Is Bitcoin bad for the environment? Luno busts 5 common myths about Bitcoin

Is Bitcoin bad for the environment and is it just a fad? If you’re not into cryptocurrency, you probably heard all sorts of stories about Bitcoin being super volatile and it is being used for illegal activities like ransomware.

To address the common misconceptions about Bitcoin, Luno Malaysia Country Manager Aaron Tang has held a virtual session to shed some light on the common myths.

1. It’s too late to buy Bitcoin

Bitcoin (BTC) which is the most popular cryptocurrency has recently hit its all-time high of over USD 63,000 (about RM260,000) before settling down around USD 40,000 (about RM166,000).

While the value is rather high, Luno says it is still early for anyone to start getting their hands in Bitcoin. Bitcoin has been around for about 12 years now and there’s still a lot of potential for the future.

It shared that the real value of Bitcoin will be seen in adoption over time in the emerging use cases. In the future, we may see wide use cases including payment, storing of value and as a method of hedging against inflation.

2. Bitcoin has no intrinsic value

On allegations that Bitcoin has no intrinsic value, Luno says Bitcoin does have both perceived and intrinsic value. Unlike fiat currency where value and legal status are determined by governments, Bitcoin’s value comes from its code, infrastructure, scarcity and adoption.

Unlike Bank-issued money, Bitcoin has a finite supply of 21 million coins and at the time of writing, there are 18.7 million BTC in circulation. Scarce assets tend to appreciate as in most situations where demand is more than supply.

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During its peak in February 2021, Bitcoin has a market cap of USD 1 trillion and it is a sign that individuals and corporations are viewing it as a credible innovation. To cushion the economic impact caused by COVID-19, institutions and even some governments have looked to Bitcoin as a way to hedge against pervasive currency devaluation.

3. Bitcoin has negative impact on the environment

You probably heard the news about Tesla no longer accepting Bitcoin as a payment method due to its environmental impact concerns. Contrary to what most people would think, Luno explains that Bitcoin only consumes a small fraction of energy that’s currently used by the financial sector.

Interestingly, it said that Bitcoin actually incentivises renewable energy as miners are encouraged to look for greener alternatives. According to Luno’s stats, 39% of Bitcoin mining is performed with renewable energy and 76% of miners use renewables as part of their energy mix.

Bitcoin miners would go to any location that could offer the cheapest power source, and renewable energy is currently cheaper than non-renewables. Bitcoin also has the potential to reduce global carbon emissions when it replaces or combine existing financial systems in the future.

4. Bitcoin is only used by criminals

It is often perceived that cryptocurrency transactions are completely anonymous and it is being used by criminals to demand ransom over the internet. While Bitcoin often gets a bad reputation for cybercrimes, Luno says criminal activities take just 0.34% of all cryptocurrency activities, and it is much less than fiat currency.

Quoting UN stats, it is estimated that 2-5% of global GDP each year is connected to money laundering and illicit activity. Luno says illicit transaction volume is 400 times higher in fiat currency than in crypto.

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Contrary to what people believe, Bitcoin is actually pseudonymous and all transactions recorded on the blockchain are immutable. In fact, the transaction history is actually viewable by the public. That means if a person’s identity is linked to a wallet, the entire history can be traced. Law enforcers can use various tools and techniques to track down such activities.

5. Bitcoin is so volatile, you can’t take it seriously

A lot of people are afraid of Bitcoin due to its highly volatile nature as a random tweet by an individual can set the prices skyrocketing or crash overnight. According to Luno, the price is driven by demand in the short term but in the long run, the price of Bitcoin has shown an increase historically due to its continued adoption and belief in its value.

During the virtual event, Aaron Tang shared a popular phrase “Volatility is the price you pay for performance.” If you zoom out and take a long-term view, you will see that Bitcoin price has only gone up.

Luno is a platform that aims to provide a safe and easy way to buy, sell, store and learn about cryptocurrency. It is one of the registered Digital Asset Exchanges in Malaysia by the Securities Commission and it currently supports 5 cryptocurrencies – Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC) and Bitcoin Cash (BCH).

In case you missed it, we had a chat with Aaron Tang about Bitcoins in our Let’s Talk About show. You can watch it here.

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Alexander Wong