decentralized and secure financial system. So, let’s not be too hard on ourselves or the technology – after all, even a quantum computer can’t crack a joke like this: “Why don’t quantum computers ever get lost? Because they always know where they qubit!

From the moment it was first introduced, Bitcoin has continuously encountered fierce resistance, often driven by apprehension, ambiguity, and skepticism, which we can collectively refer to as “FUD”. Critics frequently dismiss Bitcoin as unstable, environmentally unsound, or a means for illegal activities.

These stories reappear in every surge of Bitcoin (BTC), sometimes causing hesitation among new investors. As Dan Held, a well-known Bitcoin supporter, stated, “Critics attempt to justify their missed opportunity by fabricating reasons for its potential failure through ‘Fear, Uncertainty, and Doubt’.” However, how valid are these objections?

As a researcher, I’ve observed an interesting evolution in the perception of Bitcoin. Initially viewed as a fringe endeavor, it has since gained acceptance among financial institutions, investors, and even political figures. However, skepticism remains prevalent, with detractors voicing concerns about its inherent value, energy usage, and societal impact.

Here are a few FUD narratives that pop up whenever Bitcoin is doing well.

Bitcoin has no intrinsic value

Notable investors such as Warren Buffett and the late Charlie Munger have consistently voiced their criticism towards Bitcoin.

Legendarily, Buffett referred to Bitcoin as “toxic rat bait squared,” expressing his view that it holds no inherent worth because it doesn’t produce income or returns in the form of dividends. Similarly, Munger shared these opinions, labeling Bitcoin as “revolting” and characterizing its growth as detrimental to the well-being of society.

“I hate the Bitcoin success,” said Munger.

Bitcoin, initially introduced in 2008, has significantly increased in worth over the years, becoming one of the top-performing assets during the past ten years.

He contested the point by stating that it is inconsistent to critique Bitcoin for lacking inherent worth when, in fact, their main government-issued currency also possesses no inherent value.

On Jan. 10, 2018, economists Aleksander Berentsen and Fabian Schär wrote in a Federal Reserve review article:

“Bitcoin is not the only currency that has no intrinsic value. State monopoly currencies, such as the US dollar, the euro, and the Swiss franc, have no intrinsic value either.”

According to the research, “The past of state-controlled currencies has been characterized by extreme price fluctuations and collapses… This is why decentralized digital currencies serve as a beneficial innovation within the current monetary structure.

The inherent worth of a specific item is not concrete, as it is influenced by people’s opinions. What gives Bitcoin its value are its scarcity, usefulness, and advanced technology.

Bitcoin is limited to a maximum supply of 21 million units, making it similar to gold and giving it the label “digital gold.” Its scarcity, created intentionally, has been emphasized by institutional interest, including Bitcoin ETFs, further establishing it as a reliable store of value.

Bitcoin is just tulip mania

The swift increase in Bitcoin’s value has led numerous individuals to draw parallels between it and historical financial bubbles such as the dot-com bubble and the Dutch tulip craze from the 17th century.

As an analyst, I firmly dispute the comparison between Bitcoin and tulips. Instead, I argue that it serves as the most advanced digital form of value storage the world has ever witnessed. It offers a means to securely store value that is difficult to confiscate or transfer without authorization.

2017 saw the CEO of JPMorgan, Jamie Dimon, strongly denounce Bitcoin as a “fraud.” The following year, he went on to describe it as being even less valuable than tulip bulbs.

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Since then, he’s clarified his statements and softened some of his criticisms. In a JPMorgan earnings discussion held in 2021, Dimon stated that “trends usually don’t persist for 12 years.

In May 2024, it was reported that JPMorgan made investments in Bitcoin via Bitcoin Spot Exchange-Traded Funds (ETFs), and furthermore, developed their own digital currency known as JPM Coin.

From its inception, Bitcoin has shown persistent growth patterns characterized by periodic fluctuations. In contrast to well-known financial bubbles, it hasn’t suffered a devastating crash that irreversibly diminished its value.

Bitcoin is a tool for money laundering

As an analyst, I often find myself confronting the criticism that Bitcoin serves as a conduit for illicit activities. Notably, U.S. Senator Elizabeth Warren has branded Bitcoin as primarily a means for money laundering and advocated for increased regulatory measures to tighten control over digital assets.

In contrast, the Bitcoin blockchain operates with complete transparency, which makes it simpler to track illegal activities compared to using physical cash.

At first, lawbreakers viewed it as a powerful means to conceal their illicit actions, but soon discovered that relying on transparent blockchain technology might not provide the desired anonymity. Bitcoin’s nature is pseudonymous; accounts can remain anonymous, but if linked to an identity, its transaction history and financial activities become visible.

