This commentary is not intended as a final word on Bitcoin, but simply a contribution to the current discourse on the merits and demerits of cryptocurrencies.
There are clear ESG risks surrounding Bitcoin. These have been well-documented.
The recent gains in Bitcoin also point to traders and ‘investors’ being lured into financial markets, just as rising government bond yields threaten a steep reversal.
‘Monetary integrity’ remains at the heart of Bitcoin’s allure, with its programmed, deflationary schedule. For central banks, a shift to ‘commodity money’ would deprive them of critical monetary policy tools. This is not something a central bank, nor a government, would want. The rapid rise of cryptocurrencies therefore increases the possibility of regulators stepping in sooner to impose restrictions, before holdings of Bitcoin become more widespread.
Of course, ultra-loose monetary and lax fiscal policies may be fuelling Bitcoin’s rise. Bitcoin could become a ‘safe haven’ if, due to reckless fiscal policies, Treasuries lose their allure. However, this particular argument (mistrust in government) is ultimately very bearish for equities (and Treasuries).
