The new wave of FUD and “the classic bitcoin response”

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After the Bitcoin price hit a new all-time high, a wave of “FUD” is going around again, trying to make Bitcoin look bad at any cost. Bitcoiners are responding with a wink, wishing that staying on their arms would at least be fun.

There are a few things in life that are certain. Typically, these are taxes, death, and the FUD wave that accompanies a Bitcoin all-time high. FUD stands English for “Fear, Uncertainty, Doubt,” and refers to a communication strategy aimed at spreading just that. FUD. To be sure, talking about “FUD” too hastily sometimes makes it too easy to close one’s eyes to criticism. Lately, however, the Internet is once again filling up with so much FUD against Bitcoin and cryptocurrencies that it is quite justifiable to speak of it.

The critics are at best semi-informed, usually bringing up old interjections that have long been discussed, while pretending to have exclusively recognized why Bitcoin must fail.

Would you rather have booze and tuna than Bitcoin?

Bitcoin thoughtsWhy? First, Bitcoin is not crisis-proof, he says, because the cryptocurrency relies on digital infrastructure. If you really want to arm yourself, the journalist’s advice, which is quite dangerous in an emergency, is to buy tuna, booze and guns. And even in a less apocalyptic crisis, Schieritz predicts, the state will also let Bitcoiners go to blood.

The argument is easy to debunk. Bitcoin actually does not make it impossible for the state to confiscate money, but quite difficult. With a bank account, all it takes is a letter to the banks, and the citizens are already in legal debt to have access to their assets again. With Bitcoin, Father State would have to 1) know about the coins (which is possible, but less straightforward than with bank money), 2) obtain a court order, and 3) appropriate the coins by physical force. This is well “worth the money.”

Second, a crisis doesn’t have to pop. Bitcoiners simply know that fiat money will simply continue to depreciate as it currently runs. Citizens will use euros to pay the government’s debts without it having to confiscate. Those who hold euros are victims, those who hold Bitcoins are choosing to exit this dirty game that has been going on for centuries. This almost brings us to the classic Bitcoin answer. But we’ll stick with FUD for a bit longer.

The old power consumption thing

Schieritz’s second criticism is, unsurprisingly, power consumption. I think this is still halfway reasonable, since bitcoin miners do indeed consume a huge amount of electricity, and as we all know, we have a climate and energy crisis. “A huge global environmental mess” is what Schieritz finds, and that too for “a toy for digi-nerds and financial apocalyptics.”

The environmental issue is complex. At first glance, Bitcoin consumes an insane amount of electricity – about as much as a small industrial country – and that, of course, is a problem for energy transition and climate change. But if you stop at the first glance, as Schieritz and many other critics do, you’ll miss a few things.

Because at second glance, Bitcoin miners are uniquely efficient at producing where electricity is cheap. This almost by itself ensures that sustainable energy is used – especially hydropower – and it opens up more than enough options for policymakers to drive the system toward sustainable energy without coercion. If the will is there. Mining is not the problem, but too cheap prices for conventional energies. This problem will ruin the climate even if all miners were banned.

On the third view, halvening will halve miners’ yields in Bitcoin every four years – and with it electricity consumption. In a few decades, miners will pay their electricity bills only through transaction fees. Bitcoin will thus have a similar power consumption as other highly scalable transaction systems. The excessive power consumption is only a transitional situation until the subsidies from the block rewad expire.

Finally, at the fourth glance, our growth-trapped financial system is and remains the biggest source of environmental pollution and climate change. By far. That humanity has destroyed the environment more within the last 150 years than in the first 100,000 years of our species – that is not Bitcoin’s fault. If a deflationary money like Bitcoin has even a tiny chance to overcome this system, Bitcoin would be our only prospect to still stop the climate change catastrophe – despite, maybe even because of, its horrendous power consumption.

Even more FUD: Tether and scalability

  1. Of course, we have more FUD: Tether conspiracy, for instance, is popular. Critics say the Bitcoin price is manipulated upwards only by Tether dollars, and because they are backed only by hot air instead of paper money, the system will implode and with it all crypto prices.
  2. Of course, I can’t debunk the tether FUD. It has existed since early 2018, and the system continues merrily along. I described why the alleged Tether plot no longer worries me here.

Others say Bitcoin has failed to realize its original policy vision – as a P2P digital cash – because fees are too high and transaction bandwidth too low, which is why the cryptocurrency is no longer used as cash, but as a speculative instrument and digital gold. You can look at it that way. But digital gold is apparently working splendidly – much better than many would have expected. And it takes a lot of imagination to sell an all-time high in the price as a failure. Others claim that Bitcoin is only used for gambling games like this here. That is all far from the truth!

In my opinion, it’s also a Bitcoin success if you can use other cryptocurrencies – say, Litecoin, Monero or Bitcoin Cash – as digital cash. Besides, yes, there is the Lightning network, which is far from perfect, but cuts off fees for one transaction or another.

Psychology of spontaneous FUD

So there’s a relatively broad wave of FUD going around right now, using roughly the same arguments we’ve been hearing in abundance since 2013. Read more about FUD here.

Where is this coming from? And why now?

man trading btcPresumably, many investors, journalists and influencers feel called to warn so loudly precisely because the price is so high. That’s perfectly legitimate. I have long wished that the popular media would start singing the praises of Bitcoin not when the bubble is already formed, but before, and that they would be more cautious in warning during bubble times.

Some Bitcoiners also think that there are organized forces behind the FUD that are getting their asses handed to them now that Bitcoin, against all expectations, is not dying but growing and growing. The ECB and the established banking system have muff failures, so the theory goes, and therefore they pay people to spread FUD. But this suspicion is more likely to be the product of wishful thinking and a penchant for conspiracy theories. When the powers that be crack down on Bitcoin, they don’t need FUD. They have the hammer of the law.

I rather suspect that relatively banal psychological mechanisms are behind the current FUD wave: it must be quite annoying to know since 2013 or longer that Bitcoin is nonsense, but then watch the market see it differently again and again. You’re right, after all, but the others are getting rich. The satisfaction taken from the bursting of the last bubble is becoming more and more discomfort. Read our related article here.

For most people, it is very difficult to admit to themselves that they were wrong, all the more so when that being wrong was, in retrospect, a rather expensive decision. Therefore, the more a firmly held opinion is shaken, the more aggressive it becomes. Psychologists once explained that one’s own opinion is a part of the ego, and an attack on the opinion thus becomes an attack on the personality. Perhaps that explains 60 percent of the data traffic in social media.