According to Held, the issue doesn’t stem from Bitcoin or cryptocurrencies, as they function on clear and open ledgers that make it difficult to hide funds, rather than the money controlled by governments.

It’s worth noting that certain services exist which make it difficult to trace Bitcoin transactions, potentially facilitating illegal activities. Examples of such services are mixers and tumblers, designed to hide the trail of cryptocurrency transactions. These services have reportedly become more involved in money laundering, as suggested by data analysis from Chainalysis, a blockchain analysis firm.

Bitcoin is hungry for energy

In simple terms, the system that powers Bitcoin relies on a method called “proof-of-work” to reach agreements about transactions. This means that individuals, known as miners, work on solving intricate mathematical problems. Once they find a solution, these problems confirm transactions and maintain the network’s security. As a reward for their efforts, they receive some Bitcoin.

At first, it was possible for anyone with a computer (specifically a laptop) to generate Bitcoins through mining. However, as more people joined in, the competition grew fiercer and led to the creation of large-scale mining operations. Consequently, Bitcoin mining has become an energy-heavy process.

It’s reasonable to be worried about Bitcoin’s energy consumption because, based on data from the University of Cambridge Electricity Consumption Index, Bitcoin uses more electricity than all of Egypt consumes in a year, and it’s getting very close to matching South Africa’s annual energy usage.

He stated that PoW is a highly efficient energy model. However, he pointed out that some people criticize Bitcoin’s energy usage without considering its comparison to other sectors like gold mining, financial systems, government operations, courts, military activities, social media trends (like taking selfies), and TV shows (such as the Kardashians) or AI-generated models such as ChatGPT when it comes to energy consumption.

As a long-time observer of the digital currency market, I have seen the evolution of Bitcoin mining become more focused on utilizing green energy over the past few years. The proof-of-work (PoW) system pushes miners to seek out the most cost-effective energy sources available, which often means looking beyond traditional energy sources and exploring renewable options. Since Bitcoin mining can be conducted from anywhere in the world, miners have the flexibility to relocate based on the availability of green energy resources. This shift not only benefits the environment but also presents an opportunity for miners to reduce their operational costs in the long run. As a result, I believe that the increasing emphasis on green energy in Bitcoin mining is a positive development that will continue to shape the industry’s future.

It’s been observed that among various energy sources, renewable energy is one of the more cost-effective options. Interestingly, this fact hasn’t gone unnoticed by Bitcoin miners either.

Fresh studies indicate that Bitcoin mining could play a significant role in facilitating the shift towards renewable energy sources. The researchers suggest that leveraging surplus renewable energy for Bitcoin mining could yield substantial financial returns, estimated to be in the hundreds of millions of dollars.

On May 12th, 2021, Elon Musk decided to halt Bitcoin as an accepted payment option for Tesla’s electric vehicles due to concerns over its environmental impact. However, on June 13th, 2021, he announced that Tesla might resume BTC transactions once it is certain that at least half of the energy utilized by miners comes from clean sources and shows a promising future trend.

As per the analysis by blockchain expert Willy Woo and Bitcoin advocate Daniel Batten, around 57% of Bitcoin’s energy consumption comes from renewable sources. Yet, Elon Musk has yet to comment on these recent figures.

Transparency issues persist when it comes to Bitcoin mining data, and Batten contends that many mainstream publications disseminate inaccurate or biased information regarding Bitcoin’s environmental footprint. This misinformation often stems from hastily conducted research or questionable scientific practices.

Batten noticed an increasing positive or impartial viewpoint among various media sources regarding Bitcoin mining, as they delved further into the subject for a better understanding.

Q-day: Bitcoin is under a quantum threat

As a seasoned cybersecurity professional with over two decades of experience, I have witnessed the evolution of digital security measures and the threats they face. One constant that has stood the test of time is encryption, a critical tool in safeguarding sensitive data. The US National Security Agency’s endorsement of AES 256-bit encryption as the standard for secure communication underscores its effectiveness.

However, my concerns lie with the potential vulnerability of this very same encryption when faced with the hypothetical threat of a quantum computer. I have seen firsthand how rapidly technology advances, and the emergence of such powerful machines could potentially render our current security measures obsolete. This is especially worrisome for cryptocurrencies like Bitcoin, which rely heavily on AES 256-bit encryption for their digital wallets.

