Bank of America analyst Francisco Blanche described Bitcoin as an “extremely volatile”, “impractical” and environmentally disastrous asset that is not useful as a store of value or as an inflation hedge.
Blanche also mentioned that the cryptocurrency is an impractical payment method as it can only process 1,400 transactions per hour compared to the 236 million transactions that Visa handles.
The report, which reflects traditional financial institutions’ strict stance on cryptocurrencies in previous years, stands in stark contrast to other major banks such as Goldman Sachs and JPMorgan, which have been using Bitcoin as a resource ever since.
Contrary to the notion that Bitcoin’s steady supply of $ 21 million will inevitably drive prices up over time, Blanche argues that the price of BTC is driven by supply and demand, and argues that because supply is constant, fluctuations in demand are the only thing driving the price.
Blanche also rejected the notion that Bitcoin is an active haven. “Bitcoin is also associated with risk funds,” said a researcher at Bank of America. “They are not inflationary and still very volatile, which makes them impractical as a store of value or a payment mechanism.”
“Thus, the main argument for the wallet in favor of holding bitcoin is not diversification, stable returns, or protection from inflation, but rather net inflation, a factor that depends on increasing demand for bitcoin over supply.”
With many investors primarily concerned with profitability, the history of Bitcoin being rated the best in the past 10 years could lead them to reject such cash.
However, the perception of Bitcoin’s negative environmental impact could pose a threat to increased corporate and institutional adoption, as it conflicts with the “triple bottom line” that climate-conscious shareholders are increasingly focusing on.
The BoA states that Bitcoin has a higher carbon footprint than any other human activity in terms of dollar-to-dollar inflows, and the report estimates that Bitcoin’s energy consumption has grown by more than 200% over the past two years and is now comparable to the Netherlands. Greece and the Czech Republic.
While bitcoins often cite numbers stating that 39% to 76% of bitcoin mining uses renewable energy, the BoAs report notes that three-quarters of BTC mining is already taking place in China, where more than half of the electricity is generated from coal. It also states that half of China’s mining operations are located in Xinjiang, where 80% of electricity is generated from coal.
(This ignores the seasonal migration of miners to Sichuan to take advantage of cheap hydropower during the rainy season. Coinshares estimates that Sichuan miners account for 50-66% of the global retail rate.)
BoA says higher prices make mining difficult, relentlessly increasing the carbon production for bitcoin mining.
“The increasing complexity of the system ultimately creates an environmental vicious circle with rising prices, increased hemp consumption, increased energy consumption, and ultimately increased carbon dioxide emissions.”
BoA estimates that a $ 1 billion investment in Bitcoin produces the same carbon emissions as 1.2 million petrol cars over a year, meaning that Tesla’s $ 1.5 billion investment is equivalent to adding 1.8 million petrol cars. On the road every year, it undermines the environmental awareness of electric vehicle manufacturers.
And retail fat buyers were not saving the environment, as the analyst stated, “A purchase of one bitcoin at ~ $ 50,000 yields 270 tons of carbon dioxide, equivalent to 60 ICE [gasoline] cars.”
Blanche not only criticized Blanche, Blanche also noted that 181 companies faced risks associated with the Bitcoin currency, due to “money laundering, corruption, bribery, fraud and breach of privacy”, and that central bank digital currencies also pose a huge risk in the long-term threats to the term Bitcoin.
It is worth noting that the BoA report represents the view of one analyst, and opinions differ in large organizations. Even within Bitcoin’s public backer Goldman Sachs, some sections criticize Bitcoin in a similar fashion, while others talk about Bitcoin as the future.
Clients may also disagree with the analysis. A January survey of Bank of America managers found that “Long Bitcoin Trade” was the “Busiest Trade” for the month.