Are banks on the wrong side of history on cryptocurrencies?


Banks and other financial institutions who still refuse to recognise major cryptocurrencies, such as Bitcoin, as a legitimate asset class are putting themselves on the wrong side of history, says the CEO of one of the world’s largest independent financial advisory and fintech organisations.

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The bold observation from Nigel Green, chief executive and founder of deVere Group, comes despite the cryptocurrency market shedding more than $1tn in a week after all-time highs, which have prompted some financial institutions to speak out on the likes of Bitcoin.

However, the world’s largest cryptocurrency advanced as much as 19% on Monday.

Green says: “Bitcoin, amongst other digital tokens, has had a hugely impressive run over the last six months, so it’s not surprising that there’s a period of consolidation and short-term correction in such a hot market.

“We can expect market turbulence of this nature to continue until it fully matures and there is even greater institutional investment. But if you zoom out on the charts and take a look, they show that Bitcoin and Ethereum, the two biggest cryptocurrencies, have consistently been on an upward trajectory over the longer-term – but no financial market ever moves up in a completely straight line, yet the upside direction is clear.”

He continues: “As such, I find it baffling that some banks have decided to refute the legitimacy of cryptocurrencies. By doing so, they are not only placing themselves on the wrong side of history, but they’re not providing clients access to the potentially significant opportunities of key digital assets that could define the future.

“Of course, cryptocurrencies are not for every client – but neither is any investment. Therefore, a refusal of one particular asset class seems somewhat peculiar.

“The blistering pace of the digitalisation of economies and our lives means that from now on there will be a growing demand for digital, global, borderless money. Indeed, digital currencies have already changed forever the way the world handles money, makes transactions, does business, and manages assets.

“They are becoming an integrated part of the mainstream financial system, which is evidenced by more and more Wall Street giants, social media platforms and multinationals, amongst others, becoming increasingly actively pro-crypto.”

Green, who has long been an advocate of cryptocurrencies, is one of the leading voices calling for greater regulatory scrutiny of the market. Last week, he said that the U.S. Treasury Department’s new, stricter cryptocurrency rules underscore how the likes of Bitcoin are becoming increasingly mainstream.

“I believe that this is recognition by those running the world’s largest economy that cryptocurrencies, in some form or another, are the future of money. The genie can’t be put back in the bottle.”

He went on to say that he believed it could be the first significant step towards global regulation: “It is inevitable as the market grows and matures. Proportionate regulation should be championed. It would help protect investors, shore-up the market, tackle criminality, and reduce the potential possibility of disrupting global financial stability, as well as offering a potential long-term economic boost to those countries that introduce it.”

Monday motivation for bitcoin after big dose of Sunday blues

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown spoke to Business Leader about Bitcoin’s surge in value yesterday.

Bitcoin has been blessed with a bit of Monday motivation, creeping back up after a big dose of the Sunday blues which saw the cryptocurrency fall to just above 31 thousand dollars.

Its value more than halved compared to the high it reached above $63,000 in mid-April. But since yesterday’s low, it’s risen by around 17%, marking yet another sharp twist in its highly volatile journey.

The crackdown in China is intensifying with cryptocurrency mining the latest target. The suspension of operations of major players sent shudders through the market with bulging crypto wallets becoming distinctly thinner as other cryptos like Ethereum, Dogecoin and Binance Coin also fell sharply in value.

Crypto holders who are hoping for a bounce back from the initial sharp fall last Wednesday have been left sorely disappointed.

It’s become clear Beijing’s stance isn’t a one-off warning but the beginnings of a serious attempt to limit the decentralised power of cryptocurrencies.

Already the ban on Chinese banks and payment firms from providing crypto transaction services had been a major setback for Bitcoin’s use case.

Although the first blow has come from China, central bank fists are at the ready elsewhere. In the US, Jerome Powell, the head of the US Federal Reserve said last week that cryptocurrencies pose a significant risk to financial stability, suggesting greater regulation may be necessary.

Another drag on the price could come amid mounting concerns about the amount of energy being used to mine cryptocurrencies. That could also lead institutions around the world, who have bought into Bitcoin to reduce their holdings, leading to fresh falls.

The direction of travel though is far from clear, as despite the rollercoaster ride, some crypto fans have buckled up see the recent falls as an opportunity to buy into currencies like Bitcoin at a cheaper price.

Given the huge volatility and that the use case of cryptocurrencies is far from proven, traders should only dabble with money they can afford to lose.

Bitcoin mining consumes eight times more electricity than Google and Facebook combined

With Tesla recently putting a suspension on using the cryptocurrency – Business Leader acquired some analysis on the controversy around Bitcoin mining.

Data acquired and calculated by Finbold indicates that bitcoin’s estimated annual electricity consumption of 143 TWh as of May 5, 2021, is at least eight times higher than Facebook and Google’s combined consumption of 17 TWh. The social network consumption stands at 12 TWh while Google’s annual energy usage is at 5 TWh.

Elsewhere, bitcoin’s consumption trails China’s 6,453 TWh by at least 45 times. Furthermore, bitcoin’s consumption is at least 27 times less than that of the United States’ 3,990 TWh. Germany’s consumption is also higher than bitcoin’s at 524 TWh. The asset’s consumption also accounts for about 69% of all the energy used by world data centres at 205 TWh.

Bitcoin’s power consumption estimates are higher than Norway’s 124 TWh, Bangladesh’s 71TwH, and Switzerland’s 56TwH

Bitcoin’s power consumption increases alongside surge in value 

The debate on bitcoin sustainability has been elevated further, especially with the asset’s surge in value.

According to the research report: “Bitcoin power consumption usually correlates with a surge in value. It becomes more profitable to mine the asset because more people are selling and buying the crypto to leverage the high price movement. This calls for more miners to confirm the transactions. Therefore, the more miners, the more computing power is needed to solve computing problems.”

Elsewhere, crypto proponents believe that bitcoin mining power consumption will reduce with the emergence of renewable energy sources. The approach mirrors the energy consumption of tech companies that are shifting towards renewable sources. The report notes that: “In general, tech companies’ electricity consumption is projected to rise due to increasing internet traffic and data loads. However, these companies are countering the increased power consumption by switching to efficient means. Besides investing in renewable energy sources, the companies are also shutting down older facilities favouring ultra-efficient centres. In general, consuming less energy has become part of Facebook and Google’s corporate social responsibility efforts.”

It is essential to note that the bitcoin energy consumption debate might be around for long, especially with the asset rising in value and increased mainstream adoption.

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