According to Golden Finance, Fidelity released a 13-page report on Bitcoin on November 3. In the report, Fidelity responded to criticisms against nine types of Bitcoin.
Criticism #1: Bitcoin is too volatile to be useful as a store of value. Response: Bitcoin’s volatility is a trade-off between its perfectly inelastic supply and an uninterrupted market. Bitcoin is an emerging store of value that is undergoing financialization, and its volatility should decline. However, Bitcoin’s volatility remains relatively high compared to other financial assets, which is inherent to its perfectly inelastic supply.
Criticism #2: Bitcoin has failed as a means of payment. Response: Bitcoin has made trade-offs in order to maintain its core properties (such as decentralization and immutability), resulting in limited capacity and transaction throughput. While Bitcoin may not be able to match the transaction speeds of traditional payment processors like Visa, it provides real-time final settlement. Bitcoin also outperforms traditional payment systems. L2 solutions like the Lightning Network can further improve Bitcoin's everyday payment capabilities.
Criticism #3: Bitcoin is wasteful and bad for the environment. Response: Most Bitcoin mining is powered by renewable energy or uses energy that would otherwise be wasted. The energy consumption is justified because it provides perfect scarcity, immutability, and security.
Criticism #4: Bitcoin will be replaced by competitors. Response: Bitcoin’s network effects, community, and core attributes make it difficult to be replaced by competitors. While other digital assets aim to address Bitcoin’s limitations, they often compromise on key functionality.
Criticism #5: Bitcoin is not backed by anything. Response: Bitcoin is not backed by cash flow, utility, or government fiat. Instead, it is backed by its code and the social contract between stakeholders.
Criticism #6: A bug in Bitcoin’s code could render it worthless. Response: Bitcoin’s history includes two notable bugs that were quickly resolved by the community. While the possibility of another bug exists, the open source nature of Bitcoin’s code combined with strong incentives for stakeholders reduce the risk of a serious bug causing irreversible damage to the network.
Criticism #7: Regulation will slow down Bitcoin adoption. Response: Regulation can be seen as a positive sign for Bitcoin adoption. However, current regulatory uncertainty may hinder adoption and development, and clear and appropriate regulation may be beneficial to Bitcoin's growth.
Criticism #8: People may lose interest. Response: Bitcoin’s value proposition relies on users’ and investors’ subjective preferences for its core attributes, and Bitcoin’s network effects and continued accumulation indicate continued interest and adoption.
Criticism #9: There are “unknown unknowns”. Response: There are risks beyond what we realize (known unknown risks), and investors should act with caution and adjust their investment positions accordingly. This applies to all assets, not just Bitcoin.