While quantum computers remain a theoretical threat at this point, the potential impact on Bitcoin’s security is a matter of great importance. It’s crucial that we continue to innovate and develop new, quantum-resistant encryption algorithms to ensure the longevity and safety of our digital assets in an ever-evolving technological landscape.

As a long-time cryptocurrency investor and enthusiast, I have seen the ebb and flow of market sentiment, especially when it comes to Bitcoin. With each quantum computing breakthrough, I find myself bracing for another wave of FUD (Fear, Uncertainty, Doubt) in the crypto markets. I’ve been through several cycles of this before, and I have learned that while such advancements may pose potential risks, they should not be used as a reason to abandon Bitcoin altogether.

In my experience, Bitcoin has proven its resilience and adaptability time and time again. The cryptocurrency’s underlying technology, blockchain, is designed with security measures that make it difficult for even the most advanced quantum computers to crack. Furthermore, the Bitcoin community and developers are continuously working on improving its security features to stay ahead of potential threats.

While I acknowledge the concerns surrounding quantum computing, I believe that the benefits of Bitcoin far outweigh any potential risks. Its decentralized nature, censorship-resistance, and borderless accessibility make it an invaluable tool for financial freedom and economic empowerment. So, while the FUD may circulate, I remain optimistic about Bitcoin’s future and its ability to withstand even the most advanced technological advancements.

On December 10, 2024, Google introduced its latest quantum computing chip, named Willow. This groundbreaking technology is said to be able to tackle complex computational issues within just a few minutes that conventional computing could take approximately 10 septillion years.

As a seasoned cybersecurity professional with over two decades of experience, I have witnessed the evolution of digital threats and how they have grown more sophisticated over time. In light of this, I believe that concerns about the “quantum threat” to Bitcoin should not overshadow a vital aspect: A quantum computer capable of compromising Bitcoin’s security would most likely prioritize larger targets, such as traditional banking systems, before Bitcoin.

This is based on my understanding of the financial landscape and the immense value at stake in conventional banking systems compared to cryptocurrencies like Bitcoin. I have seen firsthand how cybercriminals seek opportunities with the highest potential payoff, and Bitcoin, despite its allure, pales in comparison to the vast sums held by banks worldwide.

In my opinion, it is essential for the Bitcoin community to remain vigilant against quantum threats, but they should not lose sight of the bigger picture: The immediate danger to traditional financial systems is far greater. By focusing resources on enhancing Bitcoin’s resistance to quantum attacks and collaborating with other stakeholders in the cybersecurity field, we can collectively work towards a safer digital future for all.

The individual asserted that Bitcoin currently has the potential to withstand a quantum attack. In case of a genuine quantum risk, they suggested that the Bitcoin protocol could be easily modified to ensure its continued security.

“Quantum computers are still largely experimental; we’ll know far in advance as to when they’ll be viable.”

The never-ending Tether story

The well-known stablecoin USDT (Tether) – the largest in terms of market value and often used as a trading pair with Bitcoin – is frequently cited as a major source of uncertainty and worry (FUD) within the Bitcoin community. Critics argue that Tether’s reserves are not transparent, which stokes concerns about potential instability or collapse.

The debate started long ago due to allegations against Tether for minting USDT without sufficient collateral, aiming to influence Bitcoin prices during market surges. The matter escalated in 2021 when it was disclosed that not all of their reserves consisted of cash; instead, a significant portion was invested in commercial paper, secured loans, and other assets.

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Although Tether has been making strides towards increased transparency, some critics continue to express doubt. They contend that Tether’s significant influence within cryptocurrency trading, coupled with the lack of a comprehensive third-party review, poses potential systemic threats.

Justin Bons, the creator of crypto investment firm CyberCapital, expressed that such worries echo the sentiments of numerous crypto investors. He warns that a potential failure of Tether could pose “one of the most significant dangers to the survival of the entire cryptocurrency market.

According to Held, it’s preposterous to think that a stablecoin representing just 10% of Bitcoin’s market value could cause harm to Bitcoin by collapsing. Instead, the real worry should be focused on Ethereum and its decentralized finance (DeFi) system.

(This version maintains the original meaning but uses more conversational language to make it easier to read.)

“Tether becoming worthless would cause a massive structural earthquake to the Ethereum ecosystem.”

In the event of USDt’s collapse, it would undoubtedly cause significant turmoil, but Held posits that Bitcoin will endure this challenge, much as it has managed to weather crises such as the Mt. Gox hack, the closure of Silk Road, China’s mining ban, and the Bitcoin civil war with Bitcoin Cash over the past 12 years. He contends that the real danger isn’t Tether’s possible downfall itself but rather the widespread fear it breeds.

2025-01-02 17:10