The Bitcoin Hype

December 4, 2024

Due to some recent market runs in the last few weeks, largely spurred by the presidential election results, Bitcoin has been hitting headline news. Most notably, we are hearing of Bitcoin's exchange rate with the dollar spiking to $100,000 and predictions that it may go higher. As the Bitcoin noise increases, you may find yourself asking.... What exactly is Bitcoin again? And should I be investing in it?

First, a basic explanation: Bitcoin is a type of cryptocurrency (or digital currency) and it operates independently of any governing authority (such as the Federal Reserve). There are various ways of investing in cryptocurrency, including ETFs, mutual funds, futures, etc. While crypto has been a trendy choice for an estimated 43 million American investors and has delivered quick riches to some, particularly early investors, it does deserve some scrutiny for a number of ethical reasons.¹

1. Excessive energy use, most notably by Bitcoin. Bitcoins are created, or "mined," by many thousands of computers in massive data centers, contributing significantly to carbon emissions and environmental degradation. Bitcoin mining, which represents the majority of crypto energy consumption, uses as much as 0.9% of global demand for electricity, which is comparable to the annual energy needs of Australia.²
2. Because crypto is unregulated and anonymous, it's a convenient payment system for criminals involved in fraud, tax evasion, human trafficking, and ransomware. When money is moved through a US bank, that bank is required by law to practice "Know Your Customer" standards, which helps to restrict bad actors. But when there's no bank involved and limited regulation, there's no system of accountability.³
3. Because cryptocurrency is shrouded in mystery with little regulatory oversight, it can create a predatory investing environment where smaller, less knowledgable investors can be taken advantage of by larger investors and crypto companies.⁴

Beyond these various ethical concerns, there is also an elevated risk involved in investing in speculative investments, like Bitcoin.

- Carrie McDonnell

1. https://www.bankrate.com/investing/cryptocurrency-statistics/
2. https://unu.edu/press-release/un-study-reveals-hidden-environmental-impacts-bitcoin-carbon-not-only-harmful-product
3. https://www.cnn.com/2023/03/13/politics/fbi-online-fraud-report/index.html
4. https://www.usnews.com/opinion/articles/2024-11-21/trump-win-bitcoin-crypto-invest