Terry Brochu~Exchange Desk Advisor~LUXOLO Financial
If only I had a satoshi for every lie that has been told about Bitcoin, I’d be doing the happy dance. Bitcoin’s recent uptick has re-awakened the hostility in the media. It’s understandable to be sure, Bitcoin has many facets and creates divisiveness among its early adopters and the so called experts. It can be difficult to cut through the noise to understand the phenomenon known as Bitcoin!
Being a new asset class makes it nearly impossible to predict, so it’s imperative as an investor to consider all the risks before creating a wallet and jumping on the Bitcoin train. So with that in mind, let’s fact check a few common misleading Bitcoin myths.
#1: Bitcoin is used only for Speculation
This is not correct. Each and every day, the Bitcoin network settles approximately $10 billion worth of transactions. With an average of 305,000 daily transactions the Bitcoin network is not far behind Fedwire, the Federal Reserve’s settlement system that handles wire transfers between financial institutions, at 550,000 transactions. Many of these transactions represent investment purchases, and some may be for speculation. However many are for regular use cases like remittances. Did you know that 32% of Nigerians own Bitcoin for peer-to-peer payments? The direction for Bitcoin is unfolding before our eyes. From my research, in regimes like Russia and Belarus, Bitcoin is sometimes the only way to fund anti-corruption efforts and protests. That can come in handy.
#2. Bitcoin is too volatile to be a store of value
While it’s true that Bitcoin is more volatile than instruments like government bonds, that is not necessarily a bad thing. Back in the 1970’s when gold was severed from the monetary system, the price became extremely volatile, it increased 10 fold in a decade, only to decline 60% and then flatlining for decades more. Bitcoin, like gold, was at its most volatile as it was increasing in value. If we look to the past, sometimes the best assets will bring the greatest returns, and sometimes they do not. Bitcoin has been said to be in “price discovery” similar to where gold was in the 1970’s, where it was normal to see big upswings and downswings. I would note that because of Bitcoins volatility it may not be for all investors.
#3. Governments will Kill Bitcoin
While many governments like Nigeria, Russia, and Belarus give Bitcoin the cold shoulder to date, here in the US, Canada, and much of the west we find ourselves in a much different situation. For instance, the top US securities regulator taught a course on Cryptocurrencies at MIT: the Commodity Futures Trading Commission, which is responsible for regulating commodity markets and is a global innovator in regulating Bitcoin derivatives. Another noteworthy event the US office of the Comptroller of the Currency recently gave clearance to banks to provide custody services for Bitcoin. The Federal Reserve cares about financial stability. I cannot think of anything more de-stabilizing to the over $1 trillion Bitcoin market than some unnecessary smackdown.
I’ve been following Bitcoin since it was $47 back in 2014, while it’s experienced many ups, downs, and all arounds, we are witnessing what could become a key player in the future of our global financial system. As humans evolve toward efficiency, money is becoming digital, and buying Bitcoin is a great way to gain some exposure to that future. Take some time to gain sound knowledge about the paradigm shift we see unfolding before our eyes.